| Allcargo Logistics Limited | ||||||||
| Ratings continues on ‘Watch Negative’; Rs.200 crore term loan continues on ‘Watch Developing' | ||||||||
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| Note: None of the Directors on Crisil Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||||||
| 1 crore = 10 million | ||||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale Crisil Ratings’ ratings on Rs 875 crore of bank facilities and Rs 150 crore of non-convertible debentures of Allcargo Logistics Limited continues on 'Rating Watch with Negative Implications'.
The negative view factors in the continued muted performance of the ECU business which contributes to around ~85% of the Group’s revenues. It also factors the expected moderation in the business & financial risk profile of Allcargo Logistics Limited (herein referred to as new ACL), as per the company’s demerger plans.
On December 21, 2023, the company's board of directors approved a composite scheme of arrangement (demerger) whereby its international supply chain (ISC) business, comprising global supply chain and domestic supply chain, as well as its support functions (~85% of Allcargo group’s revenues of fiscal 2024), will be de-merged into a new company - Allcargo ECU Ltd (AEL) while the express and contract logistics business will continue under new ACL.
This de-merger, which will be made effective in steps with appropriate allocation of shares to respective entities involved, will also result in merger of subsidiary, Allcargo Gati Ltd (housing the express distribution business) into new ACL. New ACL, which will house the relatively smaller express and contract logistics business, has reported revenues of Rs 1597 crore (~13% share of the Allcargo group's revenue) in 9MFY 25 and post Ind AS adjusted EBITDA of Rs 10 crore. While complete details on split of outstanding debt between new ACL and AEL is awaited, new ACL is expected to hold mainly working capital related debt related to express and contract logistics, the Gati KWE acquisition loan and portion of general corporate loan, total constituting to ~20% share of consolidated group’s gross debt of Rs 1202 crore as of December 31, 2024. Cash and equivalent has been at ~Rs. 141 crore as on 31st December 2024 for new ACL. Accordingly, the overall business as well as financial risk profile of new ACL will be moderate compared with the existing Allcargo.
The ISC’s operating performance, which will operate under AEL, post de-merger, is facing continued headwinds, impacted by the overall slowdown seen in global trade volumes and freight rates. In fiscal 2024, revenues de-grew by ~30% on-year to Rs 11,259 crore, with Pre-IND AS lease adjusted EBITDA declining to Rs. 194 crore from Rs. 953 crore in the previous fiscal. In the first nine months of fiscal 2025, revenues reported a 28% on-year growth to Rs. 10,634 crore, largely supported by higher freight rates. The Pre-IND AS adjusted Ebitda in value however remained at Rs 247 crore in the 9MFY25 (similar to the same period previous fiscal). Here, while there has been a gradual improvement in the gross profits supported by steady recovery in volumes, EBITDA has moderated due to high SG&A expenses. The rating continues to take comfort from the healthy financial risk of the ISC business & leading market position in the global LCL (less than container load) consolidation business. While there has been a gradual increase in working capital requirements since the last fiscal largely on account of higher freight rates, that has resulted in a short-term debt increase to Rs. 833 crore as on December-2024 from Rs 434 crore as on March-2024. However, moderation in overall debt is expected as freight rates remain range bound and with company maintaining an asset light business approach.
This demerger is expected to be completed by end of April 2025, wherein the company is in the process of submitting the final proposed scheme related filings to National Company Law Tribunal (NCLT). Crisil Ratings is in discussion with Allcargo’s management to better understand the exact bifurcation of - the current outstanding debt and will resolve the watch once there is better clarity and the key regulatory approvals are received.
Also, the long-term rating on Rs 200 crore (Rs ~34 crore outstanding as on September 30, 2024) of bank loan facilities continues on ‘Rating Watch with Developing Implications’ as this facility too in parts will be split into AEL & New ACL, as part of demerger announced in December-2023.
Crisil Ratings understands that the portion of the debt that was moved to Transindia Realty & Logistics Parks Ltd and Allcargo Terminal Ltd has been repaid. Crisil Ratings continues to engage with the company mainly to seek adequate documents to substantiate bifurcation of debt, cash and other assets and liabilities moving out; post which the watch will be resolved. |
Analytical Approach
Please refer Annexure – List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation |
Key Rating Drivers & Detailed Description Strengths:
Besides, the company is a leading player in the express logistics segment in India, through its subsidiary, Gati. Gati is one of the largest express logistics companies having extensive coverage in India and offers transportation solutions, e-commerce, trade inventory management, freight forwarding, and cold chain solutions. The company increased its stake in Gati KWE, the express logistics JV by buying-out the remaining 30% stake for Rs 406.5 crore in May-2023. It also operates a healthy contract logistics business through ASCPL, in which it acquired the remaining ~39% stake in May-2023 for Rs 163 crore and exited the freight forwarding business by selling off its 61% stake in Avvashya CCI Logistics Private Limited for Rs 39 crore.
Gati’s extensive reach provides vertical integration to the international supply chain business which, along with the contract logistics businesses, enhances the group’s ability to offer integrated transportation and logistics solutions to its diversified clientele, thus enhancing the business risk profile.
The company’s utilization of short term debt has increased as of 31st December 2024 to Rs 833 Crore relative to Rs 434 Crore as of 31st March 2024 primarily due to increase in freight rates. Increase in term debt was primarily towards incremental stake purchase: Rs 406.5 crore in May-2023 for acquisition of remaining 30% stake in Gati KWE (part funding it through Rs 200 crore term loan), payment of Rs 124 crore (net of sale of ACCI stake) in May-2023 for acquiring the remaining stake in ASCPL, payment of Rs 174 crore in August-2023 for acquiring additional 25% stake in Nordicon AB. In May-2024, the company has also taken remaining 25% stake in Fair Trade GmBH for Euro 2.9 Million, making it a 100% owned entity by ACL. While the company is not expected to take any term debt to undertake further large acquisition and is looking to reduce term debt, it remains a key monitorable.
Weaknesses:
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Liquidity: Strong Liquidity is supported by substantial cash generation and asset-light business, cash of Rs 587 crore as on December 31, 2024, and average bank limit utilisation (average utilisation of the fund-based limit for the group was ~62% during the six months through February-2025). Healthy liquidity and cash accruals with nominal capex and debt repayments (around Rs. 192 Crore in fiscal 2025 and Rs 220 Cr in fiscal 2026) should keep liquidity strong over the medium term.
ESG Profile Crisil Ratings believes that Allcargo’s Environment, Social, and Governance (ESG) profile supports its already strong credit risk profile.
The logistics sector has a relatively higher impact on the environment because of the inherent nature of assets utilized for the physical delivery of goods. However, given Allcargo is a leading LCL consolidator, its direct impact on the environment is limited vis-à-vis its partners and customers who might have higher impact. The company though has a social impact because of its large and diverse workforce. Allcargo has continuously focused on mitigating its environmental and social impact.
Key ESG highlights:
There is growing importance of ESG among investors and lenders. Allcargo’s commitment to ESG principles will play a key role in enhancing stakeholder confidence, given its high share of market borrowings in its overall debt and access to both domestic and foreign capital markets. |
Rating Sensitivity Factors Upward factors
Downward factors
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About the Company The Allcargo group including the businesses now moved to de-merged entities, promoted by Mr Shashi Kiran Shetty, provides logistics services such as container consolidation, express logistics, CFS, ICD, warehousing and coastal shipping,.
Post the de-merger, Allcargo houses the container consolidation business (under international supply chain segment), express logistics (under subsidiary Gati Limited), and contract logistics (ASCPL, wholly owned w.e.f. June 01, 2023) businesses. The group is a leading global operator in the international supply chain container consolidation business and has grown over the years through various acquisitions. Since the acquisition of the Belgium-based ECU Line in 2006, the Allcargo group emerged as a leading LCL consolidator in the world and further solidified its position in September 2013 through the acquisition of Econocaribe Consolidators to increase its presence in the US and its focus on FCL cargo.
In April 2020, Allcargo completed acquisition of 46.8% stake in Gati entering the express logistics business which complements its international supply chain business. Gati was founded in 1989, is one of India’s leading express distribution and supply chain solutions provider, with a strong presence in the Asia Pacific region and SAARC countries. It has an extensive network across India, covering 99% (672 out of 676) districts and operating more than 5402 scheduled routes. It possesses an integrated, multi-modal network of surface, air and rail along with warehouses spread across India. The company’s offerings include transportation solutions, e-commerce, trade inventory management, freight forwarding and cold chain solutions operated through various subsidiaries and JVs.
Till 9MFY25 the company has reported operating income of Rs 12,220 Crore with PAT of Rs 52 crore against operating revenues & PAT of Rs 9790 Cr & Rs 153 Crore respectively in the same period last fiscal. |
Key Financial Indicators
*Crisil Ratings adjusted numbers. |
Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*Yet to be issued |
Annexure - List of Entities Consolidated
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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#Fully interchangeable with Letter of Credit
@fully interchangeable with Overdraft Facility/Inland Bills discounting/Working Capital Loan
%%Rs 34 crore is currently outstanding as of September 30, 2024
Criteria Details
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