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 international supply chain business which contributes to around ~88% 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 (~88% of Allcargo group’s revenues of fiscal 2025), will be de-merged into a new company – Allcargo Worldwide Ltd (AWL) (Previously Allcargo ECU Ltd or AEL) while the express and contract logistics business will  continue under new ACL.

This scheme, 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 1968 crore (~12% share of the Allcargo group's revenue) in FY 25 and post Ind AS adjusted EBITDA of Rs 4 crore. While complete details on split of outstanding debt between new ACL and AWL 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 1167 crore as of 31st March 2025. Cash and equivalent has been at ~Rs. 160 crore as on 31st March 2025 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 AWL, post de-merger, is facing continued headwinds, impacted by the overall slowdown seen in global trade volumes. In fiscal 2025, while revenues reported a 25% on-year growth to Rs. 14,077 crore, it was largely supported by higher freight rates given volume growth remained modest. The Pre-IND AS adjusted EBITDA in value however remained at Rs 217 crore in the FY25 (marginal growth to the same period previous fiscal wherein EBITDA was Rs 194 Cr). Here, while there has been a gradual improvement in the gross profits supported by steady recovery in volumes, EBITDA remains 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. 808 crore as on 31st March 2025 from Rs 434 crore as on March-2024. However, moderation in overall debt is expected with term debt repayments of nearly Rs 290 Cr expected this fiscal and with company maintaining an asset light business approach.

This demerger is expected to be completed by the second quarter of Fiscal 2026, wherein the hearing with the National Company Law Tribunal (NCLT) is scheduled in the first week of July 2025. 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 March 31, 2025) of bank loan facilities continues on ‘Rating Watch with Developing Implications’ as this facility too in parts will be split into AWL & 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.

About the Company

The Allcargo group is promoted by Mr Shashi Kiran Shetty. As a group it provides logistics services such as container consolidation (NVOCC), express logistics, contract logistics, CFS, ICD and warehousing.

Post the previous de-merger effective April 1, 2023 currently Allcargo houses the NVOCC (under international supply chain segment), express logistics (under subsidiary Allcargo Gati Limited), and contract logistics (ASCPL, wholly owned w.e.f. May 17, 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 46.86% stake in Gati entering the express logistics business which complements its international supply chain business. The stake was further increased to 50.02% in FY22 through a mix of primary & secondary purchase of equity shares. Gati was founded in 1995, is one of India’s oldest and leading express logistics players. The company is engaged in the business of providing logistics solutions including express distribution (surface & air) as well as supply chain management solutions. It has pan-India network covering 99% of districts and government approved pin codes

Annexure - Details of Instrument(s)

# Yet to be issued
& RBL Bank BG and Cash Credit limits are interchangeable.
^ Yes Bank BG and Cash Credit limits are interchangeable.
$ HDFC Limits of Rs 102 Crores includes 100% FD backed OD facility of Rs 27 Crores.
&& Rs 34 crore is currently outstanding as of March 31, 2025
%% DBS Bank Limited – Rs 44 Crore is currently outstanding as of March 31, 2025.

Annexure – List of Entities Consolidated

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