Allcargo Logistics shares surge 10% on biz restructuring

Shares of Allcargo Logistics surged as much as 10.2% to hit an intraday high of ₹314 apiece on the BSE on Friday, a day after the board of Allcargo Logistics Limited and Allcargo Gati Limited approved business restructuring proposal. The scheme of arrangement for restructuring of businesses is expected to be implemented in 10-12 months.

The scrip opened higher at ₹299.55, up 5.14%, as against the previous closing price of ₹284.90. At 11:04 am, the company's share price was trading 9.48% higher at ₹311.90. This is in line with the broader BSE Sensex, which was trading 363.44 points or 0.51% higher at 71,228.54. The market capitalisation of the logistics company stood at ₹7,663.24 crore with more than 1.82 lakh shares exchanging hands as against the two-week average of 0.48 lakh shares. The company hit a 52-week high of ₹442.40 on January 20 this year and a 52-week low of ₹246 on October 26 this year.

In the past one month, and three months, the share price has given 15.29%, and 17.81% in returns respectively.

According to the company’s regulatory filing dated December 21, the International Supply Chain (ISC) business will be demerged into a separate entity known as Allcargo ECU Limited. This would include the India part of the International Supply Chain business along with the international subsidiaries held under the ECU Worldwide NV, the company says. Following the demerger, Allcargo Group will have four listed entities— Allcargo ECU Limited and Allcargo Logistics post demerger of ISC business, Allcargo Terminals Limited and TransIndia Real Estate Limited.

Apart from this, the company’s express business and contract logistics business would come under the resulting entity Allcargo Logistics (post ISC demerger). Through this, the shareholders of Allcargo and Allcargo Gati will get direct shareholding and Allcargo Group will further have an opportunity to drive cost efficiency through consolidation of infrastructure footprint and combining management structure across both businesses, the company says. 

“As per the approved swap ratio, based on the recommendations of the independent valuers, shareholders of Allcargo Gati will get 63 shares in the resulting Allcargo Logistics entity (post ISC demerger) for every 10 shares held in Allcargo Gati. Shareholders of Allcargo will get 1:1 shares in the demerged Allcargo ECU Limited and continue to hold their shares in Allcargo Logistics Limited, which will now be the resulting entity holding Express and Contract Logistics business directly. This takes into account 3:1 bonus shares approved by shareholders for Allcargo Logistics recently,” the company says.

Through the restructuring, the company aims to create a strong P&L, balance sheet and cash flows to drive synergistic growth and expansion, says Shashi Kiran Shetty, founder and chairman, Allcargo Group.

“A simple structure and sharp business focus under an independent management team/board of directors will enable the Allcargo group to continue to drive its track record of growth, having demonstrated near 18% CAGR over last 20 years,” he adds.

(DISCLAIMER: The views and opinions expressed by investment experts on fortuneindia.com are either their own or of their organisations, but not necessarily that of fortuneindia.com and its editorial team. Readers are advised to consult certified experts before taking investment decisions.)