All Cargo Debuts to Express Logistics by Acquiring Stakes at Gati

BY Tiya Chatterji December 6, 2019

Allcargo Logistics on Dec 5, declared it is acquiring a controlling stake in express logistics company Gati for Rs 416 crores. Allcargo Logistics rose 1.33% to Rs 95.40 while Gati fell 2.20% to Rs 64.55 after Gati offloaded a striking equity stake to Allcargo Logistics.

As part of the deal, Allcargo will buy up to 1,03,85,332 equity shares at ₹75 per share from some of the existing members of the Promoter and Promoter Group of Gati – Mahendra Kumar Agarwal, Mahendra Investment Advisors Pvt Ltd and TCI Finance Ltd (TCI), and Gati. The all-cash deal will see the company eventually acquiring about 45% in Gati through a direct purchase of the promoters’ stake and a subsequent open offer. It values the company at about Rs 1,000 crore.

Allcargo will also subscribe to a preferential issue of 1,33,33,340 equity shares of Gati at ₹75 per share, subject to the approval of the shareholders of Gati. If the open offer is fully subscribed, Allcargo will end up with a significant 44.6% stake in Gati. Allcargo dispenses a range of services like Multimodal Transport Operations (MTO), Container Freight Station Operations/Inland Container Depot Operations (CFS-ICD) and Logistics parks. Allcargo’s market leadership in the global less than container load (LCL) consolidation business and Gati’s domestic express transportation section enables the company to offer end-to-end transportation potential to customers.

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,” Shashi Kiran Shetty, Chairman, Allcargo Logistics Ltd said in a statement.

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,” said Bala Aghoramurthy, deputy MD, Gati Ltd.

The express logistics industry is expected to reach Rs 48,000 crore ($7 billion) by 2023, according to a study led by Deloitte in 2018. This growth will primarily be driven by domestic consumption, shift from unorganized to organized trade, ecommerce (domestic and cross border) and significant demand from small and medium B2B segment.