A lot of our businesses are recession-proof: Shashi Kiran Shetty

Q&A with CMD, Allcargo Logistics

Logistics service provider Allcargo Logistics, which recently closed its share buyback offer, is looking at acquisition opportunities both in India and overseas. The company is also looking to set up a base in the US market, Shashi Kiran Shetty, CMD, tells Dilip Kumar Jha. Excerpts from the interview:

The US economy is still not out of the woods. Why are you looking at the US market at this point?

You can’t skip the world’s largest economy. We are currently handling business in the US market through a third party. But we want to run our own operations either through acquisition of mid-size companies or setting up a greenfield project. This would complete our presence in almost all big economies. The acquisition of ECU Line in Europe in 2005-06 and two Hong Kong based entities in 2010 expanded our presence to 89 countries through 189 offices. We are sure of a recovery of the US economy sooner than later.

What’s the size of your investment plan?

We want to set up our base in the US so the amount isn’t an issue. Our low debt-equity ratio would help us raise money.

What prompted you to go for share buyback?

The trading volume was low as less than 2% was available with the public. While institutional investors held around 28%, the promoter group held over 70% in the company. Hence, we decided to purchase shares which, we believe, were underpriced. Also share buyback would help us raise money from the market in case we require to fund our proposed expansion.

We are looking at mid-size acquisitions of over Rs 50 crore both in India and also overseas, as we want to increase out footprint in the overseas markets. A lot of our business is happening through an integrated business model under which we can handle everything from less-than-a-container-load (LCL) to project handling. No other player is currently offering this in India. Also, we have our own chartered ships and warehouses. All these areas have immense business opportunities and are recession-proof. We are, therefore, confident about the long-term prospects of Allcargo.

Your project and engineering division has invested heavily in assets resulting in reducing the networth. What are your plans for the vertical?

We have received mega orders from public sector companies. The recent investment has made us better equipped to handle such orders. With air freight becoming costlier due to intermittent rise in fuel prices, transportation through water route offers at least 33% cost advantage. We have bought three vessels recently and strengthened our footprints in LCL and full container load (FCL) business.

Your container freight station (CFS) business has shown a dip. What is your strategy to maintain your market share?

We started CFS in 2003 and in 2005-06 acquired ECU Line, a European company much larger in size than us. Later in 2007, we commenced two more CFS in Chennai and Mundra. Last year, one more CFS at JNPT began operation. We are looking at offering value added services to customers to attract business and gain market share.