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The boards of Allcargo Logistics Ltd and Allcargo Gati Ltd have approved the composite scheme of arrangement for restructuring of businesses under Allcargo Ltd and Allcargo Gati Ltd (formerly Gati Ltd).
As per the scheme, the International Supply Chain (ISC) business will be demerged into a separate entity, Allcargo ECU Limited. This would include the India part of the International Supply Chain business along with the international subsidiaries held under the ECU Worldwide NV.
Express business and Contract Logistics business would come under the resulting entity Allcargo Logistics (post ISC demerger), which will benefit from combined synergies, and the shareholders of Allcargo and Allcargo Gati will get direct shareholding, eliminating inefficient complex corporate structure.
As per the approved swap ratio, based on the recommendations of the independent valuers, shareholders of Allcargo Gati will get 63 shares in the resulting Allcargo Logistics entity (post ISC demerger) for every 10 shares held in Allcargo Gati.
``Our intention is to empower our flagship businesses with strategic independence and operational synergies, with customer integration in express and contract logistics businesses and direct shareholding in operating companies,’‘ Shashi Kiran Shetty, Founder and Chairman of Allcargo Group, said in a release.
``This will also establish financial accountability for the management team, comprising best in class senior & middle management team to drive the businesses forward with growth and return mindset with a digital-first approach,’‘ he added.
With the merger of Allcargo Supply Chain and Gati Express business, the scheme will create a strong P&L, balance sheet and cash flows to drive synergistic growth & expansion in the fast-growing domestic logistics market to create an unmatched powerhouse in the domestic supply chain business.
Shareholders of Allcargo will get 1:1 shares in the demerged Allcargo ECU Limited and continue to hold their shares in Allcargo Logistics Limited, which will now be the resulting entity holding Express and Contract Logistics business directly. This takes into account the 3:1 bonus shares approved by shareholders for Allcargo Logistics recently.
According to Shetty, a simple structure and sharp business focus under an independent management team/board of directors will enable the Allcargo group to continue to drive its track record of growth, having demonstrated nearly 18 per cent CAGR over the last 20 years.
Contract Logistics business brings in customer stickiness and will help amplify scale in the Express Logistics business. The company will further have an opportunity to drive cost efficiency by consolidating its infrastructure footprint and combining management structure across both businesses.
The scheme is expected to be implemented in 10-12 months, accounting for regulatory filings, Stock Exchange approval, shareholder approval, NCLT approval and ROC filings.
Allcargo Group will eventually have four listed strategic business undertakings. Allcargo ECU Limited and Allcargo Logistics post demerger of ISC business, alongside AllCargo Terminals Limited and TransIndia Real Estate Limited, which were created through an earlier scheme of arrangement. All four public companies are well poised for growth on the back of market opportunities and robust management capabilities.
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