MUMBAI : Allcargo Logistics is keeping its cards close to its chest when it comes to plans for strategic opportunities, which are opening up in the country’s ports and logistics sector. From projects under national infrastructure and monetisation pipeline to Container Corporation of India’s (CCI) planned disinvestment, the company says that these developments represent ‘fantastic opportunities’ and that it will give it its best shot.
In an interview , the integrated logistics company’s India Chief Executive Officer Suresh Kumar R says that Allcargo Logistics would be open to expanding into new businesses and operations, which align with its core strategic priorities – ocean freight services, container freight stations and inland container depots, warehousing and express logistics. Any plans for either bidding for CCI or operating terminals at ports would be chalked out if they complement the company’s strategic focus areas, he notes. Excerpts:
The government plans to undertake the disinvestment of CCI next year. Will Allcargo Logistics be bidding?
I think it will be a fantastic opportunity for entities, who are invested in this sector and Allcargo Logistics has 30-plus years of experience in the country. We are very huge and have an enviable track record. If there are those kinds of opportunities with the right kind of partnerships, one would definitely like to look at it.
Would you prefer to bid for CCI on a standalone basis or with a partner?
We would cross the bridge when we are there. As for how we would like to approach it … we will give it our best shot as this is something which is really close to a lot of things that we do. But how we would finally approach it would depend on various other things.
What are Allcargo Logistics’ plans with regard to entering into the container terminal operations?
Privatisation of port operations is part of the National Infrastructure Pipeline (NIP), and currently there are three-four opportunities, which are now at various stages of implementation, with the government floating expression of interest, tenders. We are participating in a few of those where we see that we would be able to bring our traditional strengths into play.
The way we are going about it is that we would see if it fits in and aligns with our strategic priorities of being present in the ocean freight, CFSs (container freight stations), ICDs (inland container depots), warehousing and express logistics businesses. I think we would definitely want to take a serious look at it.
We are committed to strongly supporting all these initiatives. We are an integrated logistics player and we have a pan India presence. We have an existing network of CFSs and ICDs, which is possibly one of the largest amongst any operators in the country. We have investments in logistics parks across different geographies, and we see a potential to strengthen and expand our presence in CFSs and ICDs across the country.
When we look at warehousing, we clearly feel that there would be more demand for A grade warehousing across the country, with companies starting to change or add that as a new element into their supply chain logistics management plan. So, that is also an area in which Allcargo Logistics has keen interest.
We see opportunities in all these areas and as an integrated logistics provider, we can definitely benefit from all things which are happening in NIP and you will see investment from Allcargo Logistics in all these areas.
What is the update on the plans for hiving off your project logistics business and other non-core businesses?
Talks and discussions with various stakeholders and possible partners are ongoing. In the beginning of next calendar year, we would likely be able to talk about some of the steps we are taking in this regard.
The process is time consuming but whatever we have initiated in the last couple of quarters we are proceeding at the pace we had envisaged, and early next year, we will be able to come to you with clear timelines.
The company had earlier outlined that it is evaluating key locations at Western DFC and Eastern DFC to work on PPP model. Could you share some details on that?
We have always felt that our strengths lie largely in the Western Dedicated Freight Corridor (DFC). A large and significant share of the country’s exim (export-import) trade happens there and Allcargo Logistics has presence in multiple facilities. Our priority for investment is in the Western DFC.
There are opportunities that we see in the Eastern DFC. We also have some client presence, and strategic tie-ups and partnerships along the Eastern DFC. So, we have already made considerable investment in these areas. And if there are opportunities to expand our CFSs and ICDs in these areas, we would look at them seriously.
There are customers that we work with, including some e-commerce companies, who have interest in the west and also in the east. We are starting to offer them solutions these areas.
Do you see the worst is over when it comes to supply chain disruption and can we now expect some sort of equilibrium?
The current disruption is clearly caused by imbalance in the supply chain. There is imbalance in the ecosystem, trade container availability, economic recovery, etc. As and when more elements of this imbalance get corrected, the crisis will start blowing away. We are already noticing some signs of this, with many ports now starting to experience lesser congestion than what was there two-three quarters back.
We estimate that the second-half of 2022 is when things will truly start improving and that’s when new shipping inventory will also start to come in … lots of new containers that people have ordered.
With an increase in shipping capacity expected in the second-half of next year, do you see freight rates cooling off?
If one were to watch what’s been happening or look at the trends, there was a period in which it (freight rates) went up to unprecedented levels. Now, a certain degree of cooling off is happening. But, has it gone back to the pre-pandemic levels, or will it go back completely to the pre-pandemic levels? Well, the judgment is still not out on that.
However, if we were to look at the trends, whenever capacity start building up, freight rates should start to cool off. Early signs of cooling off are already visible. How far and how deep would this cooling off be only time will tell.
We believe maybe the middle of next year is when we could really see the change. The rates are not continuing to rise and very peak rates are already behind us.
How do you see the company’s financial performance in FY23?
Last quarter (Jul-Sep) was our best-ever in terms of revenue collection. We expect that to continue. We are well poised for double-digit growth going forward.