Gati Ltd, provider of express distribution and supply chain solutions, plans to restructure its shipping business, according to Mr Harry Lagad, Executive Director, Supply Chain and Cold Chain Solutions, Gati.
The company has appointed a leading consultancy firm to restructure the shipping business, which has been ‘plaguing' it the last two years.
It is considering various options, including bringing in an equity partner, to keep it running.
“We need to scale up the shipping business and make it more profitable,” he said.
Gati will take a decision in the next three months on the shipping business, which contributes nearly 10 per cent of the company's revenue of Rs 1,000 crore.
“For the last two years, the shipping business has been plaguing us due to the economic downturn and recession in the industry.
“We need to restructure to revive it with a new direction or get out of the business. We need to create value to our shareholders,” he told Business Line.
The partner could be a large shipping company who can bring equity and run the business.
In this case, Gati will hold majority in the company. The other option is to bring in a knowledge partner who can guide it.
In the next 6-8 months, there will be a clear focus on how the shipping business is going to be run, he said.
Double the fleet size
Gati has seven ships (five owned and two chartered), and has plans to double the fleet in the next couple of years. Shipping is all about scale and volume while Gati is still a small player in Asia-Pacific. “We need to expand to stay in the business,” he said.
Gati will focus more on fourth-party logistics by providing more value-added services such as product sourcing, channel management, inventory management, distribution services and reverse logistics.
It has lined up an expansion programme of Rs 200 crore for the next two years.
This includes procurement of cold chain trucks and setting up of container freight stations at all major ports, he said.
Mr Lagad said the company would look at new business such as ro-ro (roll on and roll off) in the coastal shipping.
In this, fully loaded trucks can be loaded in to a ship and transported to another port from where the same truck will be rolled off for delivering the cargo at the right destination, he said.