Mystery shrouds an announcement by Allcargo Logistics Ltd on Monday that its board will meet on Thursday to discuss a plan to take the company private by delisting it from the bourses.

The promoter and promoter groups hold 70.01 per cent stake in Allcargo Logistics.

The announcement has taken the logistics industry, which considers Allcargo Chairman Shashi Kiran Shetty as the doyen, by surprise, besides throwing up motives behind the move that entails spending a few hundred crores of rupee to buy out retail shareholders at a time when the world is grappling with demand destruction caused by Covid-19.

Shetty himself stressed the need to preserve cash to tide over the pandemic in an interview to BusinessLine on May 18. “The strategy is very simple. Conserve cash, minimise the losses, bring in more efficiency and try to increase market share....” he had said.

The announcement cames days after Allcargo completed acquisition of a majority 46.4 per cent stake in express logistics company Gati Ltd for ₹416 crore.

The motives being attributed to the de-listing plan include a potential sale of the company to a global logistics giant, splitting the company to separate its 80 per cent revenue-contributor ECU Worldwide, and disenchantment with the stock market for not giving the value the stock deserves since listing in June 2006 despite being in an industry that is considered the backbone of the economy.

The Allcargo stock is “undervalued compared to peers in the industry,” a market source said.

“Allcargo would like to take the firm private because the stock market has not given them stock appreciation it deserves over the last 14 years,” said Ramesh Singhal, CEO at i-maritime Consultancy Pvt Ltd.

Allcargo shares closed at ₹130.80 a share on BSE on Tuesday. The shares were trading at ₹128 a share in 2007.

The firm had reported a consolidated net profit of ₹ 234.34 crore in the year to March 2020 on revenue of ₹ 7,346.24 crore.

“While the company has grown in terms of revenue, they are not getting valuation from the stock markets,” Singhal added.

Shetty refused to talk on the matter. “Let’s avoid printing any story with my thoughts,” he said.

The announcement is all the more intriguing to those in the industry who have seen him grow the company from scratch and turn it into an entity with consolidated annual revenue of over $1 billion, with 11 acquisitions along the way, including Antwerp, Belgium-based ECU Line (since renamed ECU Worldwide), a company with revenue five times that of his Indian firm.

Allcargo is the world’s top less- than-container load, or LCL cargo, consolidator with presence in over 160 countries.

“There is nobody in India who plays integrated logistics like Allcargo,” said a logistics industry consultant. Hence, Allcargo has become attractive for some of the global giants who are looking at established Indian companies for their own end-to-end logistics solutions needs and control the entire supply chain.

Shetty will not sell his company and quit, the consultant who has worked with him said. “But, if he has such a plan, then separating ECU Worldwide, which contributes 80 per cent to the firm’s revenue, and the non-vessel owning common carrier (NVOCC) business from the other businesses after de-listing would make them more focussed and easier for sale,” he said.

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