Allcargo Logostics Limited

March 20, 2023

Table of contents

➤ Part I: Business Analysis

○ Company Overview
○ Industry Overview

➤ Part II: Valuation Analysis

○ Ratios
○ DCF & Relative Valuation

➤ Part III: Corporate Advice

○ Recommendation
○ Long Term Triggers
○ Risk Factors

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Part I: Business Analysis
Company Overview
Allcargo logistics (ALLCARGO) is a global force providing international supply chain solutions and global cargo movements across 180 countries, with door-to-door
deliveries in over 50 markets.

Company Overview Valuation & Share Performance

Key Valuation Statistics (in Lakhs)
History: Founded in August 18th 1993 by Mr Shashi Kiran Shetty Allcargo Logistics Limited
(formerly known as Allcargo Global Logistics Ltd) is one of the global leaders in logistics. The EV* 9,72,958 Revenue 20,11,441
company operates mainly into three segments i.e. (i) Multimodal Transport Operations; (ii) Container EBITDA 1,56,303
Market Cap* 8,84,520
Freight Stations/ Inland Container Depots and (iii) Project and Engineering Solutions.
P/E* 9.7x Debt / EV 18.99%
Major Corporate Financials: Global logistics powerhouse of more than $2.6 billion, we are EV/EBITDA* 6.2x Total Debt 1,84,788
looking ahead to bigger, bolder ambitions. FY2021-2022 has been a marquee one for us with a 91%
YoY increase in revenues to touch INR 20,072 crores, a 139% increase in EBITDA to achieve INR Cash 57,511 EBITDA Margin 7.58%
1516 crores and a remarkable 349% jump in PAT to INR 900 crores. We look ahead to continue these
forward strides and enhance your business supply chains, across India and the world. * As of March 31st, 2022

High / Low:
Share Price* Current Price: ₹ 362
₹ 495 / ₹ 249.20
Key Highlights
World’s #1 LCL consolidator India’s #1 CFS Operator

25+ years of experience Leading player in 3PL warehousing

Listed among top 20 global

Pioneer in Express Distribution
ocean freight forwarders

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Business Breakdown
Allcargo is a powerhouse of global supply chain solutions and a value-driven global logistics conglomerate, it powers customers’ domestic
and international business supply chains with seamless logistics through below mentioned segments

Allcargo Logistics (ACL)

By offering end-to-end logistics solutions across different industries and geographies, Allcargo has established itself as a trusted partner for customers'
logistics needs. With a focus on innovation and technology, the company aims to continuously enhance its services and stay ahead of the competition in the
dynamic logistics industry.

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Corporate Finance Activity
Incorporated
50% stake in ACM Lines
JV with Transworld Log & Ship Services
33.8% stake in ECU Hold
100% stake in Ecu Hold
IPO
JV with Container Corporation
Acquired SHE Maritime

1993 2002 2003 2005 2006 2009 2010

2011 2012 2013 2019 2020 2016 2017

Plans to acquire 30% stake in

Gati-Kintetsu Express
Acquired 20.83% stake in Gati Ltd.
Plans to sell a stake in its warehousing unit
Blackstone Group
Develops Logistics Parks in Jhajjar, Haryana
Acquired PAK DA (HK) Logistics Ltd and Spechem
Chain Management (Asia) Pte Ltd.
Acquired 100% interest in Econocaribe Consolidators
MHTC Logistics merged with parent company
Acquired 2 Hong Kong based company

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Shareholding Pattern
% to Share
Category of Shareholders No. of Shares
Capital
Promoter and Promoter Group 17,17,86,209 69.92
Foreign Portfolio Investors 2,34,78,492 9.56
Public 3,16,69,868 12.89
Mutual Fund 30,88,415 1.26
Financial Institutions 410 0.00
Clearing Member 2,31,783 0.09
Trust 23,602 0.01
NBFCs registered with RBI 2,750 0.00
Non Resident 21,22,275 0.86
IEPF Authority 873 0.00
Hindu Undivided Family 10,64,086 0.43
Alternate Investment Fund 14,00,000 0.57
Central Government 450 0.00
Other Body Corporate 1,08,26,311 4.41
Total 24,56,95,524 100.00

• The types of shares held by shareholders of Allcargo include Equity Shares, Preference Shares, and Global Depository Receipts (GDRs).

• The voting rights pattern for Allcargo is in following manner where each Equity Share carries one voting right. The Preference Shares and GDRs do not
carry any voting rights unless a specific resolution is passed by the company's Board of Directors or as per the terms of the GDR agreement.

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Economical, Industrial, and Company Strengths &
Weaknesses
Economic factors
Strengths
• Exchange Rates: Since Allcargo caters to
foreign countries thereby earning in the
foreign currency, they see an increase in
value of their sale when the conversion to
Indian rupee takes place. For example:
Conversion to INR after earning in Dollars or
Pounds will increase value.
• Export Forecasts: Since exports are expected
to grow at a rate of 7.6%, Allcargo will see a
boost in its revenue because of an increase in
its operations
Weakness
• Repo Rate: Increase in RBI's repo rate from 4%
to 4.4% will ultimately lead to an increase in
the interest expenses payable by Allcargo.
• Crude Oil Prices: An increase in expense is
expected because of the possible increase in the
crude oil prices to $110 per barrel.
• Inflation: Increase in inflation rate over its
target of 4% is expected to increase the
operational costs for Allcargo.
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Economical, Industrial, and Company Strengths &
Weaknesses
Industrial factors
Strengths
• Budget 2023: Plans to improve connectivity
and reduce costs leads to greater and more
advantageous opportunities for the logistics
sector.
• National Logistics Policy and Gati Shakti
Programme: Aims to lower the costs
incurred by logistic providers and to
increase their efficiency.
Weakness
• Repo Rate: Increase in RBI's repo rate from 4%
to 4.4% will ultimately lead to an increase in
the interest expenses payable by Allcargo.
• Crude Oil Prices: An increase in expense is
expected because of the possible increase in the
crude oil prices to $110 per barrel.
• Inflation: Increase in inflation rate over its
target of 4% is expected to increase the
operational costs for Allcargo.
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Economical, Industrial, and Company Strengths &
Weaknesses
Company factors

Strengths Weakness

• Expansion: Allcargo acquired 75% stake in

Fair Trade GmbH and 50% stake in Gati Ltd.
• Company has delivered good profit growth
of 31.6% CAGR over last 5 years, and is
expected to deliver sustained bottom-line
growth.
• Three decades of expertise, digital-first and
customer-centric approach to bolster client's
growth and progress.
• Falling forecasted cash & cash equivalents
amount from 2023 to 2027.
• Increase in expenses is expected due to
higher compliance with ESG components,
and higher health care costs (employee
benefit expenses).

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Logistics Market Breakdown
The purpose of the logistics industry is to enable effective transportation and timely movement of goods from one place to another

• The logistics market in India was valued at INR 14.08 Trn in 2021. It is expected to reach INR 29.68 Trn by 2026, expanding at a CAGR of ~14.14%
during the 2022 – 2027 period
• The industry is highly fragmented with several unorganized players. The organized sector accounts for only 10% – 15% of the market
• At present, the country’s logistics cost is estimated to be about 14% of its gross domestic product (GDP)

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Logistics Market Breakdown
India’s GDP grew by 32% from 2015 to 2020, making it the sixth-largest economy in the world. During the same period , India’s population grew by 5% and freight demand increased
by 28%
• This continuous growth in the demand for goods and its movement is expected to increase
• In a study conducted by NITI Aayog in collaboration with Rocky Mountain Institute(RMI) and RMI India, it was estimated that the movement of goods will increase to 15.6 trillion
tons/km by 2050

Composition of logistics costs in India Shares of the Four Major Segments of Logistics Transportation

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Competitors In The Industry

Blue Dart's core services Tiger Logistics is a global logistics and

Mahindra Logistics is a logistics The core services of TCI
include domestic and transportation company that offers
company based in India. Its core Gateway Distriparks' core services Express are domestic and
international express delivery, freight forwarding, customs clearance,
services include transportation, include container freight stations (CFS), international express delivery,
Core Services logistics solutions, e- warehousing, distribution, and other
warehousing, in-plant logistics, inland container depots (ICD), rail freight forwarding, logistics
commerce solutions, special logistics services to customers across
and value-added services such as transportation, and cold chain logistics. solutions, e-commerce
services, and customs several countries in Asia-Pacific,
packaging and kitting. solutions, and warehousing.
clearance. Europe, and the Middle East.

Tiger Logistics has a presence in TCI Express has a wide

Apart from India, Blue Dart
has an international presence
with operations in Nepal,
Geography Bangladesh, Bhutan, and
Myanmar, as well as a joint
venture in the United Arab
Emirates.
Gateway Distriparks has a wide
several countries in the Asia-Pacific geographical presence across
geographical presence across India,
Apart from India, Mahindra region, including Singapore, Malaysia, India, with a network of over
with a network of 10 container freight
Logistics also has operations in Thailand, and Indonesia apart from 800 branches and service
stations (CFS) located in key cities such
other countries such as the United India. Tiger Logistics has offices in locations covering more than
as Mumbai, Chennai, and Delhi. It also
States, Japan, China, the United Dubai and Oman. Tiger Logistics has a 26,000 pin codes. The company
has offices in countries like Sri Lanka,
Arab Emirates, and Singapore. presence in several European countries, also has a presence in
Nepal, Bangladesh, United Ara
including Germany, the UK, and the neighboring countries such as
Emirates and Saudi Arabia.
Netherlands. Nepal, Bhutan, and Bangladesh.

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Competitors In The Industry

Sharad Upasani Rampraveen Swaminathan Harpreet Singh Malhotra Mr. D.P. Agarwal
Key Figures Sandeep Kumar Shaw (CFO)
(Chairman) (CEO) (Chairman) (Chairman)

Headquarters Mumbai, India Gurgaon, India Mumbai, India New Delhi, India Gurugram, India

Blue Dart focuses on TCI Express

‘Bharat’; increases its Possible acquisition of ICD Tiger Logistics India Ltd bags Announcement under
Recent Events Resignation of CFO
reach in “Tier 2 & Tier Kashipur Government Tender Regulation 30 (LODR)-
3 cities” Allotment of ESOP / ESPS

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Part II: Valuation Analysis
Ratios
Sales PAT Margin
Sales has increased at 21.14% CAGR for the period
FY2018-FY2022

Sales PAT Margin

4500000 0.06

4000000
0.05
3500000
3000000 0.04

2500000
0.03
2000000
1500000 0.02

1000000
0.01
500000
0 0
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

Revenue PAT Margin

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Ratios
Property, Plant & Equipment (PPE) Total Assets

Gross PPE has been decreasing yearly at an average

rate of 8.76%

Property Plant & Equipment Total Assets

180,000 2000000
160,000 1800000

140,000 1600000
1400000
120,000
1200000
100,000
1000000
80,000
800000
60,000
600000
40,000 400000
20,000 200000
0 0
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

Property Plant & Equipment Total Assets

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Ratios
Borrowings Solvency Ratios

Borrowings Solvency Ratios

500,000 1.2

450,000
1
400,000

350,000
0.8
300,000

250,000 0.6

200,000
0.4
150,000

100,000 0.2
50,000

0 0
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

Short - Term Borrowings Long - Term Borrowings Debt To Equity Proprietary Ratio

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Ratios

Profitability Ratios

Profitability Ratios Profitability Ratios

0.6 0.2
0.18
0.5
0.16
0.14
0.4
0.12
0.3 0.1
0.08
0.2
0.06
0.04
0.1
0.02
0 0
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

ROIC ROE ROCE EBITDA Margin EBIT Margin PAT Margin

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Valuation
Discounted Cash Flow

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Valuation
Relative Valuation

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Valuation & Recommendation
Valuation & Recommendation
Industry LTP Recommendation Base Case Fair Value Bull Case Fair Value Time Horizon
Logistics Rs. 360 Buy and Hold 462 586 1 Year

BSE Code 532749

Our Take
NSE Code ALLCARGO Allcargo is the global leader in Less than Container Load (LCL) consolidation with 15% market share and is India’s largest integrated logistics
Bloomberg AGLL:IN services provider. Allcargo is a leading player in the CFS segment, which is its most profitable business, with stations at four major ports of India.

CMP Mar 20, Rs. 362 The company is currently undertaking a restructuring initiative with the aim of reducing its assets, increasing efficiency and profitability, and
2023 reducing its debt. As part of this initiative, it has entered into an agreement with the Blackstone Group to sell a portion of its ownership in the
logistics park business.
Face Value Rs. 2
The Multimodal Transport Operation (MTO) segment contributes 87.67% to revenue, CFS contributes 2.72% of revenue, the Express Distribution
Eq Share O/S Rs. 24.57 Cr business contributes 7.39% and other business (P&E and logistics park) segments contribute the balance. Significant growth in focused countries
Market Cap Rs. 8,84,520 and new trade lanes led to expansion in global market share against the backdrop of subdued trade volumes due to recessionary headwinds.

Book Value Rs. 128.68

Valuation & Recommendation
Shareholding Pattern Mar, 2022 Our projection is that the company will benefit from several factors, including (1) Its comprehensive expertise in diverse logistics verticals, which
enables it to provide tailored, end-to-end solutions for a wide range of industries (2) Company's future-oriented strategy, characterized by
Institutions 2.21 %
innovation, ingenuity, and the adoption of digital tools and technologies, is expected to contribute to its growth. (3) The recent Blackstone deal and
Foreign 10.93 % demerger are also expected to be advantageous for the company. Furthermore, Allcargo's focus on restructuring its business is anticipated to
improve its return ratios, financial performance, and transition it into an asset-light operation.
Non Promoter
3.88 %
Corp. Holding The overall performance from November to January in the flagship international supply chain business is impacted by significant slowdown,
particularly due to supply chain disruptions in China, which are now normalising in Feb post Chinese New Year
Promoters 69.92 %
The stock is currently trading at 9.2x FY22 PE, 6.2x FY22 EV/EBITDA. We believe the base case fair value of the stock is Rs.462 and in the bull
Public And
13.07 % case, the fair value of the stock is Rs.586.
Others
Totals 100

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Long-term Triggers
National Logistics Policy
The Indian economy has witnessed green shoots of economic recovery. The GDP growth rate of FY 2022 stood at 8.9%, 1.8% above the pre-pandemic (2019-20) level. India’s
merchandise exports of FY 2022 stood at USD 420 billion (43.8% YoY increase) whereas imports stood at USD 612 billion (55.1% YoY increase) - crossing the total value of $1 trillion
first time in its history.

The commerce department had recently launched National Logistics Policy that seeks to reduce India’s prohibitively high costs, ensure faster movement of goods, and boost exports. The
policy is in its final stages and has been developed after wide consultations with all central ministries and other stakeholders. It aim is to reduce the logistics cost from 13% of the
country’s GDP at present to 8% in five years.

Government Budget

The Indian Budget for the year 2023 has prioritized the logistics sector with a significant allocation of resources aimed at enhancing efficiency and reducing costs. The government has
identified 100 critical transport infrastructure projects that will connect ports, coal, steel, fertiliser, and food grains industries, with a total investment of Rs 75,000 crore, including Rs
15,000 crore from private sources.

Furthermore, the Ministry of Road Transport and Highway has been allocated 2.7 lakh crore, highlighting the government's emphasis on extensive connectivity that will further stimulate
the growth of the logistics industry.

The government has asserted that these initiatives are intended to increase the efficiency and competitiveness of India's logistics sector in the global market. By lowering transportation
costs and facilitating ease of doing business, the government aims to promote economic development and enhance trade competitiveness.

Company demerger

• The demerger was initiated to streamline operations, unlock shareholder value, and facilitate independent growth strategies for each of the businesses.
• Following the demerger, Allcargo will focus on its core businesses, such as Multimodal Transport Operations, Container Freight Stations, and Contract Logistics.
• The move is expected to create two independent, focused entities with distinct financial and operational structures, better suited to capture market opportunities and drive growth.

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Long-term Triggers
The demerger will take place in such a manner that 3 separate strategic business undertakings will be created.

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What can go wrong?
Risk Factors

Increasing competition in express distribution segment

Due to increase in ecommerce activity express distribution companies have enjoyed significant growth but due to the attractiveness of the growing industry many players have emerged
over time which make the industry more competitive.

Recessionary Pressure
The possibility economic downturns can lead to reduced demand for logistics services, as companies cut back on spending and reduce their inventory levels. Allcargo's revenues and
profits could be impacted if there is a significant decline in demand for its services. In a recessionary environment, Allcargo will need to be agile and adjust its operations quickly to
remain profitable.

Recessionary Pressure
The possibility economic downturns can lead to reduced demand for logistics services, as companies cut back on spending and reduce their inventory levels. Allcargo's revenues and
profits could be impacted if there is a significant decline in demand for its services. In a recessionary environment, Allcargo will need to be agile and adjust its operations quickly to
remain profitable.

Decrease in freight rates

This could happen if competition increases, or if there is a reduction in demand for logistics services. A decrease in revenue could affect the company's profitability and its ability to invest
in growth opportunities. Allcargo may need to focus on cost optimization and explore new revenue streams to mitigate the impact of reduced freight rates.

Demerger and Blackstone Deal

While the demerger is intended to streamline operations and unlock shareholder value, it could also result in additional costs and operational complexities. The deal with Blackstone
involves a significant equity stake in the company, which could result in a change in management or strategy that may not align with Allcargo's goals.

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