Allcargo Logistics forays into express logistics with acquisition of Gati

Post this deal, Gati will be in a position to leverage Allcargo’s global network to provide time and cost efficient solutions to clients.

Dec 05, 2019 04:12 IST India Infoline News Service

Allcargo Logistics
Allcargo Logistics has forayed into the express logistics space by acquiring a controlling stake in Gati Ltd. Through this transaction, Allcargo has added another domestic service to its portfolio by entering a segment which has been growing exponentially.

The express logistics industry is expected to reach Rs48,000cr (USD 7 billion) by 2023, according to a study led by Deloitte in 2018. This growth will primarily be driven by domestic consumption, the shift from unorganised to organised trade, e-commerce (domestic and cross border) and significant demand from the small and medium B2B segment.

Post this deal, Gati will be in a position to leverage Allcargo’s global network to provide time and cost-efficient solutions to clients.

With this acquisition, Allcargo is also entering into a strategic relationship with Kintetsu World Express (KWE), the 10th largest air freight forwarder in the world which has been in the news for acquiring world-renowned APL Logistics. KWE has a market cap of over USD 5 billion and is also one of the key customers of ECU Worldwide (Allcargo’s wholly-owned subsidiary) in its LCL business. This partnership will allow Allcargo and KWE to jointly explore and pursue further collaborations within and outside India.

“The exponential rise in cross-border and domestic e-commerce has opened up new markets for traditional express players such as Gati. With Allcargo’s existing strength in the ocean transportation business and Gati’s expertise in land and air transportation, we are now in a unique position to offer our customers a suite of truly multimodal solutions,” stated Shashi Kiran Shetty, Chairman, Allcargo Logistics Ltd.

“With this strategic deal with Allcargo Logistics, we have entered a new era of consolidation in the domestic express logistics space. This collaboration also reiterates our commitment to ensure maximum outreach across untapped markets and provide benchmarked last-mile delivery solutions to our clients,” stated Bala Aghoramurthy, Deputy Managing Director, Gati Ltd.

Ever since listing on the bourses, Gati’s stock has been traded in large volumes due to huge retail interest. From a high of 148.50 in 2017 and 154.45 in 2018, Gati’s shares reached a high of 94.85 in 2019, indicating a huge opportunity for upside from the levels we are entering (which is 75).

This important deal was done to align the group to the growing Indian transportation and logistics market which is expected to further consolidate owing to the digital push and continued reforms pursued by the Indian government. This will help Allcargo achieve sustained growth as a leader in the logistics industry and continually grow in the short, medium and long run.

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