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Logistics service provider Allcargo Logistics, which recently closed its share buyback offer, is looking at acquisition opportunities in India and abroad. The company is also looking to set up base in the US market, Shashi Kiran Shetty, CMD, tells Dilip Kumar Jha. Edited excerpts:
Why are you looking at the US market when it's economy is not out of the woods?
You cannot skip the world's largest economy. We are currently handling businesses in the US market through third parties. But we want to run our own operations there, either through acquisition of mid-size firms or a new project. This would complete our presence in almost all big economies. Our 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 the US economy would recover sooner than later.
What's the size of your investment plan?
The amount isn't an issue. Our low debt-equity ratio would help raise money.
What prompted the share buyback option?
The trading volume was low, as less than two per cent was available with the public. While institutional investors held around 28 per cent, the promoter group held around 70 per cent. Therefore, we decided to purchase shares, which, we believed, were underpriced. Also, a share buyback would help us further raise money from the market, in case we needed to fund our proposed expansions.
We are looking at mid-size acquisitions of about Rs 50 crore, both in India and abroad, as we want to increase our footprint in foreign market. A lot of our business is happening through an integrated business model under which we handle everything from less-than-a-container-load (LCL) to project handling. No other player is 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 our long-term prospects.
Your project and engineering division has invested heavily in assets, resulting in reducing the net worth. What are your plans for this 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 offers at least 33 per cent cost advantage. We bought three vessels recently and strengthened our footprints in LCL and the full container load (FCL) business.
Your container freight station (CFS) business has shown a dip. What is your strategy to maintain the market share?
We started the CFS business in 2003 and in 2005-06, acquired ECU Line, a European company much larger in size than us. In 2007, we commenced two more CFS in Chennai and Mundra. Last year, one more CFS at JNPT (Navi Mumbai) began operation. We are looking at offering value-added services to attract business and gain market share.
