Allcargo Logistics has ventured into the express logistics space as it acquired Gati. With this acquisition, Allcargo proposes to enter the express supply chain industry.

Allcargo Logistics Ltd., the integrated logistics solutions provider, announced the acquisition of controlling stake in Gati Ltd for Rs 416 crore. The board has also approved an open offer, post which Allcargo will end up with 44.6 percent stake in Gati.

Shashi Kiran Shetty, Founder & Chairman, Allcargo Logistics said going forward they would like to get a majority stake in Gati. "We will see how to go about that maybe through a creeping acquisition later, but right now we will end up about 45 percent,” he said in an interview with CNBC-TV18.

When asked what the numbers would like for the consolidated business after the open offer was successful, he said, “Approximately, in FY21 the company would end up somewhere around Rs 9.5 thousand crore in terms of revenues and the EBITDA should be upwards of Rs 650 crore.”

Allcargo Logistics has also outlined a road map to raise Rs 195 crore via Non-convertible debentures (NCDs).

With regards to raising rest of the money for the acquisition, he said, “Allcargo Logistics is an underleveraged company, against Rs 500 crore EBITDA we have business debt of about Rs 150 crore. We have borrowed for construction of the logistic park somewhere around Rs 400 crore. We will have to spend additional Rs 350 crore in the next 18 months, so that will complete 5 million square feet of warehouses and that will yield rental income of roughly about Rs 100 crore."

He further added, "We do not intend to keep these assets under the company. We are looking at financial investors, strategic investors to come in as a majority shareholder in our warehousing venture and that is why all assets are sitting in the subsidiary. We are also looking at selling some of our cranes which would raise about Rs 100 crore odd.

However, there would be little bit of a lag between payments for the acquisition versus the money that we will receive, he said. "So, temporarily loan amount would be higher at around Rs 800 crore odd. We are already in advanced discussions and the deal might get announced within next couple of weeks. Then we will be back to almost debt free company.”

When asked what would be their plan B in case the open offer was not successful he said, “Plan B would be to stay at 35 percent, and consider merging one of our businesses into Gati, to go up to the majority stake which is strategic to Gati’s business.”

For the time being they plan to keep both Allcargo Logistics and Gati listed separately, although it makes sense to have one listed company, said Shetty.