Allcargo reckons on a debt-free ending after Blackstone deal closure by Dec

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Allcargo Logistics looks forward to being debt-free by the end of the year upon concluding the sale of its warehousing unit to private equity major Blackstone.

In January, Blackstone shared that it would purchase 90 per cent equity in Allcargo’s warehousing for almost Rs 1,400 crore and that it has already invested Rs 380 crore as part of the deal which will be a combination of debt and equity.

The partnership will help grow Allcargo’s emerging 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.”

~Shashi Kiran Shetty, Allcargo Group Chairman

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.

He had also informed that Blackstone has proposed 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.

In addition to that, Allcargo will continue to manage and service the warehouses.

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.

While speaking about Gati, Shetty 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”.

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. Blackstone has so far invested more than USD 13 billion across private equity (PE) and real estate deals in the country.

As per a pre-COVID-19 EY report, companies would invest close to USD 8 billion into the domestic warehouses space in 2020 and has so far witnessed USD 270 million investment so far.

Allcargo Group Chairman Shashi Kiran Shetty also expects a brighter future for its Hyderabad-based subsidiary Gati that it had purchased last year, by way of a tax writeback of around Rs 80 crore thus hoping for a grand end to the financial year.

A leading name in its category, Allcargo Logistics, had  received the necessary approval from SEBI, India’s capital markets regulator, on its open offer to acquire approximately 3.17 crore shares or 26% stake in Gati, a premium player in the express segment, at INR 75 a share.

Allcargo is already the biggest shareholder of Gati following the allotment of 13.3 million shares by the Gati board earlier in January. On full acceptance of the open offer, Allcargo’s stake in Gati will jump to 46.83%. The acceptance of the offer will mark the completion of the acquisition process that took off on December 5, 2019. The open offer is expected to be launched in March 2020 and closed by April 2020, the company said in a statement.

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