The Hindu Business Line : Allcargo stock recovering after its weak Q3 numbers

Kolkata, Nov. 5 Allcargo Global Logistics stock has overcome the short-term weakness after it reported lower profit last week during the third quarter to September 30. However, week-on-week basis, it still needs to recover a loss of one per cent.

Mr Kunal Avasthi, Vice-President and business head of the company, told Business Line that there was drop in realisation because of a number of factors.

“On the one hand, lumpiness in billing pattern of project cargo came in the way of revenue-building, on the other hand reduction in freight rates affected topline and bottlomline growth in NVOCC (Non-vessel operating common carrier) segment. Moreover, cost escalation, particularly the staff cost, also exerted pressure on margins,” he added. (NVOCCs book space on ships in large quantities and sell it in smaller quantities, consolidating freight for transport in standard containers.)

However, according to him, the lumpiness caused by an uneven pattern witnessed in billing, is a temporary phenomenon. According to an industry analyst, “NVOCC business is a volume game. Though import volumes have gone up, export volumes have been showing signs of decline in the backdrop of rupee appreciation.”

However, the high-margin non-dimensional cargo business is on its way up as infrastructure projects with larger import content witness a frenzied growth. This is likely to serve as the silver lining for this lowly leveraged company, which is among the top two global NVOCC players.

According to analysts, in response to the changing trade dynamics and consumption pattern in the country, this multi-modal logistic services company has planned to turn challenges into opportunities by putting greater emphasis on domestic cargo movements. Higher capacity utilisation, value-addition and foray into niche areas such as equipment hiring business or car containers would cushion margin pressure and provide additional revenue streams, analysts said.

Land bank

The positives are also stored in the unutilised land at various ICD and CFS locations of around 100 acres and the company’s plan to commercially exploit them setting up logistic infrastructure such as silos, warehouses, distribution centres and cold stores.

Mr Avasthi said that investment worth around Rs 200 crore has been planned in these verticals. Another Rs 90 crore would go into the equipment and container trailer segment.

The new ICD and CFS at Pithampur would be on 14.5 acres and logistic parks are being set up in Goa, Ahmedabad, Bangalore, Nagpur and Hyderabad. Currently, the company has three CFSs.

Allcargo is also actively considering setting up warehousing and distribution centres in the West Asian trade hubs like Dubai or Jebel Ali.

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