Allcargo Logistics to expand warehouse space
Allcargo Logistics Limited is looking at new opportunities to expand in the warehouse space.
It wants to ramp up capacity by 5 times to 10 million square feet in the next five years.
The company will require about INR 700-1,000 crore for warehouse capacity expansion. Since Allcargo is a very under leveraged company, it will raise money from debts as well as internal accruals, said Shashi Kiran Shetty, Chairman, Allcargo Logistics.
He said that It will also explore bringing in a partner or raise equity at some stage as about 70% of the company is held by the promoters.
The bond market could also be tapped for raising funds. All the options are available.
Shetty said accessing funds up to INR 1,000 crore is manageable as the company generates about INR 550 crore earnings before interest, taxes, depreciation and amortization (EBITDA) every year. The process of raising the money will start in a few months, he added.
Allcargo is building its business strategy for growth based on logistics parks, which will have very large warehouses, inland container depots and freight terminals. It has a land bank to support these ventures.
On GST’s impact on the logistics business, Shetty said the delays at the Octroi and border check posts have gone, and this will lead to higher truck utilisation and reduce operational costs. In a day, a truck’s operational time will get reduced by two hours, which will bring down operational expenditure. The multiple handling of cargo and the holding cost will go down and help companies such as Allcargo.
He pointed that due to GST, inventory management will move from a taxation model to a consumption model, which means smaller warehouses will get consolidated into bigger ones. The number of locations will also come down.
He said that Some reports estimate that GST will add about 1-1.5% to the GDP.
The objective of GST is to plug the loop holes in taxation and bring in efficiency in the supply chain, which will help in ease of doing business. In the short term, there may be apprehension in the market but there will be clarity once the process of GST reconciliation takes place. Similar to Tax Deducted at Source, the compliance to GST regime will happen, Shetty said.
Tag Keyword: Allcargo Logistics Limited , Warehouse Space , EBITDA , Earnings