allcargo logistics ltd share price Management discussions

Global Economy Overview

Global economic growth in 2022 slowed down to 3.2 percent after recording a 6.0 percent growth in 2021. The degrowth was marked by high inflation, Russia Ukraine conflict, disruption in food and energy markets, and continued instances of Covid-19 pandemic. In 2022, Central banks around the World raised interest rates in quick succession to tame inflation. US Fed effected the largest cumulative rate hike in any year since 1980. On the positive front, supply chain bottlenecks started easing in 2022 due to reduced backlogs and better delivery times.

The pressure from these shocks is likely to continue in 2023 with IMF predicting the global growth to slow down to 2.7 percent in 2023, though Central banks are likely to ease interest rate tightening. Accordingly, global inflation should decrease, although more slowly than initially anticipated, from 8.7 percent in 2022 to 7.0 percent in 2023 and 4.9 percent in 2024. While expectations of a soft-landing form the base case outlook but overall uncertainty remains high. Stickiness of inflation and impact of high rates are becoming apparent resulting in pressure on the banking sector. In this backdrop, the emerging markets, though not immune to spill over effects, are likely to grow better as developed economies face the direct brunt of a slowdown.

International trade flows are projected to further weaken in 2023. The baseline scenario projects that volume growth of global trade in goods and services will nearly stagnate in 2023, as per United Nations World Economic Situation and Prospects (WESP) 2023. This is further exacerbated by unresolved trade tensions between the US and China. However, Chinas growth pick-up in 2023, after lifting of lockdowns early in the year, remains a silver lining for the global trade. Global shipping rates have largely normalised after falling significantly from their record highs.

Weakness in global trade will provide greater consolidation opportunities benefitting larger players like Allcargo. Introduction of newer trade lanes, digitalisation initiatives, and better yield management will help Allcargo emerge stronger from the slowdown as we continue our journey to gain market share and explore business opportunities.

(Source:, gem/global-economic-monitoring-unit/world-economic- situation-and-prospects-wesp-report/)

Indian Economy Overview

Amidst uncertain global economic outlook, Indian economy exhibited signs of resilience. Strong economic growth helped India overcome the UK to become the fifth-largest economy after it recovered from COVID-19 pandemic shock. Indias real GDP recorded a growth of 7.2 percent in FY 2022-23, stronger than RBIs expectation of 7 percent. Currently available forecasts of Indias real GDP growth for 2023-24, including those of the RBI, broadly settle between 6.0 and 6.5 per cent, this contrasts with Global GDP growth projection of 3 percent. India has emerged as the fastest-growing major economy in the world and is expected to be one of the top three economic powers in the world over the next 10-15 years, backed by its robust democracy and strong partnerships. In US dollar terms, Indias per capita GDP has crossed USD 2,450 which represents a stride towards becoming a middle-income economy. The Government announced Foreign

Trade Policy (FTP) 2023 in March. It aims at reducing transaction costs and encourage ease of doing business through process re-engineering and automation.

Overall aggregate demand conditions remain resilient for the country. Governments thrust on the infrastructure and revival of corporate investments in select sectors augur well for the economy. Investment activity in India is exhibiting buoyancy on the back of strong composite Purchasing Managers Indices (PMI) readings. Merchandise exports have risen by 6 percent in FY 2002-23 to all time high of USD 447.5 billion and services exports remain strong. Overall, merchandise imports also reached an all-time high of USD 714.2 billion in FY23, increasing by 16.5 per cent y-o-y. E-way bill volumes and toll collections remained strong, reaching new highs in March 2023. RBIs monetary policy measures have resulted in headline CPI inflation declining from 7.8 percent in April 2022 to 5.7 percent in March 2023 with further easing expected during the year. However, weak global macroeconomic scenario is impacting India as well with Indian Q1FY24 merchandise exports down 15 percent to USD 103 billion as compared to USD 121 billion in Q1FY23.

The Union Budget 2023-24 aimed at strengthening Indias economic status in the 75th year of Indias independence. Seven priorities adopted in the budget included inclusive development, reaching the last mile, infrastructure & investment, unleashing the potential, green growth, youth power and financial sector. RBI expects Indias real GDP to grow at 6.5 percent during the financial year 2023-24, on the back of resilient economic activity and evenly balanced risks. Globally, geopolitical issues, high inflation, and tight monetary policy conditions will continue to have a negative impact on the growth. Despite global challenges, India will continue to grow and remain resilient against external shocks. India is set to benefit from governments thrust on infrastructure, capital expenditure, and increased credit growth. Apart from government expenditure, improving sentiments from private sector and better capacity utilisation also hold the key to Indias economic growth. CPI inflation is projected at 5.1 percent for 2023-24.

(Source: IMF World Economic Outlook April 2023, RBI State of the Economy Bulletin - April and June 2023, Union Budget 2023-24,

Global Logistics Sector

The global shipping sector remained volatile during the year with significant softening of freight rates. The diminishing tailwinds were driven by supply chain normalisation, geopolitical uncertainty, continued incidents of Covid-19 pandemic, and high inflation. Shipping Lines have witnessed softening demand during the year and will likely see further drop in profitability as contracts are renewed at lower rates. They now expect a bounce back on trade activity in the second half of 2023. Freight rates appear to have normalised paving way for more predictable shipping rates and therefore, more stable supply chains going forward.

Key trends shaping the sector include 1) Need for stable supply chains, 2) Protectionism and Friend-shoring, 3) Rising e-commerce, and 4) Digitalisation. Global geopolitical tensions have led to an emerging trend of ‘friend-shoring wherein investments, manufacturing links and facilities are moved to countries that are deemed to be ‘friendly. Higher base and

inventory levels saw a muted H2FY23 for global logistics industry. However, e-commerce activity remained strong compared to pre- pandemic levels, despite elevated inflation. Global e-commerce logistics market is expected to grow by 7.9% in 2023.

Global freight forwarding industry is fragmented with top 15- 20 players occupying 35-40% market share followed by lot of small regional players with insignificant market share. High competitive intensity leads to a competitive pricing landscape. Players with established networks, digitalisation, operational expertise, and vendor relationships stand to gain in the current backdrop.

(Source: logistics-market-to-grow-7.9-in-2023,

htt ps:// www. ajot. com/news/ arti cle/supply-chain- professionals-sound-alarm-on-recession-ggeopolitical- tensions-and-cost-pressures-in-h2-2023)

Indian Logistics Sector

India, a favoured investment destination and among fastest growing economies, is poised to be one of the top three economies and a global manufacturing hub in this decade. Logistics play a pivotal role in powering the growth in EXIM and domestic trade. The Indian logistics sector is pegged to grow at a rate of 10-12 percent, to USD 380 billion by financial year 2025. Indias logistics cost is in the range of 12- 14 percent of GDP which is high as compared to developed economies that typically range 7-8 percent. The Government has taken initiatives that will help reduce the logistics cost to below 10 percent of GDP. These initiatives are in the areas of improving infrastructure, helping boost manufacturing, providing a digital landscape, and effective policymaking. India improved its logistics ranking of the World Bank to Rank 38, moving up by six places.

In September 2022, the Prime Minister launched the National Logistics Policy (NLP) which acts as a guiding document for States / UTs seeking to formulate logistics policy (19 States / UTs have notified their logistics policy). The National Logistics Policy has outlined the ambition and roadmap for the Indian logistics sector. The policy is centred around upgradation and digitisation of logistics infrastructure & services. Further, with focus on bringing efficiency in services (processes, digital systems, regulatory framework) and human resources, the policy puts marked emphasis on streamlining processes for seamless coordination, and reduction in overall logistics cost, besides incentivising employment generation and skilling of the workforce. NLP also lays emphasis on the shift towards more energy-efficient modes of transportation and greener fuels to reduce the carbon footprint.

Governments thrust on achieving best-in-class logistics costs and improving trade flows is led by flagship programmes like Make in India, PM Gati Shakti, Dedicated Freight Corridors (DFC), and Production Linked Incentive (PLI) schemes. Additionally, emergence of e-commerce provides a strong growth outlook for the sector. Significant opportunities emerge in the logistics value chain – Container trade, Transportation, Express Delivery, Warehousing, Processing, and Distribution.

Recognising the logistics sector as one of the seven engines of growth in the Indian economy, latest Budget allocated 1.4 lakh crore for the development of the railway infrastructure, while 20,000 crore were granted to expand the national highway network by 25,000 km. This focus on implementation of infrastructure development initiatives will strengthen the multimodal supply chain network and enable the logistics industry to operate at its optimum efficiency.

Industry preferences are shifting towards integrated supply- chain services and other sophisticated solutions such as inventory optimisation and data analytics from isolated offerings such as transportation or warehousing. The logistics outlook remains robust with government-led reforms, changing industry preferences and newer business segments (e-commerce, network services) with some softness expected in H1FY24, reflecting weak global macroeconomic scenario and related impact on demand.

(Source:, Union Budget 2023-24, IBEF,, Niti Ayog, World Bank)

About Allcargo Logistics

Having commenced operations in 1994, Allcargo Logistics takes pride in being among the leading Indian Multinational Companies today. The organisation has been providing seamless, end-to-end logistics solutions to its customers, for over two and a half decades. The mission is to create a sustainable, well governed, and market-leading logistics business worldwide, with digitalisation at its core. Allcargo, along with its subsidiaries, offers a wide range of services like International Supply Chain which includes Less than Container Load (LCL) and Full Container Load (FCL), air freight, trucking, and door-to-door services, globally. On the domestic front, the organisation offers services across express logistics, contract logistics, and supply chain management. Through this gamut of offerings, Allcargo has laid out a single window to offer customised logistical solutions to its Indian and Global customers.

The organisational strategy is focused on creating market leadership in respective business segments. Through ECU Worldwide, its wholly owned global subsidiary, Allcargo operates one of the worlds largest and most complex LCL consolidation network, with more than 300 offices across 180 countries. Within this niche segment, ECU Worldwide commands the largest market share of 15%. The strategic acquisition and turnaround of Gati has resulted into the organisation maintaining its market leadership in the B2B surface express distribution space. Gati manages one of the industrys widest supply chain networks, covering 99 per cent of Government of India approved PIN Codes. Allcargo Supply Chain, wholly owned subsidiary, helps spearhead efforts in the Contract Logistics space with leadership in solutions for the chemicals sector and increasing focus in other sectors.

The Company has de-merged into three entities through a mirror demerger:

  • Allcargo Logistics Limited – focusing on International Supply Chain (LCL and FCL operations), Express Logistics through its subsidiary Gati, and Contract Logistics through its subsidiary Allcargo Supply Chain.
  • Allcargo Terminals Limited – focusing on the CFS and ICD business of the Group.
  • TransIndia Real Estate Limited – housing a portfolio of high yielding rental assets including the Logistics Park. Recently, the business has also initiated plans to diversify the crane rental business which was non-core to its operations.

The rationale behind the demerger is to help the company accelerate growth by creating independent business undertakings. The demerger leads to strategic independence for each entity and allows operational and financial flexibility to drive growth. The Company also refreshed its visual identity to showcase the organisations transformation and progress in shaping the future of global and domestic supply chains.

In June 2023, the Company bought 30% stake in Gati KWE from KWE (Kintetsu World Express) for an aggregate consideration of

406 cr. The Company also bought the remaining 38.87% stake in the JV ACCI for a consideration of 145 cr, with this development, the contract logistics business is now completely owned under the subsidiary Allcargo Supply Chain Private Limited. At the same time, Allcargo sold its 61.13% stake in the custom clearance business thereby fully exiting this non-core business.

In December 2022, Allcargo subsidiary ECU Worldwide acquired 75 percent stake in Fair Trade GmBH, for a consideration of EUR

12 million, with existing promoters holding the remaining 25 percent of the stake. The acquisition expands and strengthens the service network of ECU Worldwide in strategically important market of Germany with sizeable volumes.

ESG Overview

Our ESG initiatives are driven by our purpose of Helping global supply chains, while caring for sustainability and prioritising our efforts to reduce carbon emissions. The Company aims to be carbon neutral by 2040. In its endeavours, the Company planted more than 8,60,000 trees and aims to plant a million by 2023. Allcargo also supports inclusive social welfare programmes in Health, Education, Environment, Womens Empowerment, Sports, and Disaster Relief. The Company adheres to high standards of corporate governance, creating an enabling business environment and ecosystem. It has ISO 31000 certified framework for risk management and ISO 27001 for information security.

Consolidated Financial Overview

Allcargo delivered a strong financial performance despite macroeconomic headwinds. The year was marked with supply chain normalisation, softening of freight rates, geopolitical uncertainty, high interest rate environment on the international front while the domestic scenario remained healthy. Resilient business performance over the last year has enabled the Company to reduce debt and reach a net cash position of 604 Cr in financial year 2023.

Revenue for the year declined 5.3% YoY from 19,062 Cr in financial year 2022 to 18,051 Cr in financial year 2023. However, the Gross Profit over same period increased 7.7% from 3,476 Cr to 3,744 Cr. Decline in revenue is largely on account of ocean freight rate decline, which is mostly a pass through in LCL business and hence a similar decline in operating expenses is also visible, barring impact on FCL business and investments in new trade lanes, which would be loss making initially. LCL yield has remained almost same from April 2022 to March 2023, despite significant reduction in Ocean Freight during the period.

The total (FCL + LCL) business volumes stood at 9,665 TEUs for the year ended March 31, 2023, as against 9,520 TEUs for the

corresponding previous period, registering an increase of 1.5 percent. Express business volumes increased from 966 kt in financial year 2022 to 1,133 kt in financial year 2023, an increase of 17%.

EBITDA for the financial year 2023 was 1,129 Cr as compared to

1,268 cr in the previous year.

Reported profit was 653 Cr as compared to 824 Cr (continued operations) in the previous year.

The company intends to revive profitability in international supply chain business by increasing volumes and reducing SG&A. Yields are expected to remain rangebound with short term decline driven by competitive pressure and bounce back with improved operating parameters including utilisation and share of 40 feet containers. Company will aim to offset Gross Profit impact on account of FCL, which contributes to 30% of the total, by way of volume growth once trade environment is normalised. The express business operations are now best in industry and with mega hubs in place, the management expects revenue and margins to gradually expand.

Allcargo Logistics Limited

Global Container Trade Overview

Ocean freight rates oscillated dramatically between January 2019 and March 2023. The year 2021 saw an especially steep increase in global freight rates, with World Container Composite Index reaching a record of 10,000+ in September 2021. Driven by post Covid normalisation of the supply chains and associated inventory levels, notwithstanding the weakness in overall demand, the freight rate index has dropped by ~80% from the peak (September 2021) to March 2023, subsequently reaching pre-Covid levels. Global exports saw an increase of 2.6% in 2022 over 2021, this was impacted by health restrictions in China in the wake of frequent Covid breakouts.

Shipping Lines have witnessed softening demand during the year and will likely see further drop in profitability as contracts are renewed at lower rates. However, freight rates appear to have normalised paving way for more predictable shipping rates and therefore, more stable supply chains going forward. As a result of falling spot rates, container lines have started actively managing capacity by slow-steaming and bringing in blank sailings (cancelling a scheduled port call or voyage). The average fleet speed for both large and medium containerships has decreased by about 10 percent compared with previous highs in 2021. Reducing speed virtually adjusts the supply of containerships to decrease while also reducing bunker fuel costs.

(Source: container-freight-index/, has-the-container-shipping-boom-waned/, Industry Reports)

International Supply Chain Business Overview

International Supply Chain includes the movement of cargo, domestically or internationally through multiple modes of transportation like air, ocean, road, and rail. This service includes Non- Vessel Owning Common Carrier(NVOCC) operationsrelated to Less than Container Load (LCL) consolidation, Full Container Load (FCL) forwarding and related services. International Supply Chain business is aggregation/consolidation of cargo in shipping vessels. LCL players like Allcargo book the container berths with the shipping companies on a regular basis and in turn resell the space in smaller quantity (less than container load) to the consumers at better rates. This is a win-win for both as consumers save the cost of hiring the full container and LCL player can resell the space at favourable rates.

Allcargo is a global leader in LCL consolidation and operates the largest global LCL network with 15% market share. The Company operates across 2,500 direct trade lanes and 4,000 Port pairing.

LCL business accounts for ~6-8 percent of the overall global shipping trade volumes. The balance ~92% is FCL, which is addressed by large freight forwarders. Global cargo traffic volumes have been growing at an average rate of ~3 percent for the past decade. However, Allcargo has been growing at rate which is higher by 2-3x of the global cargo growth rate. This significant outperformance was driven by strong growth in the LCL segment led by organic and inorganic initiatives.

The Company has been at forefront of digital developments and offers a unique combination of traditional strengths with excellent network and modern technology through ECU 360 platform. Close to 60 percent of ECU worldwide bookings are being done through the ECU 360 platform. Complementing digitalisation are companys efforts towards yield management and trade lane management.

International Supply Chain Financial Overview

The consolidated (FCL + LCL) business volumes stood at 9,665 TEUs for the year ended March 31, 2023, as against 9,520 TEUs for the corresponding previous period, registering an increase of 1.5 percent. Within this, LCL volumes remained flat YoY at 9.05 mn cbm and FCL volumes grew by 1.8 percent YoY to 604.5 thousand TEUs.

Total revenue for the year ended March 31, 2023, was 16,333 crore, as against 17,642 crore for the corresponding previous

period. EBIT was 875 crore for the year ended March 31, 2023, as against 1,187 crore for the corresponding previous period.

Express Distribution Business Overview

Allcargo operates its express distribution division through its wholly owned subsidiary Gati Ltd. Gati, incorporated in 1989, is one of Indias oldest and leading express logistics players. The company boasts of a strong network and reach that covers about 99% of government of India approved pin codes. Gati is predominantly a multimodal express logistics player that provides end-to-end solutions to its clients. Services provided by Gati include express distribution, air freight and supply chain management. Gati also provides special services like student express, bike express, art express and Laabh. Gati, being one of the oldest express logistics players, has a strong and longstanding relationship with marquee clients.

Post its acquisition by Allcargo Logistics in 2020, Gati embarked on a road to transformation where the company restructured its balance sheet, improved its governance structure, reduced its debt, and moved on to the next phase of transformational growth Gati 2.0. Under Gati 2.0 the company laid down five pillars of growth that are a) digitisation, b) sales acceleration, c) infrastructure, d) streamlining operations and e) talent pool. The company has carved out a path to profitable growth based on these pillars and is well on its way to achieving the same.

During the year, Allcargo Logistics announced its plan to acquire a 30% stake from KWE in GKEPL, a subsidiary housing the express business. The acquisition is a part of a well-planned strategy by Allcargo that involves further investment in the express business. Allcargo acquired the 30% stake from KWE in June 2023 for a consideration of 406 crores. The agreement was mutually agreed upon by both Allcargo and KWE. The strategic collaboration with Allcargo allows Gati to leverage its global network and allows opportunities to cross sell its products.

With Gati 2.0 the management continues its path to achieve sustainable profitability. The management continues to walk on the pillars of growth it had laid out with more vigor. Out of the mentioned pillars, Talent Acquisition of top management, which is a key differentiator between organisations, has been undertaken and the Company is now being driven by seasoned professionals. Significant reinforcement has been made at mid- level as well. Right talent enables a right approach, well directed strategy execution, and ensure future readiness.

Express Distribution Financial Overview

The total revenue for the year ended March 31, 2023, was 1,723 crore as against 1,490 crore for the corresponding previous period, an increase of 16%. Express business volumes increased from 966 kt in financial year 2022 to 1,133 kt in financial year 2023, an increase of 17%.

EBIT losses narrowed to 24 crore for the year ended March 31, 2023, compared to 32 crore for the corresponding previous period.

Allcargo Supply Chain (Contract Logistics) Overview

For financial year 2023, the contract logistics business appears as a Joint Venture of the Company with CCI; however, effective 17 May 2023, it is now a wholly owned subsidiary of the Company. Allcargo Logistics provided contract logistics services through its

Group Company Avvashya CCI (ACCI-CL). Avvashya CCI was a joint venture between Allcargo and CCI Logistics, where Allcargo held 61% and CCI held 38%.

In May 2023, the Company bought the remaining 38.87% stake in the JV ACCI for a consideration of 163 cr, with this development, the contract logistics business is now completely owned under the subsidiary Allcargo Supply Chain Private Limited. At the same time, Allcargo sold its 61.13% stake in the custom clearance business under ACCI for 39 crores, thereby fully exiting this non- core business.

Post the successful execution of the transaction, the contract logistics business is housed under a wholly owned subsidiary Allcargo Supply Chain Private Limited. This strategic decision would provide greater control over the operations with a well-

Key Financial Ratios

focussed strategy. This will also create room to explore potential synergies between the contract logistics and express distribution business going forward.

The contract logistics business includes end- to-end logistics services – warehousing, transportation, payments and inventory management. Allcargo Supply Chain offers 3-PL and warehousing solutions enabled with customised services for its customers spread across diverse industries. Through its extensive and wide network, the organisation can provide unmatched reach backed by its expertise to cater to customised and specific requirements. The contract logistics business is market leader in chemical warehousing and is rapidly growing in other segments like pharma, auto, retail and e-commerce. It has over 50 warehouses across 45 locations in India and manages over 5 million sqft. of built-up warehousing space.



March 31, 2023

March 31, 2022*

Variation (%)
Net Debt - Equity ratio (Refer Note a)


0.32 -186%
Net Debt / EBIDTA (Refer Note a)


0.74 -185%
Debtors Turnover ratio (in days)


49 6%
Interest Coverage ratio


11.04 13%

Current ratio


1.14 17%
Operating Profit Margin (Refer Note b)


7.55% -12%
Net profit ratio (Refer Note b)


4.48% -24%
Return on Average Net Worth (Refer Note b)


29% -37%

* March 31, 2022 is including Continuing and Discontinuing business as reported in previous year annual report

  1. Reduction in Net Debt during the year ended March 31, 2023, due to increase in cash, bank balances and current investments Net debt has become negative on March 31, 2023
  2. Consequent to demerger, there is a reduction in profitability due to CFS, Equipment hiring & Logistics Park business moving out of Allcargo Ltd. and reduction in profitability of International Supply Chain business.