Allcargo Gati Limited: ‘Rating watch with developing implications’ due to ongoing composite scheme of arrangement for restructuring businesses of Allcargo Logistics

  • Allcargo Gati Limited:  ‘Rating watch with developing implications’ due to ongoing composite scheme of arrangement for restructuring businesses of Allcargo Logistics

  • Rationale and key rating drivers 
    • The rating assigned to the fixed deposit (FD) programme of Allcargo Gati Limited (AGL) continues to remain on the ‘Rating watch with developing implications’ due to ongoing composite scheme of arrangement for restructuring businesses of Allcargo Logistics Ltd (ALL, rated CARE AA- (Rating watch with negative implications) / CARE A1+ (Rating watch with negative implications) and AGL. 
    • Per the scheme, the ISC business, which contributes over 85% of revenue and EBITDA of ALL will be demerged into a separate entity, Allcargo ECU Limited. (AEL). 
    • This would include the India part of ISC business and international subsidiaries held under the ECU Worldwide NV. 
    • The remaining entity, ALL, will hold the Express and Contract Logistics Business. 
    • Transfer of contract logistics and express logistics businesses will happen through amalgamation of Allcargo Supply Chain Private Limited (ASCPL- Contract logistics) and Gati Express & Supply Chain Private Limited (GESCPL- Express logistics) with and into AGL. AGL (Contract logistics and express business) will merge with ALL. Each ALL shareholder will get one share of Allcargo ECU for every one share held. AGL’s shareholders will get 63 shares of post-demerged ALL for every 10 shares they hold. 
    • AGL expects the scheme to be approved by NCLT by April 2025. 
    • CARE Ratings Limited (CARE Ratings), will continue to monitor developments of this scheme and will take a view on the rating once there is fair amount of clarity on the impact of this scheme on the business and financial profile when all requisite approvals are in place. 
    • The rating continues to derive strength from the operational and financial synergy derived by AGL from ALL, established position of AGL in the express cargo industry with pan-India presence enabling it to cater to a diversified customer base across industries. AGL has a comfortable capital structure and healthy liquidity profile. 
    • However, the rating is constrained by low profit before interest, lease rentals, depreciation, taxation and (PBILDT) margin FY24 (FY refers to April 01 to March 31). 
    • It is further constrained by, concentrated revenue profile deriving large share of revenues from less-than truck load (LTL) segment, stiff competition from unorganised players and new start-ups. 


Allcargo Gati Limited: Story turnaround

  • Augmenting the managerial strength: Mr. Ketan Kulkarni who was appointed as the chief growth officer of Allcargo group early this year, has been elevated as Deputy Managing Director of GESCPL effective immediately. 
  • Ketan comes with 30 years of experience spanning multiple sectors. 
  • His last stint was with Blue Dart Express as a Chief Commercial Officer where he spent 17 years leading sustainable and strategic growth initiatives 
  • Gross Margin: Gross margin has increased on a QoQ basis, for Q1FY25 gross margin stood at 27% as compared to 26% for Q4FY24  
  • EBITDA: Operating cost continues to get optimized to bring about future growth in EBITDA. For Q1FY25 EBITDA stood at Rs. 20 crores, up 11% as compared to same period last year and 33% as compared to last quarter
  • Cash Positive: Debt free as on June 2024 with a positive cash position of Rs. 196 crores after a successful QIP of Rs. 169 crores. 

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