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Allcargo Logistics Ltd.

BSE: 532749 | NSE: ALLCARGO |

Represents Equity.Intra - day transactions are permissible and normal trading is done in this category
Series: EQ | ISIN: INE418H01029 | SECTOR: Transport & Logistics

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Annual Report

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Chairman's Speech

Dear Fellow Shareowners,

I take immense pleasure in sharing with you all the highlights of our Company’s performance for the financial year ended March 31, 2018.

As an organisation, we have always set our eyes for the future and capitalised on opportunities. As the leader in our sector, we are constantly pursuing excellence and embracing change. Through innovation, we are committed to offer excellent services and create greater value for our stakeholders and customers.

The bygone financial year was a year of great contrasts. Amidst stern challenges, we found great opportunities. The results were a reflection of the tough times. But our commitment to our core Company values and business philosophy inspire us to take on the challenges head on.

Guided by an experienced senior leadership and backed by consistent efforts and team work, I can assure you that we are responding to the challenges very well. Our focus is to provide world-class integrated logistics services in India and globally. In the following paragraphs, I will detail out to you some of our significant plans that will help us achieve this.

Regulatory developments that panned out in the course of last year have influenced the sector. Trade restrictions, slower capex cycle, and the after effects of the shipping crisis continue to influence the sector at different levels.

All through the last financial year, we managed to successfully keep up our momentum, while framing our strategic plans for the future to achieve long term sustainable growth. We are relentlessly developing new tools, products and services to achieve excellence and create greater value for our stakeholders and customers. With a strong focus on the Company’s values and commitment towards our vision, we are set to take another leap in our growth trajectory through digitization and diversification of our business.

We proudly share that today we stand as India’s largest integrated logistics services provider. Over the years, we have emerged as a leading and competent player across businesses that we operate in.

Today we are:

- The Global Leader in Less than Container Load (LCL) Consolidation segment of Multimodal Logistics

- The largest provider of integrated logistics solutions in India

- Amongst the largest Indian CFS/ICD operators with the widest network pan India

- Only Indian Company with significant presence across the country’s three major container ports; we also further strengthened our position in this fiscal by opening a new CFS at Kolkata -where we are the only national CFS operator

- Amongst India’s leading Project and Engineering solution providers

- Amongst very few Indian companies specializing in contract logistics, a business with significant growth opportunities and potential

Indian Logistics Industry

Infrastructure development is a critical enabler to economic growth. Logistics infrastructure, covering the road, rail, waterways and air network of a country, is the backbone on which the nation marches ahead. The urgency to develop India’s logistics infrastructure has been realised in the past decade. A robust logistics sector can go a long way in boosting India’s quest for being a manufacturing giant. It is estimated that the Indian logistics industry will continue to show robust growth of 10-15% annually, leading the pace of growth of the economy at large.

In a push to the development of an integrated logistics framework in the country including industrial parks, cold chains and warehousing facilities, the government granted infrastructure status to the logistics sector, enabling the industry access to cheaper finances and access to larger amounts of funds. This gives this critical sector the significance it deserves; it will also make it easier for companies to secure funding for high capex logistics projects from banks and financial institutions. This in turn will trigger technical efficiencies and innovations and spark an overall upgrade of the sector as a whole. The competitive index of the sector will go up.

A prerequisite for service integration is the development of a robust multimodal infrastructure network that will enable the use of different modes of transportation to seamlessly transfer cargo. Such a transport network would ensure that freight is channelled through the most efficient mode for faster, safer, cost effective and pollution-free movement. This would be driven primarily through the development of multimodal logistics parks, streamlined economic corridor routes for efficient freight movement, and intermodal stations to connect various transportation modes.

Allcargo is at the forefront of this and has first mover advantage in the development of a multimodal logistics park in Jhajjar, Haryana. This facility will see a phase-wise implementation in 2019. This facility will be India’s largest logistic park, housing a rail-linked private freight terminal catering to railway cargo movement, a free trade warehousing zone, domestic tariff area and other related activities. It will also have the facility to handle both in-bound and outbound contract logistics services.

Our land banks in key consumption centres and industrial clusters are being developed to provide world class facility housing amenities and technology. Once ready, these facilities will aid the transit of cargo and reduce logistics cost for our customers.

Business Performance

In our MTO business, we continue to be the global market leader in LCL cargo and have made significant progress in FCL services. Project TOPAZ, has now been rolled out across majority of our offices. We believe this platform has given us a distinctive advantage over our competitors by bringing in operational efficiencies.

In CFS segment, we are the only CFS operator with facilities in the major Indian container ports at JNPT, Nhava Sheva, Chennai, Mundra and with the newly commissioned facility in Kolkata, we are now covering all major corners of our country. Our container freight stations are now present in ports that handle over 80% of India’s containerisation. Kolkata CFS will help us augment our business through the trade on the eastern coast from Bangladesh, Nepal, Myanmar. The Direct Port Delivery initiative had some implications on market dynamics which slowed down the anticipated growth and marginally impacted our volumes. But our timely adjustments on our business strategy of handling DPD cargo has reduced the overall impact on this segment.

The Projects and Engineering Solutions business continued to see a challenging business environment primarily driven by the lower than anticipated capex growth as well as certain regulatory changes impacting sectors like wind energy. To overcome this, we continued to lighten our asset base, increased asset utilization in our equipment business in the last two quarters of FY-2018, and moved focus to project transportation. With a strong order book pipeline, revival in wind sector and capex cycle, we continue to be positive and envisage a turnaround in this business segment in the coming financial year.

Avvashya CCI Logistics is a leading contract logistics Indian Company, where we are a dominant contract logistics partner for marquee clients in sectors like chemicals, pharma, auto, retail and e-commerce.

The rising internet consumption and likely consolidation of the Indian e-commerce sector will benefit the Company. ACCI currently manages 3 million plus sq ft of warehousing space in 45 locations in India.

Leadership expansion

A strong executive leadership is important to strengthen our strategic priorities. To continue setting global benchmarks, we have brought on board Claudio Scandella as the CEO of ECU Worldwide. He is an industry veteran, having served leadership positions in DHL for over 10 years, and the best fit to lead ECU Worldwide to the next phase of growth by tapping new markets, products and services.

Rene Wernli is the new Regional CEO of the Indian sub continent (ISC) Middle East, East Mediterranean and Africa - ECU Worldwide. He is spearheading the important and strategic opportunity markets for ECU Worldwide with his rich experience.

We believe in technology being a key enabler. Other than the several tools that we are developing and rolling out, we are also focusing on a strong leadership to guide us towards the IT vision. Ashish Mathur has been appointed as group CIO to spearhead our IT initiatives that will drive the next phase of growth. He is a seasoned IT professional who has led strategic roles in companies such as Maersk Group, Fidelity (FIS), WNS Global and Barclays bank.

These appointments are a part of a rejig to expand ECU Worldwide’s market leadership through digitization and innovation for customer satisfaction.

Focus on tools and technology

With our focus on the IT Vision, we have rolled out new tools for better customer service and efficiency. Our customers can search sailing schedules, get quick quotes, book, access real time updates and historical information on ECU 360, an easy interface which is available in eight languages.

ECU ART, our other tool, enables faster booking services for our customers. These tools will significantly reduce operational time and increase efficiency. Our aim is to bridge coordination gaps using robust technology and provide superior services to our customers.

Through the course, we have also introduced Avvashya Quality, a quality improvement tool to bring efficiency in our global operations. The purpose of our quality mission is to eliminate waste and to plug productivity gaps, so that our turnaround time improves and we are able to provide a faster and hassle-free customer experience. Digitisation will work only if our processes are standardised and automated. For this, quality plays a very important role. It can be about how fast we reach accurate information to our customers and how easily they can stay updated on their shipments.

Community and environment

Economic value is closely related to the social values. We have been engaging with communities to empower them to lead a better life through education, healthcare, environment and sports. We are ultimately a part of this society and it is our responsibility to constantly uplift them, whether it is through planting trees or providing medical facilities. Through Avashya Foundation, we supported Chirag Shetty, part of the badminton contingent which recently won gold at the recently concluded Commonwealth games 2018 in Australia.

At the corporate level, we recently launched Allcargo Greens, a long term campaign aimed at reducing carbon footprint. Our commitment to save resources for the future generation remains undeterred. We are taking small steps by saving electricity, reducing plastic and paper consumption. As the campaign sees gradual roll out across all our offices, we will definitely have a significant impact.

In the last count, we have planted close to 4 lakh trees as part of Maitree, our green initiative. Through partnerships with NGOs and government bodies, we have empowered the lives of over 7000 farmers till date. We will clock higher numbers in the coming years with our focus on giving back to the society.

Financial Performance

The consolidated financial performance for the 12 months ended March 31, 2018, is as follows:

- Total income from operations at Rs.6,088 Crore for the year ended March 31, 2018

- EBIDTA at Rs.416 Crore for the year ended March 31, 2018

- EBIT of Rs.257 Crore for the year ended March 31, 2018

- PAT of Rs.174 Crore for the year ended March 31, 2018

- EPS for the year ended March 31, 2018 was Rs.6.97 for a face value of Rs.2 per share

Future Blueprint

We see the fragmented LCL industry as a continued growth opportunity to expand our global network further and aim to scale up the business from current levels. We will also leverage our diversified network and products to grow our FCL business.

Growth in the infrastructure sector especially power, oil & gas, cement and steel is expected to increase demand for specialized transport solutions. We will continue to maintain our leadership position in the P&E segment.

We plan to further scale-up the contract logistics business with a special focus on chemical warehousing and e-commerce as GST and heavy domestic consumption have set high demands in supply chain management. With the introduction of GST, ACCI is further consolidating by increasing its warehouse footprint by over 1 million sq.ft. in the next financial year through Built to Suite warehouse infrastructure.

Overall, our focus continues to be on driving the Company’s Revenue and Profitability growth, increasing Return on Capital Employed and asset utilizations and improving cash flows across all our businesses.

The Company is ultimately guided by the values and cultures it propagates. Our workforce of 4500 people is bound by strong Company values that reflects in the work we do. As we go ahead, the belief will only grow stronger.

Before I conclude, I would like to thank you for your support, consistent commitment, engagement and encouragement. We continue to seek your participation in our next leg of growth and footprint expansion.


Shashi Kiran Shetty