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Allcargo Logistics Ltd.

BSE: 532749 Sector: Others
NSE: ALLCARGO ISIN Code: INE418H01029
BSE 00:00 | 20 Sep 244.35 5.15
(2.15%)
OPEN

237.00

HIGH

251.50

LOW

234.35

NSE 00:00 | 20 Sep 244.30 4.80
(2.00%)
OPEN

236.60

HIGH

251.90

LOW

234.00

OPEN 237.00
PREVIOUS CLOSE 239.20
VOLUME 163543
52-Week high 251.50
52-Week low 113.20
P/E 19.64
Mkt Cap.(Rs cr) 6,004
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 237.00
CLOSE 239.20
VOLUME 163543
52-Week high 251.50
52-Week low 113.20
P/E 19.64
Mkt Cap.(Rs cr) 6,004
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Allcargo Logistics Ltd. (ALLCARGO) - Chairman Speech

Company chairman speech

Dear Fellow Shareholders

It gives me an immense pleasure to share with you our company'sperformance highlights during the financial year FY2019-2020. We faced an unprecedentedCOVID-19 crisis starting with our operations in China and disruptions spread across theworld in March. I am proud of our team which stood strong against all adversities andremained committed to protecting shareholder value and delivered another year of stellarbusiness performance. The pandemic is leading to paradigm shifts in the business landscapein India and across the world. It is also creating new opportunities for digitally-enabledcustomer centric organisations. We have always focused on our customers and we arereaffirming our commitment to transformation through innovation in action andentrepreneurship as we embrace change.

Collaboration to combine strengths

We started this year riding high on the success of completing 25glorious years in the logistics industry and inspite of the challenges faced we havecontinued to achieve new success milestones. Our most significant highlight this year hasbeen the strategic acquisition of Hyderabad-based Gati Ltd. India's pioneer inexpress logistics and first and last mile deliveries. This is our largest acquisition inrecent times and we envision an exciting future in this partnership.

It had always been our aspiration to venture into the express logisticsand first and last mile delivery segments as it was a logical progression to offerend-to-end integrated logistics. Welcoming Gati into the Awashya Group family as anAllcargo company gives me great happiness and pleasure. We could not have asked for abetter partner. A home-grown company with consistent leadership over more than twodecades an industry-leading brand trusted by all. In many ways Gati is just like us.And in areas where it's not namely products and services it complements usperfectly and opens up opportunities for both organisations to offer better moreintegrated services to their customers.

With an asset-light model focus on technology and customer-centricoperations Gati fits in just right with our vision and plans for the future and I seeimmense scope and

potential going forward. As Gati's nationwide reach and servicesbolster our own range of services across the global network operating via more than 300offices in over 160 countries we are in a position to truly straddle India and the worldoffering an unmatched range of logistics services to our global and Indian customers.While it is the culmination of a long-standing dream this is also just the beginning of anew era for us. There is significant amount of work we need to do in order to take thiscollaboration to desired success.

Collaboration is the theme of this annual report and has been drivingour activities in the year gone by. Today as the world grapples with the impact ofCOVID-19 on global trade and economy collaboration assumes even greater significance. Inthis post-COVID ‘new normal' era collaboration at every level of the businessand across the logistics ecosystem will prove crucial to tide over and continue on thepath of growth.

Embracing change

In response to the COVID-19 outbreak and to contain its spread mostparts of the world went into a complete lockdown during the past few months. With socialdistancing emerging as the only plausible way to flatten the curve a large chunk of theglobal workforce moved from regular offices to working from home and connecting remotely.

Even in our organisation our teams across the world were given therequisite support and equipment to continue being productive from their homes and only theminimum number of staff members required to keep our CFSs warehouses sites and otherfacilities operational supported us immensely by working on the frontlines.

Even as restrictions ease the threat from the virus continues to beimminent and remote operations will be an essential requirement of the new normal. Thecurrent situation has also brought to the fore the tremendous importance of leveragingdigital tools and technology. My son Vaishnav Shetty who is the Executive Director atECU Worldwide our wholly-owned global subsidiary has taken on the mantle of leading theorganisation's digital play and driving business ahead by implementing numeroustools software and online platforms.

Innovation in action

We are living in a world where business environment is increasinglymore Volatile Unpredictable Complex Ambiguous (VUCA) and the current times haveestablished this even more starkly.

If we are to succeed in an ever-evolving business environment we needto be agile and able to unlearn old ways and relearn new ones quickly and moreefficiently. Our entire way of doing business needs to undergo a transformation withprocesses and operations being re-engineered to enable digitisation and optimisation. Itis time to increase focus on innovation and to ensure that it is followed byimplementation and execution.

We have undertaken major organisational transformation projects atAllcargo Logistics ECU Worldwide and Gati. While these will be driven by internal teamsdedicated solely to these projects we have decided to engage with the most competentexternal professionals for advisory and consultancy to support and guide us in ourtransformation journey.

At Allcargo Logistics and ECU Worldwide Project Voyager will aim totransform organisational performance in terms of cost optimisation sales andcustomer-centricity which is core to our business. At GATI Project Awashya will be thekey to helping the organisation in its transformation to regain its leadership position inthe express logistics business with

best-in-class processes technology and facilities supported byhealthy financials.

New ideas are integral to our business. We continuously seek tomaximise our impact through value creation for our clients by delivering world-classsolutions leveraging IT digital platforms and newer technologies that present themselvesin the future.

ECU360 our state-of-the-art online platform that has been launched insome countries is a step in the right direction. With easy navigation and a host offeatures it lets customers ship with a click. We have empowered customers to conductbusiness 24x7 and complete transactions independently so as to experience the convenienceof seamless cargo transportation. The young energetic team led by my son Vaishnav Shettyhas been quite successful in implementing ECU360 in some of our key regions. Intoday's world digital is an absolute given and we aspire to set industry-leadingbenchmarks.

Business impact at the global and Indian level

While COVID-19 has had a considerable adverse impact on our businessour global network has helped us to mitigate the situation to a certain extent.

During the lockdown in China our business in other parts of the worldkept us afloat and by the time various other countries went into lockdown operations hadgradually started to resume in China. Difficult times present challenges on cash flow butwe have been doing our best and working on innovative solutions in collaboration withcustomers partners and vendors.

Our dedicated Crisis Management Team has been constantly assessing thesituation and having deliberations and discussions to take strategic decisions in interestof our organisation.

I am very proud to note that our team members serving on thefrontlines ‘Corona Warriors' as we call them have kept operations running atour CFSs warehouses project sites and all other facilities. Every safety precautionincluding distancing disinfection using sanitizers masks and temperature checks forstaff members and visitors has been taken along with complete adherence to all therequisite restrictions and protocols.

A silver lining to these challenging times is that we have beenrecognised among the top 20 ocean freight companies in the world and our efforts to betterour performance continue.

Inspite of the challenges once we are on the way to gradual recoveryand business-as-usual the prospects for the logistics sector seem bright. According to arecently published report Post COVID-19 the global logistics market size is projected togrow from USD 2734 billion in 2020 to USD 3215 billion by 2021 at a Y-O-Y of 17.6%.

In India too developments such as the proposed roll-out of theNational Logistics Policy (NLP) a single window e-logistics market leading to theintegrated development of Indian logistics will help reduce logistics cost for end usersand offer exponential opportunities for growth to organised logistics players.

Business performance

We continue to maintain our leadership in the multimodal transportationbusiness and have been recognised among the top 20 ocean freight companies in the world.Driven by a key understanding of customer demands we have launched XLERATE an expresssea-air service from China and Busan to USA and further to Europe LATAM and Caribbean. Ithas been very well-received as a timely and cost-effective alternative to air freight.

While we maintained our volumes in the CFS-ICD business over the pastyear in the last few months we have been facing hindrances. Our de-stuffing scheduleshave been disrupted owing to shutdown of factories and non-availability of transport dueto the lockdowns. However our CFS teams have remarkably collaborated with stakeholders tooptimise processes and schedules to tackle space constraints at the ports. They haveensured that ports don't get choked and global trade keeps moving.

Our utilization of assets in the Projects and Equipment business hasshown improvement and we have undertaken the sale of some of our underutilized assets. Theorder book of the projects division is healthy and we look forward to contributing to coresectors like power oil & gas renewable energy infrastructure and others. Especiallyduring the lockdown and curfews in various states the projects team has successfullysought permissions and completed documentation to continue transporting Over-Dimensional

Cargo (ODC) and containerised cargo for customers involved in diverseprojects contributing to building the nation.

We continue to expand our nationwide warehousing footprint. With therising demand for e-commerce we see potential in the logistics parks business and wouldcontinue to monetize our assets. As announced on 13th January 2020 we have entered intoa definitive transaction with the Blackstone Group wherein Blackstone would acquire 90%stake in Allcargo's warehousing subsidiaries at Telangana Tamil Nadu KarnatakaGujarat Goa and Maharashtra for an equity consideration of Rs. 380 crores. Allcargo wouldremain a strategic 10% stakeholder in these warehousing subsidiaries. The timeline of thedeal would be around 12 months subject to satisfaction of customary closing conditionsand achievement of certain milestones as agreed.

Awashya CCI our contract logistics subsidiary has kept up itsperformance and continues to build capabilities in e-commerce chemical warehousingpharmaceuticals and auto logistics. We have ably supported our customers involved in themanufacture and distribution of essential supplies for COVID-19 relief and receivedappreciation from some of our marquee customers.

Looking ahead to better performance and closer collaboration with Gati

We have now concluded our strategic acquisition of Gati and are focusedon closer collaboration within the teams.

A joint meeting was held between the senior leaders of both AllcargoLogistics and Gati and it has been very fruitful in generating ideas on products andservices where we can collaborate and serve our customers better.

The acquisition of Gati also brings us closer to one of the largestlogistics company in Japan Kintetsu World Express (KWE) which is among the world'slargest air freight forwarders and parent company of APL Logistics. Interestingly KWE isalso one of ECU Worldwide's key customers. Going forward we will continue to look foravenues to collaborate and grow our mutual business.

With Gati's unparalleled domestic network that covers more than19000 PIN codes in India and Allcargo's global network through ECU Worldwide whichoperates in over 160 countries together we literally cover the entire world

with a deep penetration and connectivity to our customers in India. Ourcollective gamut of logistics services enabled by a world-class technology and the way ourbusinesses complement each other will surely help us leverage off each others capabilitiesand create significant synergies.

This strategic partnership is in complete alignment with our commitmentto provide ingenious solutions to our customers generate better returns for ourinvestors and help India emerge as an economic powerhouse by strengthening the logisticalbackbone of the economy.

Corporate citizenship

I believe it is not enough to do well as an organisation unless youare truly making a positive difference to the environment and the society.

Under the aegis of Avashya Foundation our CSR arm spearheaded by Mrs.Arathi Shetty Non-Executive Director at Allcargo Logistics our efforts across the areasof Health Education Environment Women's Empowerment Sports and Disaster Relief havebeen impacting numerous lives.

This year we have also launched Allcare our employee volunteeringprogramme. This allows employees of Allcargo Logistics and all our group companies tospend a part of their working hours in volunteering for our CSR initiatives. Our employeeshave already participated in number of activities that include beach clean-ups orphanagevisits distribution of medicines and interactions with cancer patients and many more. Iam really happy to see the enthusiasm with which our volunteers have supported Allcare. Itshows that they too have the desire to do something for the underprivileged andcontribute to social welfare.

In support of India's fight against COVID-19 we have stepped upand done our bit. Donations to the Chief Minister's Relief Fund in Maharashtra andKarnataka along with distribution of food packets to migrant labourers stuck

with no jobs and no means of sustenance as well as contributions tosupport healthcare workers with protective gear were some of our initiatives taken. AtGati under the initiative Gati Niwas their warehouse was used to give shelter to 3000 oftheir associates handlers (loaders) and drivers during the lockdown period. Providingfinancial assistance to handlers stay and food arrangements for drivers stuck at varioushubs etc. were some of the other relief measures carried out.

We also continue the effort to bridge the industry's skill-gap andgive local unemployed youth the opportunity for better employability income and lifethrough our skill-development centre run as a Pradhan Mantri Kaushal Kendra (PMKK) underthe Pradhan Mantri Kaushal Vikas Yojana (PMKVY) at Bokadvira in Uran near Mumbai incollaboration with JNPT and CIDCO. I am pleased to note that this year the centre hasreceived a 5-star rating the highest possible from the National Skill DevelopmentCouncil (NSDC).

Through Maitree our unique initiative to green the Earth's coverwe have planted more than 650000 trees until the last year and are well on track toachieve our aim of planting a million trees by 2021. Under Allcargo Greens and ECU Greensour organisation-wide initiatives employees are doing their bit for the environment bytaking small sustainable actions that can together make a big difference.

Building abiding relationships

The current crisis has reinforced without a doubt that collaboration isthe only way forward. Navigating the complexities of this crisis has seen us work intandem and understanding with our peers competitors and all stakeholders in the logisticsecosystem. Together we have all stepped up to the task of keeping the country'strade flowing and business moving.

In a landmark development we have partnered with Gati India'sbiggest express distribution company and we aim to offer our customers a range ofintegrated logistics services at a level that has not been offered in India before.Aligning

our teams to a common culture and set of core values is what will holdus in good stead while we collaborate at a business and operational level.

In keeping with the importance of going digital we are focusing onbolstering our processes and operations with technology as well as making sure ouremployees are equipped with the required knowledge and training to use them and achievebusiness performance excellence.

In the coming year we will continue our journey to growth and progressby conducting business in a fair transparent and open manner with the highest standardsof ethics and corporate governance while interacting with employees customers vendorspartners associates shareholders investors and all other stakeholders.

I look forward with positivity to the days ahead of this crisis andhope that we recover faster and emerge stronger together.

Regards

Shashi Kiran Shetty
Chairman

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