Allcargo Group Announces Business Restructuring Scheme; Shares Rally Up To 8%

Boards of Allcargo Logistics Limited and Allcargo Gati Limited have given nod to the composite scheme of arrangement for restructuring of businesses under Allcargo Limited and Allcargo Gati Limited (Formerly Gati Limited), according to a BSE filing issued on December 21, 2023. As per the scheme, International Supply Chain (ISC) business will be demerged into a separate entity: Allcargo ECU Limited. This would include the India part of International Supply Chain business along with the international subsidiaries held under the ECU Worldwide NV.

Soon after this development, shares of Allcargo Logistics Ltd gained 8.13% at 10:08 am on Friday. Current market price of Allcargo Logistics share on BSE is Rs 308.05 per share. The stock's 52-week high price is Rs 442.40 per share and 52-week low price is Rs 246.00 per share, respectively. The company has a market capitalisation of Rs 7568.65 crore. Allcargo Logistics shares gained 16% in last 3-months, declined 23% in last 1-year, and offered return of 136% in last 3-years.

Meanwhile, current market price of Allcargo Gati Ltd share on BSE is Rs 140.00 per share with intraday gain of 1.30%. The stock's 52-week high price is Rs 177.50 apiece and 52-week low price is Rs 97.65 per share, respectively. The company has a market capitalisation of Rs 1823.32 crore. Allcargo Gati shares gained 20% in last 6-months, fell 14% in last 3-months, and rallied 71% in last 3-years.

Express business and Contract Logistics business would come under the resulting entity Allcargo Logistics (post ISC demerger) which will benefit from combined synergies and the shareholders of Allcargo and Allcargo Gati will get direct shareholding eliminating inefficient complex corporate structure.

As per the approved swap ratio, based on the recommendations of the independent valuers, shareholders of Allcargo Gati will get 63 shares in the resulting Allcargo Logistics entity (post ISC demerger) for every 10 shares held in Allcargo Gati. Shareholders of Allcargo will get 1:1 shares in the demerged Allcargo ECU Limited and continue to hold their shares in Allcargo Logistics Limited, which will now be the resulting entity holding Express and Contract Logistics business directly. This takes into account 3:1 bonus shares approved by shareholders for Allcargo Logistics recently.

Commenting on this announcement, Shashi Kiran Shetty, Founder and Chairman, Allcargo Group, said "This is a momentous occasion in the history of the Allcargo Group. Our intention is to empower our flagship businesses with strategic independence and operational synergies, with customer integration in express and contract logistics businesses and direct shareholding in operating companies. This will also establish financial accountability for the management team, comprising best in class senior & middle management team to drive the businesses forward with growth and return mindset with a digital first approach."

He further added that "A simple structure and sharp business focus under independent management team/board of directors will enable the Allcargo group to continue to drive its track record of growth, having demonstrated near 18% CAGR over last 20 years" He further added that the group is committed to create immense value for all the stakeholders.

The scheme is expected to be implemented in the period of 10-12 months, accounting for regulatory filings, Stock Exchange approval, shareholder approval, NCLT approval and ROC filings.

Allcargo Group will eventually have four listed strategic business undertakings. Allcargo ECU Limited and Allcargo Logistics post demerger of ISC business, alongside Allcargo Terminals Limited and TransIndia Real Estate Limited, which were created through earlier scheme of arrangement. All four public companies are well poised for growth on the back of market opportunities and robust management capabilities.