Allcargo plans to invest Rs 1,000 crore in logistics park development

Allcargo Logistics, part of the Avvashya group, has no plans to set up more container freight stations or inland container depots. The company said it would focus on developing logistics parks that is witnessing growing demand.

“Today, there are sufficient container freight stations and inland container depots, and we do not need to put up more. We are up to the brim in this segment. Logistics park is the future,” Prakash Tulsiani, an executive director and CEO, told Business Standard. “Lack of rail capacity is increasing road cargo activities and, hence, we need to have logistic parks for the first- and last-mile delivery,” he said.

In container freight stations segment, Allcargo operates in the major container ports at JNPT-Nhava Sheva, Chennai, Mundra and the recently-commissioned facility in Kolkata. With this, the company's container freight stations are present in ports that handle over 80 per cent of India’s containerisation. Its total segment capacity is 500,000 TEUs at present.

Allcargo is also developing multimodal logistics park in Jhajjar, Haryana. This facility is seeing a phase-wise implementation this year and will be India’s largest logistic park, housing a rail-linked private freight terminal catering to railway cargo movement, a free trade warehousing zone, and other related activities. It will also have the facility to handle in-bound and outbound contract logistics services. “Demand for logistics park is consumption driven and implementation of GST (goods and services tax) has only streamlined the logistics sector,” said Tulsiani. The company aims to invest Rs 1,000 crore over next 3-5 years towards logistics parks and if sees demand growing further would take the next leap for investment, informed Tulsiani without divulging details of fundraising for the investment. 

Alongside, the company is also seeing its spending grow towards technology and hiring as it looks to expand. “There will definately be need for people as we open new facilities (logistics park) in new locations and there will be demand for people across board. However, I cannot give a hiring number,” he said. 

As of March 2018, Allcargo’s net debt stood at Rs 474 crore, almost half of what was reported in FY14 when the company’s ROCE was the lowest in seven years at 9.8 per cent. In the fiscal gone by, the ROCE of the company has only inched up to 10.8 per cent, much lower than the highest seen in the period under review at 17.9 per cent in FY12. Meanwhile, the company’s top line has been witnessing decent growth. 

“We did have trouble in projects and engineering solutions division and we were not needed since they (client companies) didn’t have any capex. Our utilisation in this segment halved from 75-80 per cent earlier and this hit our performance. Disruption in CFS segment via DPD (direct port delivery) was also another hit that we had to take,” said Tulsiani.

Allcargo provides consultancy and equipment services to engineering companies in the country. 

DPD allows importers/consignees to take delivery of the containers directly from the port terminals and haul them to factories without taking them first to a CFS and from there to factories. An importer is thus assured clearance of cargo in less than 48 hours under DPD as against an average of seven days if routed through a CFS.