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Allcargo Logistics Ltd.

BSE: 532749 Sector: Others
NSE: ALLCARGO ISIN Code: INE418H01029
BSE 00:00 | 19 Feb 112.50 2.70
(2.46%)
OPEN

110.00

HIGH

114.25

LOW

109.85

NSE 00:00 | 19 Feb 112.45 2.70
(2.46%)
OPEN

109.95

HIGH

114.30

LOW

109.75

OPEN 110.00
PREVIOUS CLOSE 109.80
VOLUME 12195
52-Week high 126.00
52-Week low 87.35
P/E 23.94
Mkt Cap.(Rs cr) 2,764
Buy Price 111.15
Buy Qty 20.00
Sell Price 112.50
Sell Qty 40.00
OPEN 110.00
CLOSE 109.80
VOLUME 12195
52-Week high 126.00
52-Week low 87.35
P/E 23.94
Mkt Cap.(Rs cr) 2,764
Buy Price 111.15
Buy Qty 20.00
Sell Price 112.50
Sell Qty 40.00

Allcargo Logistics Ltd. (ALLCARGO) - Chairman Speech

Company chairman speech

Dear Fellow Shareholders

It gives me great pleasure to share with you the highlights of our Company'sperformance during thThe financial year ending March 31 2019.

Last year was an important year in our company's history. We celebrated our SilverJubilee upon the completion of 25 years of operations a feat that was made possible by ashared vision and a collective enterprise.

Great institutions are not measured in years or decades but centuries. If longevity isof any significant consequence we should set our sights much farther. Hence the theme ofthis annual report is

‘Allcargo celebrates 25 years - Together to silver. Together to gold.'

But before we get there let us look at the larger ecosystem of the infrastructure andlogistics sectors.

The prevailing trade issues between US and China and geopolitical tensions between USand Iran have led to some dampening of business sentiments in the last few months.Bilateral trade tensions are expected to continue which could further dampen consumerdemand. However we remain guarded to a great extent because of our global network. Thisis further aided by the stabilisation of global freight rates in certain pockets.Countries are re-evaluating their supply chain cycles amidst these changes. Tech-leddisruptions in the maritime sector will also change the scenario. As one of the leadingcompanies in global MTO business we have been taking stock of these developments andcreating strategies to achieve our goals and vision. I have expounded about it in detailas you will read further.

We have opened the books for the current financial year (FY20) on a very positive note.The infrastructure status accorded to logistics and the implementation of the Goods andServices Tax (GST) in India were significant reforms during NDA 1.0. that made the sectormore organised. We expect NDA 2.0 to build on these policies. The large projects that wereinitiated in the last five years can be expected to continue for at least five more years.The implementation of long-term and critical national projects like Sagarmala andBharatmala will also continue and hopefully pick up pace in the next few years. There is arevival in the government's capex cycle. Roads and highways are being constructed atrecord speed to connect cities and villages for seamless mobility. The logistics sectorwill be one of the major beneficiaries and contributors of this development.

The future looks positive for our sector and as the leader in this space we havestarted taking steps to capitalise on this growth.

Indian Logistics Industry

This is a good time to be in the logistics business in India. The Indian logisticsindustry is expected to grow to $215 billion in revenues by 2020-21 from about $160billion in 2016-17.

The on-going work towards creating ‘The Integrated Transport and Logistics Policy'is definitely the first step towards realising this goal and certainly the right one. Butthere is a need to step up the pace and move into the implementation stage. It willrequire integration of several ministries like rails roads shipping and aviation forbetter coordination and focus. This unified approach is necessary to reduce the cost oflogistics in India.

Over the past five years there has been a considerable level of infrastructurecreation in terms of roads railways and airports. However our inland waterways forvarious reasons have been one of the most underutilised national assets. The opening ofthe first inland waterway connecting Kolkata and Varanasi is a great start. But theexpansion here has to pick up speed particularly in flagship projects like Sagarmala.

Investments in public and private assets in the logistics business must be taken up ata holistic level to ensure that we do not create fresh inefficiencies. For example thegovernment is planning to set up 50 economic corridors 35 multimodal logistics parks at15 locations and 10 intermodal stations. But there is a need to consider these plans at amore comprehensive national level to avoid the risk of creating pockets of overcapacitythat will lead to larger systemic inefficiencies.

A strong digitalisation wind is already sweeping across the sector and it is only goingto get stronger. The pressure on improving efficiencies will largely be driven by digitaland other technologies in every aspect of our business. Advanced analytics application ofartificial intelligence robotics and blockchain will be at the forefront of this change.

Adoption of new technologies along with digitalisation of the sector is also likely tothrow up new challenges in terms of manpower and skills. For example higher levels ofautomation could make a lot of traditional roles redundant while the demand for newskills will increase manifold. Creating a new skilling ecosystem to address this changewill be essential.

In March 2019 we signed a Memorandum of Understanding with JNPT and CIDCO (City andIndustrial Development Corporation) under the Prime Minister's Kaushal Kendra skillingprogram wherein Allcargo would set up the operations maintenance and management of askill training centre. The first batch of students has started receiving vocationaltraining in consignment booking documentation and warehouse management at the SkillDevelopment Centre in Bokadveera Uran near JNPT Mumbai. Expanding the skill pool alsoprovides fresh opportunities to make it more inclusive to cover a wider section of oursociety. From training women to learn to drive heavy-duty vehicles to reaching out to theyouth in the less-privileged sections of society to improve their employability andlivelihood we are not only addressing the skill gap in the logistics sector but alsocreating a more inclusive ecosystem.

We are committed to the cause of gender diversity and equality in our workforce. Ourwomen colleagues work across various levels including key positions and continue to leadtheir respective areas with zeal and professionalism. It is also a matter of great pridefor Allcargo that 41% of our global workforce is women perhaps amongst the highest andmost inclusive in the global logistics sector.

Business Performance

We continued to maintain our leadership in the MTO business with an overall growth ofaround 15% vis--vis a global growth of only around 4%. We are in the process of creatinga very strong sales leadership and continue to hunt for established sales staff in majormarkets of Asia USA and Europe.

The CFS-ICD business managed to bounce back with around 12% growth in revenue andaround 13% growth in volumes in extremely challenging circumstances. Our company's abilityto quickly adapt to changing market conditions and optimise our services to our advantagewas reflected post the DPD rollout. With timely response we were able to grow our sharein the CFS addressable markets in various segments. Our Kolkata CFS is in full swing andwe continue to grow volumes and gain customers. We do anticipate some impact due to theUSA and China trade war; however we have taken steps to counter these challenges andensure that we do not get impacted. We have drawn out plans to grow our business throughinnovative ways and expand market share. Our focus remains to manage our costs well andprovide our customers ease of doing business with us.

After a certain slow down due to low capex and market conditions the Project andEngineering (P&E) business managed to turnaround and posted a revenue growth of around7.6% in FY19. This was due to improved utilisation of engineering solutions assets andexpansion to new geographies. We secured our first projects in Africa and Bangladeshduring the year. The

P&E business is expected to grow further during 2019-20 with revival in 8 coresectors -- coal crude oil natural gas refinery products fertilisers steel cementand renewable energy. We will continue to clock higher utilisation of our assets throughthe next couple of years as we have a reasonably strong order book.

We have completely exited our coastal ship owning business this financial year asresult of a conscious strategy to become asset light. This worked to our advantage giventhe slower than expected growth in the Indian coastal shipping sector.

Our existing land bank which the company had invested strategically has become one ofthe most valuable assets in thThe Warehousing industry. We have set up this business andput in place a very strong focus to make the best out of the huge demand for A gradewarehouses in some of the most important consumption centres in India. We own large landparcels and we are developing 95 acres near Delhi 102 acres in Bengaluru and 30 acres inHyderabad. This opportunity of building logistics parks has turned out to be a hugesuccess for us. We are now one of the largest warehouse developers in the country havingpre-leased assets of 3.5 million square feet of warehousing space to large multinationalcompanies for long term contracts. Over the next two years we plan to expand ournationwidThe Warehousing footprint to 6 million square feet by establishing strongconnectivity to industrial hubs and transport routes. Positive reforms and innovation willfurther push the envelope. The sector is set to evolve and demand more value-addedservices. We now have this valuable asset in the books ready to be monetised at the rightvalue and at the right time.

Our supply chain and contract logistics subsidiary Avvashya CCI is targeting to tripleits warehousing facilities to 10 mn. sq. ft. over the next four years. The introduction ofthe e-way bill has further strengthened the existing tailwinds in the supply chainbusiness that can propel the industry into a double-digit growth rate in the contractlogistics segment.

Putting together a strong leadership team

We have put together a comprehensive strategy to achieve business leadership. We havebeen driving the sales process to help our team deepen and widen our customer base.

Tim Tudor is leading ECU Worldwide as the CEO and driving the growth agenda by makingus more agile and goal-oriented. Tim's grasp of the company comes with his long experienceof working with us as the Regional CEO of the Americas region.

Uday Shetty who is also Regional CEO APAC ECU Worldwide has been given an additionalresponsibility as the Chief Operating Officer a newly created role to work closely withthe CEO at the strategic level. We have comprehensive plans to go digital throughtransformations which would help us expand our business and also build internalefficiencies.

At the start of this year (calendar 2019) we reworked our sales leadership to bring inmore focus on sales management. We got on board Dmitriy Ioffe for the new position in thecompany Chief Commercial Officer (CCO). His 23 years of LCL experience includes commercialleadership roles with Shipco Transport and Vanguard Logistics. His primaryresponsibilities are to increase our footprint in the Transpacific East and West boundmarkets. This is the largest trade lane in the world and we have huge room to grow in thismarket. A focus on this market will also help us generate volumes for other trade lanesand further augment our volumes in FCL and Air Freight.

Vaishnav Shetty my son who completed his graduation from Emory University Atlanta inthe USA has joined Allcargo in 2017. He has been inducted to the board of ECU Worldwideas Executive Director to work on digital transformations.

A strong believer in tech power Vaishnav has undertaken the task of developingproprietary tech-tools at ECU Worldwide. As the youngest member of the ExecutiveCommittee he constantly supports the group's vision – to become a global leader inthe business and be known for pioneering solutions in logistics worldwide. He was earlierinvolved in the business development role to set up state-of-the-art bespoke warehousesfor India's biggest e-commerce and retail brands.

A strong leadership is the cornerstone of the company's growth. I have immense faith inthis team.

Putting together a digital strategy

We have been pursuing our digital strategy since the last couple of years and pursuantto that with the launch of our global ERP called TOPAZ and our DIY tool for our customersECU360. We should be able to access the market deeper and wider using technology as anenabler and business driver. Differentiating ourselves as a dominant player is part of ourstrategy for accelerating revenue growth in the coming years. We are fully integratingtechnology in all our day to day activities to gain better control and provide superiorexperience to our customers employees and other stakeholders.

We are embracing digital innovations to increase operational efficiency. We are amongstthe first in this business to introduce tools like Net Promoter Approach (NPA) to garnerfeedback and improve our services.

Continuing with our commitment towards community service through CSR

Helping the community has been the cornerstone to our 25-year long journey. As we growthe commitment and involvement with the society at large has always been close to ourheart.

Being responsible to the environment will be the overarching principle of everything wedo over the foreseeable future. We are taking significant steps to conserve resources andreduce waste across all levels. To start with we have banned all plastic materials at ourpremises. Through focused campaigns like Allcargo Greens and ECU Greens we continue toengage with our colleagues communities and stakeholders to encourage responsible ways ofliving. We mobilised our workforce and over 300 employees participated in a beach clean-updrive held at Juhu Mumbai during the 5th anniversary of the Swachh Bharat Abhiyaan.

In the past year we continued to work with local communities in the areas ofhealthcare education sports environment women empowerment and disaster relief.Through a host of healthcare initiatives like Jeevan Vanprastha Ashram LeprosyEradication Program Drushti Medicare and Dhvani we have supported over 23000beneficiaries. Similarly on the education front through initiatives like Disha AnandoKaushalya Mentor Me India and Skill Development the Avashya Foundation has reached outto more than 10000 youth across the nation. We are also using sports as a tool tochannelise skills ability and energy of the country's youth in a direction that willdevelop discipline as well as nurture a healthy lifestyle.

I take great pride in stating that we are well on track towards our vision to plant onemillion trees by 2021 under Maitree – our environmental sustainability project. Wehave already planted 549000 fruit bearing trees in the tribal areas of Maharashtradirectly benefiting over 10000 farmers who have been able to empower their families withbetter income and education.

At the urban level our environmental initiatives under the Allcargo Greens and ECUGreens banners have now roped in more than 4000 of our employees to be a part of oursustainability programmes. We believe small steps lead to larger goals which drives us toconsider every opportunity to save scarce resources and minimise our carbon footprint ineach step towards our larger corporate goals. Our sensitising campaigns aim at reducingthe use of paper in printing and packaging replacing plastic with glass bottlesconsciously switching off electrical devices that are not in use encouraging ride-shareand cycling to work and participating in afforestation beach and river cleaning drivesetc.

We remain committed to serving communities through these projects. For the year wehave charted out a detailed plan to reach out to a wider base of people.

Financial Performance

I am very proud to announce that we have crossed a billion dollar revenue mark thisfinancial year. This makes us the only Indian promoted logistic company to achieve thismilestone.

The consolidated financial performance for the 12 months ended March 31 2019 is asfollows:

# Total income from operations at `6895 crores for the year ended March 31 2019.

# EBIDTA at `482.3 crores for the year ended March 31 2019.

# PAT at `247.9 crores for the year ended March 31 2019.

# EPS for the year ended March 31 2019 was `9.85 for a face value of `2 per share.

Setting sights and strategy for the future We are pioneering our logistics parkbusiness by building world class facilities like we did in our CFS business. We believethere are tremendous opportunities to consolidate these assets with our contract logisticsbusiness to some extent and grow it significantly over the years. We could then enter thegrowing logistics market in India where there is direct synergy between the contractlogistics business and distribution.

Transformation of thThe Warehousing industry is paramount for enhanced efficiency. Weare in talks with various industrial houses and manufacturing companies who are seeking tore-engineer and consolidate their multi-location third-party logistics and supply chaininto fewer facilities.

Adopting technology is becoming a necessity for internal as well as customer-orientedefficiency. We are adopting a strategy comprising of digital innovations for internalefficiency and for customer efficiency.

While we will aggressively pursuThe financial numbers we understand that they are onlya numerical confirmation that we are doing the right things. We intend to include everykey stakeholder as an integral part of our future.

As the saying goes

"Walking alone might take us to our goals faster but walking together takes usfarthest."

Regards

Shashi Kiran Shetty