The pandemic has led to an increase in the adoption of technology and digitization of the logistics sector, which is expected to accelerate further in 2022, mainly thanks to e-commerce. With its digital first strategy, Allcargo Logistics, ECU Worldwide and Gati are also looking to further harness the potential of emerging technologies, said Chairman Shashi Kiran Shetty. In an interview with FE’s Rajesh Kurup, he explained the reasons behind the recent split of Container Freight Stations (CFS) and Inland Container Depots (ICD) into Allcargo Terminals, along with equipment rental, parks logistics and real estate in Trans India. Edited excerpts:
Q. Allcargo Logistics’ net profit soared to Rs 354 crore in the third quarter. Where does the growth come from?
Our growth in recent quarters is the result of sustained efforts over the years and transformation initiatives undertaken over the past 2-3 years. We focus on asset-light models and digital businesses and that has made a difference. Our acceleration of sales across the globe through transformation initiatives combined with digitization initiatives has provided us with the operating leverage. Our performance continues to improve through use in the international supply chain sector. All digital interfaces combined, more than 55% of export reservations in this business are now digital. Other businesses also continued to perform well, with both organic and inorganic growth contributing to net income.
Q. The rationale for splitting CFS and ICD into Allcargo Terminals, and equipment leasing, logistics parks and real estate into Trans India.
The spin-off was to help the company accelerate its growth by creating independent business ventures, with more focused management, better access to adequate capital, and greater operational and financial flexibility. Following the demerger, each company will have an independent structure with mirror shareholders. Allcargo Logistics would continue to be the leader in international supply chain, express logistics and contract logistics, with an increased focus on digitization. Allcargo Terminals will be the market leader in the CFS business in India and will continue to expand its presence in ICDs. TransIndia will focus on asset-heavy business opportunities such as Class A warehouses.
Q. The pandemic has disrupted last mile warehousing and logistics operations. Do you see any other disruptions in the industry?
The pandemic has accelerated technology-driven transformation and digital adoption, and this will continue in 2022 through e-commerce. The digitization of the supply chain to improve visibility, transparency and operational efficiency and the integration of new era technologies such as artificial intelligence and big data to enhance predictability will gain further momentum. Various sub-segments of the logistics industry would benefit from such disruptions, providing customers with more efficient service offerings.
Q. Allcargo has always relied on acquisitions to grow.
All of our acquisitions over the years have added strategic value to the group. The acquisition of the Belgian company ECU-Line (today ECU Worldwide), with a turnover almost five times greater than that of Allcargo Logistics in 2006, made us a global player. The acquisition of Gati in 2020 marked our foray into express logistics. Diversification and consolidation of operations through acquisitions has enabled Allcargo to become an integrated logistics solutions provider.
Among recent acquisitions, our joint venture with the Swedish logistics player Nordicon Group has seen its profitability multiplied by several. Digital adoption has put Gati on a path to growth. Our acquisition of Speedy Multimodes and the joint venture in Korea also proved to be very value-creating.
Q. On the group’s adoption of technology and the digitization of vertical markets.
As part of our digital-first strategy, we have deployed new era technology and data science tools, automation, to strengthen our network and ECU360 digital platform pricing efficiencies. At Gati, we’ve worked with Salesforce to develop an advanced CRM tool to improve customer service, customer management, and analytics. Also, our booking platform for onboard customers and suppliers came to life, payment gateway adoption was achieved. Going forward, our focus on digitization remains strong.
Q. Allcargo is hiring more and more senior executives.
The group has hired nearly 60 CXO-level resources and onboarded nearly 100 additional critical managers across the globe to facilitate growth and digital adoption. Attracting and retaining the best talent across the world is a key objective for us and it is part of our mission to build a leadership force to strengthen our position as a multinational logistics player and generate robust growth.