Allcargo Logistics pursues $30 mn cost-cutting amid global slowdown

08 Jan 2024 CW Team

Additionally, an anonymous source disclosed that the company plans to raise up to Rs 3 billion in equity funds for Gati, its express logistics business.

Shetty attributed the disruption in the supply chain to excessive ordering during the global logistics slowdown, leading to full warehouses. However, he highlighted a significant shift due to geopolitical events, such as the war in Russia and Ukraine, causing dramatic changes in the global landscape with rising commodity prices and interest costs.

Acknowledging the challenging market conditions, Shetty outlined the cost-cutting measures, including workforce rationalisation and a hiring freeze. Despite the current challenges, he expressed optimism about improving conditions from December onwards, citing decreasing inventory levels and a surge in real orders.

Allcargo Logistics is actively investing in digitalisation, data security, and centralisation of its processes, particularly in the aftermath of a cyber-attack in 2022 that disrupted the company's systems for a week. Shetty emphasised the company's commitment to becoming one of the most secure logistics companies globally, collaborating with firms like IN Groupe, Soc LLC, KPMG, and EY.

Highlighting the ongoing restructuring efforts, Shetty announced the demerger of ECU Worldwide, its lucrative international business, into a separate listed entity named Allcargo ECU. This move is the final step in a series of strategic initiatives that included selling non-core assets, providing exits to partners, and acquiring their stakes in business.

The Allcargo Group will now consist of four listed entities: Allcargo ECU, Allcargo Logistics (including the acquired Gati express business), Allcargo Terminals, and TransIndia Real Estate. Shetty indicated that Gati, still a loss-making and leveraged entity, will raise equity funds to create a five-year business plan, invest in systems, processes, people, and retire debt. TransIndia Real Estate may explore the alternative investment fund route for fundraising. Shetty concluded by envisioning a global system, operating system, and platform for Allcargo Logistics' businesses by the end of 2024.

Allcargo Logistics is targeting a cost reduction of $30 million (approximately Rs 250 crore) by the end of the fiscal year 2023-24 amidst the ongoing global logistics sector slowdown, revealed Chairman Shashi Kiran Shetty in an interview. Despite this cost-cutting initiative, the Mumbai-based company is allocating $100 million (Rs 830 crore) for a comprehensive digital transformation, including the enhancement of its cybersecurity infrastructure. Additionally, an anonymous source disclosed that the company plans to raise up to Rs 3 billion in equity funds for Gati, its express logistics business. Shetty attributed the disruption in the supply chain to excessive ordering during the global logistics slowdown, leading to full warehouses. However, he highlighted a significant shift due to geopolitical events, such as the war in Russia and Ukraine, causing dramatic changes in the global landscape with rising commodity prices and interest costs. Acknowledging the challenging market conditions, Shetty outlined the cost-cutting measures, including workforce rationalisation and a hiring freeze. Despite the current challenges, he expressed optimism about improving conditions from December onwards, citing decreasing inventory levels and a surge in real orders. Allcargo Logistics is actively investing in digitalisation, data security, and centralisation of its processes, particularly in the aftermath of a cyber-attack in 2022 that disrupted the company's systems for a week. Shetty emphasised the company's commitment to becoming one of the most secure logistics companies globally, collaborating with firms like IN Groupe, Soc LLC, KPMG, and EY. Highlighting the ongoing restructuring efforts, Shetty announced the demerger of ECU Worldwide, its lucrative international business, into a separate listed entity named Allcargo ECU. This move is the final step in a series of strategic initiatives that included selling non-core assets, providing exits to partners, and acquiring their stakes in business. The Allcargo Group will now consist of four listed entities: Allcargo ECU, Allcargo Logistics (including the acquired Gati express business), Allcargo Terminals, and TransIndia Real Estate. Shetty indicated that Gati, still a loss-making and leveraged entity, will raise equity funds to create a five-year business plan, invest in systems, processes, people, and retire debt. TransIndia Real Estate may explore the alternative investment fund route for fundraising. Shetty concluded by envisioning a global system, operating system, and platform for Allcargo Logistics' businesses by the end of 2024.

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