The pandemic actually enhanced our operational efficiencies and in the process we are realigning the management heads of our global operations spread across more than 70 countries.
The logistics sector, witnessing transformation in the wake of the Covid-19 induced pandemic, has brought about a change in its functional narrative. Shashi Kiran Shetty, founder and chairman of Allcargo Logistics, speaks to Indronil Roychowdhury about the sector’s transformed model that has come to effect. Excerpts:
How has the Covid -19 impacted the logistics landscape in both the first and the second waves and the modus operandi to which the sector had to adopt?
Logistics sector, at the global level, during the first wave of pandemic, faced interruptions in delivery, congestion, capacity constraints, transportation and irregularities in container movement. But things improved fast. The Indian logistics industry on the contrary, showing resilience, continued operations with workers exhibiting exceptional commitment with nearly no disruption in port operations and containers transported efficiently to CFSs and ICDs. CFSs came out of the volume slump during April-June 2020 registering better than pre-COVID-level throughput by March 2021 for being able to regularise operations with all the safety protocols. But a buying behaviourioul change triggered e-commerce logistics’ growth bringing opportunities that called for a transformation in the sector.
The challenges during the second wave were no different but the industry was better equipped. In Allcargo, we prepared elaborate contingency and operations never came to a halt. The pandemic actually enhanced our operational efficiencies and in the process we are realigning the management heads of our global operations spread across more than 70 countries.
The business of logistics is man power intensive. Are you having to realign your workforce as digitisation has already come to play?
The logistics industry had to rethink its functional narrative for responding to the evolving scenario as maintaining social distancing and operating with the reduced workforce became the new-normal. We had to switch to remote working model to ensure safety. Working with precision and responsiveness became imperative in the transitory environment. Allcargo Logistics played a pioneering role in adopting ECU360, our digital platform for global trade, offering single-window shipping. This gave convenience to companies with in-depth local market expertise, unmatched custom clearance experience and strong global logistics network. At the operational level, technology-upgradation and digitalization have become critical with the growing e-commerce penetration.The warehousing and contract logistics segments have also become extremely competitive and demand for modern warehouses with higher throughput is growing. Technologies like Artificial Intelligence (AI) and Internet of Things (IoT) are revolutionizing the logistics landscape of the country.
What is the present scenario of sea borne cargo logistics that also influences occupancy in the CFS/ICDs?
Sea-borne cargo logistics have been disrupted in the past one year with pandemic restrictions in different parts of the world at different times bringing in temporary trade imbalances. Inventories remained blocked and blanking ( a scheduled sailing, cancelled by a shipping line wherein a vessel skips certain ports or even the entire route) led to significant capacity constraints. This drove freight rates to unprecedented levels though container inventory and trade imbalances witnessed some gradual rectification. The Suez Canal blockage pushed the recovery back to the same situation as several weeks ago but at the present point of time trade is again returning to normalcy. This should stabilise freight rates and availability of inventory for sea borne cargo logistics, though unlikely that freight rates would go back to pre-Covid levels again.
As for CFS/ICDs, they play a very significant role in India. They were the rescuers in most challenging times since many ports faced a risk of closure. But seamless evacuation of cargo to CFS/ICD network allowed ports to operate efficiently. The CFS/ICD occupancy levels have been more or less stable. The restrictions lead to reduced volumes, but also lead to increased dwell times, which combined to the utilisation levels ending up more or less consistent. Longer disruptions and lockdowns can lead to reduced utilisation, however, we see situation improving now and do not foresee such challenges for the CFS/ICD.
As you have made a number of acquisitions both domestically and globally and Covid is now continuing for more than a year now, have these acquisitions been helpful to your business?
All the acquisitions have been strategized to make Allcargo group a specialized global integrated logistics service provider with scale and the right footprint across markets. Our global NVOCC business has been an early mover towards digitization – we run a digital platform for global trade, on ECU360, a part of ECU Worldwide which we acquired in 2006. It has seen a significant take-up from clients. Being a digital platform, ECU360 offers end-to-end service factoring the entire process from pick up from the warehouse to delivery to the recipient. During the pandemic, this has been helping our customers across the globe carry on with their business with just a few clicks.
The acquisition of Gati is a part of our strategy to foray into the express distribution with first and last mile logistics segments. The aim is to combine Gati’s domestic reach with our global network to offer end-to-end integrated logistics solutions. As e-commerce is witnessing rapid growth during pandemic, the acquisition will make us a part of the e-commerce growth journey.
How has Covid -19 impacted your business revenue-wise last fiscal? How do you foresee the current fiscal, specially revenue-wise?
If you look at our financial results last year up to the December quarter, we have done better than in 2019 ( Revenue- Dec -20 Rs 506.06 crore against Rs 373.61 crore same period last fiscal. Net profit – Dec 2020 Rs 70.28 crore against Rs 159.59 crore during the same period last fiscal) even during the pandemic aided by improved volumes and in part by higher freight rates across the board. There are, of course, challenges due to lockdowns in multiple states in India, but I expect the logistics industry – both in India and across the world – to be a very exciting place post pandemic as economic activity fully recovers.
How is Allcargo charting its growth trajectory?
We are certainly not shy of acquiring companies. We have acquired over 10 companies outside India, all of which have been successful amalgamations. Our last was Gati,completed in 2020, and we are turning it around to get its growth trajectory on track by reducing debt, improving operational efficiency and exiting non-core businesses. The aim is to regain the market leadership that Gati once enjoyed in express distribution.