Allcargo Logistics plans to cut costs by $30 million in FY24 amid global slowdown

MUMBAI : Allcargo Logistics aims to cut costs by $30 million (about Rs.250Cr) by the end of 2023-24, amidst the ongoing slowdown in the global logistics sector.

The company is also spending $100 million (Rs.830Cr) on a complete digital transformation including upgrading its cyber security structure.

The company also aims to raise Rs.300 Cr in equity funds for Gati, its express logistics business. “During the supply chain disruption period people order a lot of material. All the warehouses were full and there was no space. People over ordered thinking this will continue,” Mr. Shashi Kiran Shetty, Chairman, Allcargo Logistics said. “But with the sudden war between Russia and Ukraine, things have changed dramatically, commodity prices and interest costs went up and the governments in the western world stopped doling out money.”

Global freight rates which had risen to record highs in 2021 and 2022, have now fallen to pre-COVID levels, as inflation pressure squeezes consumption levels across the world and there is an oversupply of container vessels in the sea. Allcargo Logistics’ consolidated revenue – the largest chunk being its international supply chain operations – slid 35% Y-o-Y in July-Sept 2023, while EBITDA fell 68%. Mr. Shetty said, cost cutting would include a rationalisation of the workforce and freeze on hiring. The staff count and costs have gone down substantially, he said.

However, things will look up as inventory levels are now down and real orders are now taking place. With Chinese New Year coming up, things will start looking up in April. Allcargo Logistics is investing heavily in digitalisation, data security and centralisation of all processes including financial systems. “Today we are one of the most secure logistics companies in the world,” he said. “By the end of 2024, we will have a global system, one operating system, one platform to transact our businesses,” Mr. Shetty said.