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| Edited By: Prithvi Durai Ganesh |Source: DNA |Updated: Mar 30, 2018, 03:09 AM IST
Allcargo Global Logistics, the world’s second-largest less-than-container-load (LCL) service provider, is aggressively looking to expand its footprint through the inorganic route.
The Mumbai-based company is looking to acquire one company each within India and overseas, predominantly in the LCL segment, chief financial officer S Suryanarayanan said.
West Asia and the US are geographies that the company may explore. Allcargo is also in advanced stages to buy some stake in companies in China, Hong Kong and Brazil. The feasibility study and funding for the acquisition are being worked out.
Less-than-container-load shipments are those that are not large enough to fill a standard container. This prompts some shipping and logistics companies to pool goods from various companies in the same container.
Suryanarayanan also said that in early 2010 Allcargo Global purchased 51% stake in a UK company, the financial closure of which is almost complete. Allcargo already conducts business in the UK through its subsidiary.
In addition, the company will raise its stake in Argentina subsidiary to 100% from 49% currently.
Explaining the drive behind the torrent of acquisitions, he said, “We are looking to increase stake in existing subsidiaries. In some we hold 51% stake, while some are lesser. In some geographies we are not the leading LCL player, and so we keep looking out for companies that could give us that edge.”
Allcargo will use qualified institutional placement proceeds to fund the string of acquisitions and stake buys.
In April, it had raised about Rs 100 crore through qualified institutional placement for capital expenditure and acquisition plans. “The companies that we are looking at, I can assure it will not erode our margins...we have enough funds to manage it. We are sitting on Rs 200 crore cash, and have internal accruals of Rs 60 crore,” he said.
The company’s loan book was at Rs 171 crore as on March end.
In fact, margins of its European business, ECU Lines, may improve as the company has been passing on the rise in freight rates to its clients. “We have been passing on the rise in freight rates by 4-5% to customers since April-May.”
In January-March, Allcargo’s ECU Line business was subdued because of its inability to pass on freight costs, leading to erosion in operating margins by 269 basis points.
Suryanarayanan expects ECU Lines to improve operating margins to 32% in the second quarter compared with 31% in January-March. Margins were at 33% in the previous year.
