A file photo of Shashi Kiran Shetty founder and executive chairman at Allcargo Logistics. Photo: Mint
Mumbai: Allcargo Logistics Ltd, a port-based transportation company, has firmed up its plans to enter full container load (FCL) business through acquisitions in Europe in the context of shrinking margins of its existing less than a container load (LCL) business, according to a top company official.
FCL business is collecting full container box of cargo while LCL business refers to collection of small cargos and aggregating these into a container, known as an LCL.
“One of the areas where we wanted to expand is into the business of FCL. Today, we are global leaders in LCL business. Now, we want to build a very strong FCL business,” said Shashi Kiran Shetty, founder and executive chairman at Allcargo Logistics.
He said the customers of FCL business could be the same but his company can offer a full suite of logistics offerings, including value added services, custom clearances and door-to-door delivery.
Allcargo Logistics is working to become the world’s largest LCL operator by the end of this fiscal year, overtaking Vanguard Logistics of the US, according to analysts. Vanguard has a revenue of $800 million while Allcargo’s earnings are at $750 million. In late September, Allcargo acquired US-based logistics company Econocaribe Consolidators Inc., which has over $125 million in revenue, to push its LCL business.
Allcargo bought Econocaribe through its Belgium-based subsidiary ECU Line Ltd.
Shetty said his company is in talks with some of the specialised FCL companies including NVOCCs—non-vessel operating common carriers—in Europe and will conclude a deal shortly.
“Diversification was always the strategy of Allcargo. In terms of volumes, LCL is a very steady business. But margins of LCL business are shrinking as it is very competitive business and highly fragmented. We need to grow and diversify,” Shetty said.
In a 19 September note, senior analyst Amit Agarwal at domestic brokerage Kotak Securities Ltd, wrote that Allcargo Logistics had developed a strong presence in the mutli-modal transport operating (MTO) business through the wide network of ECU Line.
Agarwal said Allcargo as a LCL consolidator won’t be much impacted by the current weakness in the container market as LCL volumes are more immune to such sluggishness as a large part of full container load volumes during tough times gets converted into LCL volumes.
Allcargo, initially a Delhi and Mumbai agent for ECU, bought a 33.8% stake in the Belgium firm in 2005-06 and acquired the remaining shares in the following year for €23 million. The takeover of ECU, which had five times the acquirer’s revenue in 2006, made Allcargo the world’s second largest LCL firm, after OTS Logistics Group of the US.
ECU Line in recent years has been engaging Econocaribe as its agent in the US. The acquisition now enables ECU Line to increase its foothold in North America.