Logistics

Allcargo sees growth potential in Asian market

| | Updated on: Jun 24, 2013
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Allcargo Logistics, the Indian multinational logistic company, operates from 89 countries and employs over 8,000 people. Engaged in multimodal transport, warehousing and project engineering, the listed company is among the leading players in the global LCL (less-than-container load) market.

With consolidated revenues of close to Rs 4,000 crore, Allcargo hopes to become a billion-dollar enterprise by next year. Shashi Kiran Shetty, Executive Chairman, spoke to Business Line about the current tough market scenario and his strategy for growth. Excerpts from the interview:

How do you foresee the year ahead for the logistics sector?

The current fiscal will continue to be challenging as the global economy is still sluggish. Infrastructure companies are facing a cash crunch and declining business volumes. Their margins are under pressure. We hope to see some revival but only by the end of the year or post elections next year.

What about your company?

We are comparatively well managed. At the same time, we are also facing challenges such as payment delays. As a policy we make provisions for delayed receivables beyond 180 days. We are a global brand with global customers. So we are in a better position to face market cycles. We expect the year would be more or less the same as the previous fiscal.

What do you think logistics firms should do in the current market scenario?

The best the companies can do is to manage their costs and increase their market share. If the home market is tough, they must tap overseas opportunities through acquisitions or new ventures. We are trying to increase our global market share, particularly in Asian countries.

Will the depreciating rupee impact your revenue?

In fact, on a consolidated basis, it should help us, as around 70 per cent of our revenues and 40 per cent of our operating profits come from overseas operations. We have some foreign currency borrowings that are hedged. But companies which have un-hedged forex exposure may get badly hit.

You are on record that your vision is to become a billion-dollar company by next fiscal. Are you on track?

Our focus is to make Allcargo a billion-dollar company. Container Corporation of India is the only company in the Indian logistics sector to cross the mark. We are already close to Rs 4,000 crore in revenues, although with a depreciating rupee our task will be more challenging. We need to work towards increasing our market share.

Our strategy has been organic as well as inorganic growth. We have an efficient integration of people and assets. We have the right system and procedures, we have a sustainable model. We hope to achieve our goal by end-2014.

How is your shipping service doing?

We have three ships; one . One is on long-term charter. We couldn’t make much headway into this sector thanks to the prolonged recession and infrastructure limitations. But there is potential.

What needs to be done to develop coastal shipping?

First, the government should take a policy decision that a percentage of cargo, say 15- 20 per cent, now being moved by road in the coastal area should be diverted to costal shipping in the next two-three years. Then it should be made mandatory for manufacturers, particularly those along the coasts, to move that percentage of their cargo by sea. Initially, there should be some incentives to all — manufactures, ship-owners and port operators. This could be financial support. Also, there should be priority berthing facilities for coastal vessels at all ports — both public and private — in the country.

What do you think the government should do to help the sector?

Of all the initiatives, implementation of GST (Goods and Services Tax) at the earliest would be a real game changer. A fast-track approach to infrastructure projects, bringing in more transparency to eliminate red-tape, and ensuring a level-playing field for all are some of the important issues the government can consider to help the sector.

Also, the public sector undertakings (in the logistic sector) should invest more. For example, major ports should be investing in green-field projects, as joint ventures partners rather than just limiting their role as a landlord.

At some stage, they should get listed, as it would put pressure on the management to perform. Ports have to be managed like a corporation.

At present, major ports are mandated to collect rent. For new projects they wait for someone to offer the highest revenue share. The focus should be to aid international trade and not to raise money for the government.

kurup.nk@thehindu.co.in

Published on March 12, 2018

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