Allcargo board approves demerger of CFS/ICD, real estate businesses

The board of Allcargo Logistics approved the demerger of CFS/ICD business into Allcargo Terminals and demerger of equipment rental, logistics parks and other real estate assets into TransIndia Realty & Logistics Parks (TransIndia).

As per the company's press statement, the demerger will position the company to accelerate growth across businesses by creating independent business undertakings, with "sharper management focus, better access to right capital, and greater operational and financial flexibility."

The resulting company Allcargo Terminals will be a major player in the CFS business in India and will continue to expand its footprint in ICDs. Five out of seven facilities of Allcargo Logistics are already on lease and the new resulting structure will make all seven CFS/ICDs completely asset light, positioning the company strongly to drive growth with high return on capital employed.

Under the proposed scheme of demerger, the equipment rental and real estate businesses will move to TransIndia. This will create a portfolio of class grade A warehouses and other assets leased to marquee clients. The business will also hold the shares in the JV with Blackstone. Post demerger, the business would have opportunity to attract pools of capital, as grade A warehousing is in very strong demand and capabilities of TransIndia will provide opportunities for robust growth.

Under the scheme of demerger, all three companies will have mirror shareholding, resulting in no change in entitlement of shareholders for each entity. Post demerger, shareholders will get 1 share each of Allcargo Terminals and TransIndia Realty & Logistics Parks for every 1 share held of Allcargo Logistics. The 1:1 ratio will avoid fractional allotment and benefit all shareholders, the exchange filing highlighted.

Allcargo Logistics' consolidated net profit surged 355.9% to Rs 264.39 crore on 113% increase in net sales to Rs 4,977.86 crore in Q2 September 2021 over Q2 September 2020.

Shares of Allcargo Logistics advanced 3.30% to close at Rs 373.85 on Thursday, 23 December 2021. Allcargo Logistics is India's largest integrated logistics solutions provider.

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