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Allcargo expects to be debt-free with Blackstone deal closure by December

Allcargo Logistics, the largest private sector player in the segment, expects to be debt-free by December when it will conclude the sale of its warehousing unit to private equity major Blackstone.

Allcargo Group Chairman Shashi Kiran Shetty also expects a brighter future for its Hyderabad-based subsidiary Gati that it had bought last December, by way of a tax write back of around Rs 80 crore through the ongoing dispute settlement forum called the 'Vivad se Vishwas' scheme, and thus to close the financial year with a fatty bottomline.

In January, Blackstone announced that it would buy 90 per cent equity in Allcargo's warehousing vertical for around Rs 1,400 crore and the Wall Street major has already invested Rs 380 crore as part of the deal which will be a mix of debt and equity.

The partnership will help Allcargo's growing third-party logistics business into which it had invested around Rs 1,000 crore.

"We are on course to close the sale of 90 per cent consideration for Rs 1,400 crore in our warehousing vertical to Blackstone by December. With that, we should be a debt-free company," Shetty told .

Allcargo has a consolidated debt of Rs 1,000 crore currently, including both term and working capital loans, and the company hopes to retire all of this, Shetty said.

Blackstone proposes to make the investment through debt and equity and will be developing logistics parks in key consumption hubs across the country and even after the conclusion of the deal also, Allcargo will continue to manage and service the warehouses, Shetty said.

Allcargo has 6 million sq ft of developed Grade-A logistics parks across the Delhi-NCR, Bengaluru, Hyderabad, Ahmedabad, Pune, JNPT in Mumbai, Hosur and Goa, and are in an advanced stage of development and has 3 million sq ft under development.

About 80 per cent of its warehousing portfolio is pre-leased, of which close to 1.5 million sq ft already generates income.

On Gati, he said the company has a "disputed tax claim of Rs 150-160 crore and we hope to settle it at the half the amount and thus will be able to write back at least Rs 70-80 crore by December", Shetty had told last week.

Shetty bought the express parcel major in December for Rs 416 crore including an open offer for a controlling 46.83 per cent stake and has since appointed turnaround experts Alvarez & Marsal to revive it.

Set up in 1993 by Shetty, Allcargo is an end-to-end logistics services provided such as multimodal transport, container freight stations, inland container depots, and contract logistics, logistics parks and last-mile express parcel deliveries after the takeover of Gati last December.

For Blackstone, the investment will help it expand the footprint into the country's logistics sector which has been clipping at a faster pace on the back of a booming e-commerce sector. Blackstone has so far invested more than USD 13 billion across private equity (PE) and real estate deals in the country.

A pre-COVID-19 EY report had forecast that companies would invest close to USD 8 billion into the domestic warehouses space in 2020 and has so far seen USD 270 million investment flowing in so far.


June 15, 2020

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