ETMarkets Management Talk | Demerger will accelerate growth momentum: Allcargo Logistics

"Our recently-launched demerger plan will offer restructured businesses greater financial flexibility and strategic independence, further adding to the growth momentum,” says Ravi Jakhar, Chief Strategy Officer, Allcargo Logistics. In this interview with ETMarkets, he explains how shareholders will gain once the yield business of realty gets separated from the service-based logistics business. Edited excerpts:

In FY22, your revenue grew by 91% YoY. What's working in your favour?
Well, the robust revenue growth may appear as a one-year outlier, but it has actually come on the back of our relentless efforts in the last 48 months aimed at carrying out a holistic transformation involving extensive digital integration on the operations side and strategic realignment on the business side. In that phase, we also crafted an effective turnaround of our domestic express logistics arm, Gati to bring down debt and boost its operational efficiency.

As a part of our strategic and fundamental business realignment, we exited the non-core business such as the cold chain and project transportation business and started focusing on our four core businesses – international supply chain, CFS, express logistics and contract logistics.

Thanks to new-age technology adoption in service delivery and operations, ECU360, the digital platform of our international supply chain business, scaled higher peaks. ECU360 now accounts for almost 60 percent of export bookings across all key markets worldwide.

The acquisition of Swedish logistics company Nordicon Group and the joint venture in South Korea also positively impacted the group’s performance in FY22. The synergy with those companies thanks to a strong network integration benefited us immensely. The foundation has been built for the next phase of growth.

Does this growth rate look sustainable this year as well? Any expectations that you would like to share?
The volume-driven growth has been a key contributor over the last few quarters thanks to our diversified service offerings. Factoring in the geopolitical uncertainties and other disruptions, we expect the momentum to continue as the transformation initiatives within the group which is in the final stage have started delivering the desired results. We are now gearing up for the next phase of digitisation with extensive use of data science models in express logistics and international supply chain businesses.

We have already established our market leadership in the global LCL trade and CFS (container freight station) segment. Despite leadership, we are gaining market share, which indicates sustenance of our growth and there is strong positive momentum.

Our recently-launched demerger plan will offer restructured businesses greater financial flexibility and strategic independence, further adding to the growth momentum.

Can you explain how you are using automation and digital platforms to drive growth?
Automation is the mainstay of our international supply chain and express logistics businesses and both are asset-light in nature. Apart from automation, we are leveraging new-age technology, data analytics, and predictive analytics to enhance service delivery competence of our global digital logistics platform, ECU360. The digital enhancements helped in achieving superior network optimisation. Better route predictions help become more competitive and yield management through digital assets further helps expand business and contributes immensely to growth.

At Gati, we have also joined hands with Salesforce to develop a cutting-edge CRM tool to take our customer service and client management efficiency to the next level, which is helping us drive growth in sales.

How would the demerger of a warehousing-focused real estate unit and container freight station business benefit shareholders?
The broader goal of demerger is to offer greater financial flexibility, management bandwidth and strategic independence to drive robust growth. Growth will benefit everyone. Further, the simplified structure will also unlock value potential benefiting shareholders as yield business of realty gets separated from service based logistics business. Both these businesses are valued very differently and demerger will help in establishing fair value for both businesses.

Can you highlight the key growth drivers in the next 1-2 years?
Building integrated digital platforms to better serve our customers and using tech for dynamic decision-making and process optimisation has been the underlying theme of our growth journey. Going forward, aggressive digitization and use of data analytics will continue to remain major growth accelerators for all the four core areas of our operations. The gradual revival of the global cross-border trade, robust logistics demand from the e-commerce sectors, and strong consumption led growth in India shall continue to act as tailwinds to our businesses across the group.

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