Port-based logistics firm Allcargo Global Logistics Ltd said on Monday it is bolstering the services business by acquiring two Hong Kong-based freight-forwarding companies, and is also diversifying into shipping with the purchase of two general cargo vessels.
Allcargo will acquire a 100% stake in one firm and initially buy a 75% stake in the second, a senior company executive said, requesting anonymity. The acquisitions will together cost around $22 million.
The company bought two vessels of 6,500 dead weight tonne capacity each for an undisclosed amount. The vessels will be primarily used to carry overweight cargo from bigger Indian ports to small ports.
Both acquisitions, ships and companies, were made through wholly-owned subsidiaries.
Hong Kong is fast becoming a preferred destination for acquisitions by Indian logistics firms. In March, Aqua Logistics Ltd acquired three logistics companies in Hong Kong--CIT Logistics Ltd, TAG Logistics Ltd and AGI Logistics Ltd--through its wholly owned subsidiary Aqua Logistics HK Pvt. Ltd.
According to the terms of the deal, Aqua Logistics will initially acquire a 60% stake each in all three for a total consideration of $7.09 million.
In late 2007, another Mumbai-based firm, Direct Logistics India Pvt. Ltd, had acquired a Chinese logistics company, Shenzhen Dida Logistics Ltd. It is currently scouting for more deals in China.
"China is India's largest trade partner and the unprecedented volume growth witnessed in the first half of FY 2011 is largely led by Chinese imports," said Gautami Seksaria, founder partner of Supply Chain Leadership Council, which conducts business events for the Indian logistics and supply chain sector.
"An acquisition in Hong Kong will give Indian freight forwarders the opportunity to serve their customers door-to-door and allow greater control on this India-bound volume on the one hand and a piece of the wider Chinese export pie on the other," Seksaria added.
Seksaria said AllCargo has strong ambitions in the project cargo segment. Having their "own vessels will protect them from the increasingly volatile charter market, but will also allow them greater control over their project cargo supply chain, offering a critical differentiation in this lucrative but extremely sensitive segment."
Mint could not immediately contact Shashi Kiran Shetty, chairman and managing director of Allcargo Global, for comment.
"The companies that we have acquired fall under NVOCC (non-vessel owing common carrier) category that are doing business in China and other parts of eastern regions. We have zeroed (in) on Hong Kong because that area has a lot of cargo generating capacity," said the Allcargo Global executive quoted above.
He said the company would look at captive and third-party opportunities for the ships acquired.
The shares of Allcargo Global rose 1.44% on the Bombay Stock Exchange, or BSE, on Monday to '159, while the benchmark Sensex gained 0.7% to 20,303.12 points.
According to the company's filing with the BSE, the acquisition in Hong Kong will further strengthen operating profit by adding nearly $3.53 million on a yearly basis, while the entry into shipping will result in substantial savings on hiring ships and help in planning project cargo movements.
In 2006, Allcargo Global acquired Belgium-based ECU Line NV, the world's second largest LCL firm. LCL (less than a container load) firms collect small cargo and aggregate them into a full container load.
Allcargo Global has interests in LCL, running container freight stations, warehouses and handling project logistics.
In 2008, private equity firm Blackstone Group picked up a stake in the company and invested $75 million in two tranches.
Allcargo will acquire a 100% stake in one firm and initially buy a 75% stake in the second, a senior company executive said, requesting anonymity. The acquisitions will together cost around $22 million.
The company bought two vessels of 6,500 dead weight tonne capacity each for an undisclosed amount. The vessels will be primarily used to carry overweight cargo from bigger Indian ports to small ports.
Both acquisitions, ships and companies, were made through wholly-owned subsidiaries.
Hong Kong is fast becoming a preferred destination for acquisitions by Indian logistics firms. In March, Aqua Logistics Ltd acquired three logistics companies in Hong Kong--CIT Logistics Ltd, TAG Logistics Ltd and AGI Logistics Ltd--through its wholly owned subsidiary Aqua Logistics HK Pvt. Ltd.
According to the terms of the deal, Aqua Logistics will initially acquire a 60% stake each in all three for a total consideration of $7.09 million.
In late 2007, another Mumbai-based firm, Direct Logistics India Pvt. Ltd, had acquired a Chinese logistics company, Shenzhen Dida Logistics Ltd. It is currently scouting for more deals in China.
"China is India's largest trade partner and the unprecedented volume growth witnessed in the first half of FY 2011 is largely led by Chinese imports," said Gautami Seksaria, founder partner of Supply Chain Leadership Council, which conducts business events for the Indian logistics and supply chain sector.
"An acquisition in Hong Kong will give Indian freight forwarders the opportunity to serve their customers door-to-door and allow greater control on this India-bound volume on the one hand and a piece of the wider Chinese export pie on the other," Seksaria added.
Seksaria said AllCargo has strong ambitions in the project cargo segment. Having their "own vessels will protect them from the increasingly volatile charter market, but will also allow them greater control over their project cargo supply chain, offering a critical differentiation in this lucrative but extremely sensitive segment."
Mint could not immediately contact Shashi Kiran Shetty, chairman and managing director of Allcargo Global, for comment.
"The companies that we have acquired fall under NVOCC (non-vessel owing common carrier) category that are doing business in China and other parts of eastern regions. We have zeroed (in) on Hong Kong because that area has a lot of cargo generating capacity," said the Allcargo Global executive quoted above.
He said the company would look at captive and third-party opportunities for the ships acquired.
The shares of Allcargo Global rose 1.44% on the Bombay Stock Exchange, or BSE, on Monday to '159, while the benchmark Sensex gained 0.7% to 20,303.12 points.
According to the company's filing with the BSE, the acquisition in Hong Kong will further strengthen operating profit by adding nearly $3.53 million on a yearly basis, while the entry into shipping will result in substantial savings on hiring ships and help in planning project cargo movements.
In 2006, Allcargo Global acquired Belgium-based ECU Line NV, the world's second largest LCL firm. LCL (less than a container load) firms collect small cargo and aggregate them into a full container load.
Allcargo Global has interests in LCL, running container freight stations, warehouses and handling project logistics.
In 2008, private equity firm Blackstone Group picked up a stake in the company and invested $75 million in two tranches.