Crossing frontiers

Crossing frontiers

Starting as a pure India player, Allcargo Logistics completed 25 years of operations and established a firm position in Less than Container Load (LCL) segment by expanding its footprint to over 160 countries through acquisitions. In an interview Prakash Tulsiani, Executive Director & CEO, CFS-ICD, Allcargo Logistics tells us that due diligence is required for M&As, and how it aims to tap new business channels. 

Allcargo Logistics has come a long way since its establishment. Which are the biggest milestones of all that have shaped its business today?    
Allcargo is built on a strong foundation of values and ethics. And this is key to our growth in the last 25 years. Our journey to the top league in the global logistics table has been replete with several path-breaking milestones. Starting as a pure India player in 1993, we had established a firm position as LCL consolidator in India. The acquisition of ECU-Line in 2006 was a turning point for Allcargo, making it a name to reckon with in the global non-vessel operating common carrier (NVOCC) segment. The acquisition proved to be significant for us, allowing us to expand our operational footprint to 120 countries. 
We acquired companies in China and USA–the two major markets, soon after. In 2016, the global presence of ECU-Line was consolidated and rebranded as ECU Worldwide. With this, we are now present in more than 160 countries.
Simultaneously, the company expanded its India presence by establishing Container Freight Stations. Today the company is the largest national CFS operator with facilities in major ports of India.  In 2004, we also entered into projects logistics and further strengthened it by the acquisition on MHTC.

A controlling stake in CCI Logistics in 2016 helped us emerge as strong players in the contract logistics business. Known as Avvashya CCI Logistics  post-merger, the entity is slated to rank among the country’s top three integrated logistics companies.  In 2018, Allcargo extended its portfolio of integrated services by adding a new business vertical called the logistics parks. Delhi Mumbai Industrial Corridor (DMICC) has planned industrial clusters and dedicated freight corridors. Allcargo will plan its future logistics parks based on the developments of these clusters. The parks  will cater to container, bulk, liquid and RORO for both exim and domestic cargo – depending on the needs of its customers. Allcargo’s value proposition is to provide end to end logistics with one stop solution. 
We have bolstered our leadership position to emerge as India’s first and largest integrated logistics solutions provider in the private sector. We have consistently placed onus on scaling our operational competencies and expanding our presence in international markets. A constant focus on customer outreach and service excellence has enabled us to become reputed global leaders in the container consolidation business and multimodal transport operations.

In the last 25 years, the company has taken organic and inorganic routes including 12 acquisitions to expand. How do you assess any company before mergers or acquisitions? 
The first and foremost stage of assessment involves determining whether a planned M&A or acquisition of a company aligns with our business vision and operational strategies. We also keenly analyse the value proposition that a potential transaction would bring while exploring potential M&A opportunities or acquisitions. Undertaking of legal due diligence procedures becomes necessary for addressing integrity issues and mitigating business risks in M&A processes. The opening of new business channels and expanding marketing geographies for our group remain core consideration factors while deciding 
the viability of a future acquisition. We also determine whether the target company has a loyal customer base and evaluate its market potential before making a final decision.  

What are the learnings from the acquisitions made so far?
Our vision is to provide world class logistics solutions globally. Every acquisition that we made was a strategic step forward towards this vision and towards cementing our position as business leaders in the global logistics arena while maintaining a consistent leadership position. Following a multi-pronged strategy of building a strong India presence through a series of organic growth and business expansion strategies across new verticals was pivotal to scaling a higher growth trajectory. We could also expand our operational footprint in international markets by undertaking a series of bold and strategic acquisitions. All the while, we have been sensitive to the local cultures. We have enabled smooth cultural blend and ensured that the local teams continued in their roles.  The acquisitions have been a reiteration to us that in a constantly volatile global business environment, change remains the only constant. We cannot afford to remain static and consistently need to re-evaluate our business strategies to retain the crucial competitive edge in global business dynamics. Apart from enhancing Allcargo’s brand recall, the acquisition strategies have facilitated the expansion of our market reach and geographical footprint. 

Allcargo Logistics aims to invest over  `1,000 crore to set up four logistics parks. How will that fortify the business of Allcargo? 
Allcargo has announced plans to invest  `1,000 crore in a phased manner over a period of five years for setting up of four logistics parks across strategic locations in the country with India’s largest logistics park at Jhajjar in Haryana with built-up area of 3 million sq feet. The company would also be setting up logistics parks at  Bengaluru with 2.5 million sq feet, JNPT in Mumbai with 1.5 million sq feet and Hyderabad with 0.5 million sq feet. These parks are being planned around the major consumption and industrial hubs with an aim to provide end to end solutions to our customers. We estimate that logistics parks operated by us will be pivotal to offering seamless transport on a pan-India basis and optimising operational costs through lowering transit time. Locating the parks in key industrial and consumption belts in the country and offering crucial linkages between producers and consumer markets, we aim to provide an integrated logistics infrastructure set-up to customers. Promising to provide advanced multi-modal solutions to our clients, the logistics parks will provide state-of-the-art services. The service competencies of the parks would also extend to providing in-bound and out-bound contract logistics services. We intend to leverage our operational expertise to become market leaders in the contract logistics segment and provide end-to-end solutions to broaden our services portfolio.
What are the common problems associated with utilisation of infrastructure for logistics operations?
Roads are important for first and last mile connectivity and, they account for a bulk of the freight movement in the country. Given that an efficient road network is pivotal to seamless freight movement, onus needs to be placed on fast-pacing road infrastructure and highway projects and improving road connectivity on a pan-India basis. Initiatives like the Dedicated Rail Freight Corridor project are key to decongesting saturated road networks and enhancing the freight carrying capacities of rail networks while ensuring speedy freight mobility. Efforts need to be expedited to tap the efficacies of India’s vast coastline and 
boost maritime connectivity to reduce freight costs and lower downtime. The maritime sector in the country remains woefully underinvested. 
Can India transition smoothly towards an integrated multi-model transport?
Multi-modal transport is the need and requirement of our customers. The government has already placed high-priority emphasis on building a robust multi-modal logistics and transport model. This can be achieved by building crucial synergies across rail, road, waterways and air transport to build a strong and integrated multi-modal transport infrastructure. The transition from a “point-to-point” model to a “hub-and-spoke” model has boosted the competencies of the Indian logistics sector through the setting up of an efficient transportation grid. Effective policy reforms and regulatory interventions have ensured that India is on the path to smoothly transition towards adopting an integrated multi-modal transport model. 

What is the outlook for All Cargo business in 2019?
With global trade growing at 3-4 per cent and Indian consumption drive increasing, we remain positive. Our key growth areas will be logistics parks and contract logistics. While we experience stable environment in our existing key pillars of MTO and CFS, the improving capex cycle will benefit the P&E vertical.