Welcome to all of you to Allcargo's Annual Meet 2025. I am your hostess, Jyotsna Morris, and we are delighted to have you here with us as we share our journey, growth story, and vision for the future. Thank you for taking out the time to be here with us today. What started out as a vision over 30 years ago to bring greater efficiency to operations at the Nhava Sheva Port in a port liberalization India, has over the years grown into a logistics multinational with a global presence, known for its operational excellence, digital logistics solutions, and commitment to customer centricity. Today, we will have the management of three of our listed entities, Allcargo Logistics, Allcargo Terminals, and Allcargo Gati, who will present an overview of the businesses and way forward for the respective companies. Each of the presentations will be followed by a Q&A.
As we commence the proceedings of the day, I call upon our Founder and Chairman, Mr. Shashi Kiran Shetty, to share his message with us. Mr. Shetty's entrepreneurial foresight and commitment to building future-ready logistics solutions has shaped Allcargo into a global leader, delivering comprehensive services to its group companies. His focus on care that goes beyond business guides Allcargo towards his purpose of helping global supply chains by caring for sustainability. Inspired by his commitment, the group has taken a strategic approach to sustainability and aims to be carbon neutral by 2040. Mr. Shetty also serves as Chairman of the Board of Governance, IIM Mumbai, where he champions industry academia partnerships that foster innovation. He has been widely recognized globally and within India for his contributions to logistics and philanthropy. Mr. Shetty, could I request you to please take the stage?
Thank you, Jyotsna, for the introduction. Thank you very much. Good afternoon, dear friends, ladies and gentlemen. Thank you for your valuable time and efforts to come here today to understand our group's progress. We are very happy to be here to present that and help you to carry with you our dedication to create stakeholder value. Last five years have been very exciting, challenging, and rewarding. As you will see, my team and I have spent a lot of time driving the group's vision, purpose, mission, and values. I am very proud to say we are the only Indian company who is present in all relevant verticals of logistics in India, spread across the world. This brings in tremendous strength of knowledge, brand, and most importantly, very high energy and high-quality people to serve the company. Please join us as partners in our company's sustainable growth in the years ahead.
As you know, India is growing by stature and by economy. We stand strong to help the logistics need of our country and grow together. Largely, a lot of my time has been spent in the four high message that you read in the slide. I have been spending tremendous effort, my experience, my knowledge in what we call as institution building by giving the strategic direction, creating independent boards to run the companies, and have two independent chairmen also in a couple of our boards of the listed entities. You all know that we also went through a demerger process, and I am very happy to announce that yesterday, the NCLT has heard the final restructuring of our companies, and hopefully we will get that approval within a week.
Also spent a lot of time in robust system development, or rather, giving a vision for our team to develop a very good system and process, which is very essential for institution building, as all of you know. Also spending a lot of time making sure that we are a very compliant organization, are on top of our governance standards and compliances. The next one is the innovation and execution. I have my son, who is right now not in the room. He is traveling in China. He has been working relentlessly on improving our digital standards and capabilities. You will hear more about that from his colleague, Mr. Kapil Mahajan, who is a very industry renowned CIO who has been with us since last few years.
This is one of our core investment in the last few years, and we will continue to do that in the years to come to make ourselves a digitally enabled global supply chain service provider. You will get to also see more slides later. I do not want to take the thunder away. We are very proud where we have achieved probably one of the best in the world, which will bring a great amount of value in the years ahead. As you know, one of the most important thing for any sustainable and growing organization is what you need as a core value and a clear direction and the vision of the group where we want to end up. We want to make sure that the company is well managed even when people like me retire.
There will have to be younger people, there will have to be a brand, there will have to be a robust system process for the company to continue to operate in a very profitable environment. That has been one of my other core messaging and communication and driving the value in the organization. At the end of the day, all that need to end up in value creation for the shareholders. Market leadership, as all of us know, for us to have investments in managing the business by top people of the industry or people who are very specialized in managing the functions. To attract that kind of a talent and invest in systems, et cetera, you need an extremely good market leadership position so that you can invest your money also to manage the business centrally.
That has been also one of the core focus, and that is where we have our group finance function, Ravi Jakhar, our group human resource function, Indrani Chatterjee, and many others who are in the room today. Care for environment and society has been a core in my mind all the time because I come from a very humble background myself and build this entire organization through a tremendous amount of goodwill, which is built due to the hard work and sincerity and compliances.
So ESG is something that we always been practicing as a group right from the younger days, and we continue to invest on that, continue to build on that, to make sure that we do our contribution towards the environment, towards the society, and build a sustainable organization with a right kind of a governance, which I very, very sincerely believe is a pillar for any organization to last. So the vision is built to last, the vision is to stay strong, vision is to be a very respected, admired company from our own very country. Thank you very much. I now hand over back to the team. Thank you.
Thank you, Mr. Shetty, for your message. To take the proceedings forward, let us now look at our progress over the last five years and the road ahead. May I now request Mr. Ravi Jakhar, Allcargo Group's Chief Financial Officer and Director of Strategy, to take us through the Allcargo growth story over the last five years and share the roadmap for the years ahead.
Thank you, Mr. Shetty, for your message. These core principles have been guiding the management and operations of all our four companies across the group and for us functional leaders as well. If you look back, what we have done over the last five years and where we are heading the next five years, I have tried to put together in one slide. Over the last five years, we undertook a massive restructuring program, which, like Mr. Shetty just shared, got concluded yesterday with the final hearing. Now we believe that effective 1st of November, we should have the international supply chain business de-merged into the new company, Allcargo Global. This has allowed us to have a very sharp focus on each of the businesses, a very simplified management structure.
Besides that, coming in directly from the founder's core priority, all of us have spent a considerable amount of time in building digital platforms, technology, and all those things have been pivotal in our journey in the last five years. We entered into new markets. We expand into Latin America. We acquired new Container Freight Stations. We got into new business segments in the domestic supply chain, getting into meaningful opportunities. We acquired companies across Scandinavia. We expanded into Latin America, diversified our country logic. There is a lot of things have happened over the last five years, despite the macroeconomic environment and the challenges that were presented to us. Now, when we look ahead at the next five years, there are four key things which we believe are going to drive us.
What we essentially mean is any business is run by its core people, and that is something which we have taken up as almost as a strategy, whereby we have brought in world-class talent across new country managers being hired in Germany, Japan, many other countries, hiring the entire leadership team in Latin America. Teams joining us across Central Asia, Latin America, and parts of Asia as well. The key part here is it is pretty simple. Everybody knows that people drive business. How do you attract the best of the people? How do you make sure that you build an organization that attracts the best talent in the industry? That is something which I think it is a very proud moment for us as a group and perhaps for us as a country as well.
Because as far as the LCL consolidation is concerned, this impeccable organization that started with Mr. Shashi Kiran Shetty's vision and what we have built today, across the world, any market, any country, we are able to pick the best talent. Everybody has a desire to associate with and work with Allcargo and the ECU Worldwide as a global brand operating across the world. The second part, we are very sharply focused on value accretive growth, taking the asset-light approach, and you would hear about that from my colleagues, the managing directors for various businesses on how each business has built its own strategy of being asset-light or asset-light as the business demands be. That has ensured that we are able to plan optimal leverage and have a very efficient growth strategy, which would continue to ensure that we have strong foundations to grow upon.
My colleague Kapil Mahajan will speak more on the technology side. At the core of it, I think it is advantage to be an Indian company in today's macroeconomic environment with many of our businesses directly benefiting from the immense growth that India is witnessing as an economy. On the domestic supply chain, there are tailwinds now compounded with the GST simplification. There are tailwinds with new sectors emerging on the contract logistics. India is bound to grow in the manufacturing capabilities, which means that there are opportunities to expand in the exim business, which benefits directly our Allcargo Terminals business. There is new infrastructure coming in. We are building up facilities that connect to dedicated freight corridor. India as a country, as an economy, as a market, opens up infinite opportunities for us, and that is something which we truly look forward to taking an advantage of.
These are broadly the things that drive our vision and strategy across the group. Perhaps to take it more deeper look into each of the businesses, you would now get to the three key logistics businesses that are part of the group. So back to you, Jyotsna Morris. Thank you.
Thank you, Ravi. With that overview in mind, let us now turn our focus to our international supply chain business. I now welcome the management of Allcargo Logistics, the one and only Mr. Adarsh Hegde, Managing Director, Allcargo Logistics. Ladies and gentlemen, a round of applause, please.
I got to change here. After you have a very tall man standing on the dais, you know, it becomes difficult. I guess I'm audible. Good evening. First of all, thank you very much for all the support, investors, analysts, colleagues, everyone who are present here. Without you all, probably, we wouldn't have also stood here in front of you and share the dais, sharing about this organization, the brand that has been built, which you guys have been acknowledging and appreciating as well. Well, before I get into the real presentation, a little deeper on the international business, I want to give you a little glimpse. Before I give you the other glimpse. Before I give you a deeper glimpse, I would like to little recap on what happened in the last couple of years back, during COVID, obviously.
With the COVID, what happened was that everyone got benefited out of it. The entire logistics industry was benefited out of it, and we too benefited in a large way. While it set some perspectives, it set some expectations, right. We went along while in the last two years you suddenly saw some dip. It completely changed. The scenario changed, and that didn't happen just for us, it happened for the entire industry. While we were not immune to it, right. We've seen this before as well, but this was very different. Having said, what we did was also, we immediately recalibrated ourselves, got back onto the drawing table and set things right. During COVID, there was a lot of cost that got built because the volumes had gone up and multiple things happened around that time, so there was cost built in.
The first initiative, if I recall two years back as well, the chairman himself had expressed there is a BCD program that he launched to bring down the cost immediately. A lot of actions were taken, and with those actions, we were able to bring down the cost. Mind you, the market shrank, but we held on to our volumes. The gross profit was challenging, but we held on as well in terms of the percentage. Just to give you that part of it, but what we did during those two years, and which has now set the momentum for what you have been seeing in the last couple of months, it's completely changed. Those are the efforts that we're going to share with you and some which Ravi did mention.
Well, I am sure you all know about this, our global presence in 50 odd countries in the Americas, with about 134 offices. Europe, close to about 30-- in 37 countries in Europe, 52 offices. 68 countries in the India Subcontinent, Middle East, and Africa with about 122 odd offices. In the APAC region, in 25 countries with about 67 odd offices. These offices, obviously, are also with some of our agents as well. We operate close to about 2,400 direct trade lanes. We have 4,000 + employees. Needless to say, three and a half decades of experience. What we have done in the last 10 years, we would have been probably known as the LCL consolidator, which we continue to be.
But in the last 10 years, we have also grown our FCL, the neutral FCL business, where today we clock about 650 ,000+ TEUs, with about 9 million feet of LCL cargo. In the last three years, we have also started the air part of it, where we have done about 30,000 tons of air. There are four pillars of value proposition, which I always say is a single brand global network. The other is digital-first approach, end-to-end logistics, and local hands on the deck. When I say single brand global network, across the globe, if you look at any of our competitors as well today, ours is the only company which has the maximum number of offices across the globe. What I mean to say, the entire network is controlled by it. Digital-first approach, needless to say, Ravi Jakhar mentioned it, the Chairman mentioned about it.
The change that has been brought in this organization for the last couple of years since the young man comes on board with that digital mindset, Vaishnav Shetty, turned around and what he has done and what he has demonstrated, what digital can do for our organization, you will see it from what Kapil Mahajan will present. Of course, Kapil Mahajan being a pioneering in it, the CIO of the company, will present it a little more deeper. That has also given us a lot of insight, a lot of decision-making abilities have come through these digital that we have introduced. End-to-end logistics, obviously, with the people around, with the infrastructure that has been created across the globe, and with digitalization, we are now able to give end-to-end logistics solutions, providing complete visibility to our customer.
When I say hands on the deck, it is our people who manage the, like it was rightly said, asset-l ight, of course. In some places, we still work with the vendors, partners, and in some places, we have invested on our own and where it is being controlled and managed by us. The other growth initiatives that we have taken up is getting deeper into the hinterlands. Why I will tell you this also, you must have heard about the recent crisis that we have been going through for the last couple of years with geopolitical situation, multiple issues around the Red Sea, and obviously the tariff, which has been keeping us up at night as well. To get over this, what we have done is also we have identified areas where we can actually get into new markets, building new products as well.
One of the areas that we have identified, as you know, China is a huge market. We have started getting deeper in. We have named it as COM China. We have already seen the results of it, and there is huge more opportunities for us to do more there. Expansion in Africa. Africa is an area where we have huge potential to grow. We have started getting deeper into Africa as well. We also have strategically thought about in the CE region, the central Europe, where, again, a COM Europe is being done so that we go deeper into that areas. Like Ravi Jakhar said, in LATAM, we have built our infrastructure in terms of people. A new team has been brought on board for the last couple of months. We had some political situations in some of the countries in LATAM, which has changed now completely, and we see a huge opportunity.
We are aiming for better market share. We have already seen some results that has come out of Brazil. We are already knocking at the number one position in Brazil itself. Expansion in the retail business into the additional international markets, and obviously the expansion of our FCL business, FCL footprint, which in the last 10 years you have seen that we have started, we are around about 650,000 TEUs, aiming to get to 1 million in the next five years. Creation of global CFS product. Recently in Busan, we have brought in where it was the need of the hour that could change the entire dynamics for us, and we have already seen the results in the last four months. Cross-border e-commerce. E-commerce is a big name that is been spoken about everywhere. We have already got into that product as well.
We have introduced some services like return of cargos as well, return logistics for the e-commerce business. And expanding our air product as well. Wherever we see an opportunity, we are trying to expand it slowly as well. The strategic initiatives are, of course, focused more on profitable long-haul trades. We have already launched about 20 + new trade lanes in the U.S. and LATAM. Technology led, obviously, sales to capture long-tail customers in China, LATAM, as I said. Sales acceleration, this is something that we have been deeply involved for the last couple of years, and this has actually started reaping a lot of benefits. This is integrated with our CRM and our Chief C ommercial Head based out of Dubai is continuously focused in driving volumes and garnering and not losing customers. The customer retention of ours has really gone up through this process.
Huge growth opportunities in regional and local accounts we do see. While our dependence has been on the global accounts, and now our focus also continues to be in the regional and local accounts, which was always there, but we have now strengthened ourselves and have started going deeper in to garner more market share. Global FCL growth, this is something through the ECU360 we have just recently launched about two months. I can tell you I have not heard of anything like this in the industry. I will be surprised if I know there is something. There are some IT-based logistics company who have recently actually reached out to us that if they can come on board and use this technology. So you can imagine what I am saying, that something that we have introduced is very, very unique, and we should be having the first-mover advantage on this.
Needless to say, the cost initiatives continue to be key for us wherever we saw that there was opportunities for us to bring in shared services, which we have introduced already in Mexico, in Cebu. These are the two hubs that we have created. This has really benefited strategically as well, and also of course, on the cost parameters, efficiencies, et cetera. Process and system, this continues to be key for us. New business process management structure has been created with our new COO coming on board, due to which we've seen a lot of process being optimized. This optimization is delivering quality, productivity, utilization, and of course, the world-class standards, which reduces complexity for our customers. iTopaz, this is the transport management system for us.
I would say has been there earlier, it is known as Topaz, now it's iTopaz, is being re-architected to a cloud-native and AI-enabled platform. AI and automation, I don't want to dwell too much on this, as our colleague Kapil Mahajan will speak about it as we move forward. Of course, we've also got into some strategic AI partnerships, which will help us to build what we want to achieve to be ahead of any of our competition. On the procurement front, yes, as cost is always a key in this business, and it's very, very important, our procurement is very, very strong. We have strengthened our procurement at the regional levels so that it is not centrally controlled, due to which what happens is, there is a lot of focus in negotiating every step on the freight part of it.
As you all know, freight is the biggest part of our business, and that is very, very key to the profitability of this organization. So we've strengthened that part of it. There's a long-standing relationship, and obviously, with lot of volumes that we now generate, does give us the power to go and negotiate. So that was from my side, and in case anybody has any questions, happy to take or before do the digital part of it, we do it, and then we take the questions. Okay. So let's have Kapil Mahajan, and thank you very much for your patience hearing.
Good afternoon, everyone. In today's world, speed is the new currency and intelligence is the new fuel. At Allcargo, we have both, and we are deploying them at scale. Let me start with how AI is shaping the way we work. Take AQUA. Our email-to-quote AI is already live in four countries and has slashed quoting time by nearly 60%. We're doing about 20,000 quotes every month. That's customer delight delivered at speed. ELMA, our operation assistant, it's like having a digital co-pilot guiding our teams with the latest SOPs, ensuring compliance while keeping execution fast and flawless. Finally, SARA, our AI for customer retention, deployed across 25+ countries worldwide. It uses AI and machine learning to engage customers smartly, and in our early pilots, attrition dropped significantly amongst customers that we connected using SARA. That's loyalty powered by intelligence. But we didn't stop here.
We embedded AI into the very heart of sales, pricing, operations, and finance. For sales, [Glimpse] AI gives teams instant customer insights, enabling sharper consultative conversations. Marketing automation ensures accuracy in targeting, and pricing intelligence recommends the smartest freight lane prices with multi-factor precision. On the operations and finance side, AI is quietly. Sorry. [inaudible] . Yeah. On the operations and finance side, AI is quietly rewriting the playbook. Era AI captures inquiry emails and drafts perfect responses without a human in the loop. Booking AI converts booking seamlessly with human-validated accuracy. Document AI and invoice intelligence transforms unstructured chaos into structured clarity. Fact, our finance AI, delivers real-time insights, deviation analysis, and instant alerts. So leaders act proactively, not reactively. Together, these AI engines form what I like to call the digital nervous system of our enterprise.
At the center of it all, as you heard the previous speakers talk about it, is ECU360, our flagship customer-facing digital platform, already acclaimed as best in class worldwide. With 2,400+ trade lanes, it offers instant quotes, bookings, dashboards, track and trace, truly connecting any corner of the world to any other. The trajectory ahead is even more compelling. We are introducing predictive visibility, advanced personalizations, and sustainability with CO2 visibility embedded in every quote and booking. Furthermore, ECU360 is evolving into a growth engine, extending into trade finance integration, new customer segments, and adjacent services such as domestic trucking, FCL, and air freight. In a sense, it is not merely a digital tool, but a strategic ecosystem.
Our ambition is clear: to integrate speed, intelligence, and security into the DNA of logistics, creating solutions that are smarter, faster, more resilient, and sustainable for our customers while delivering long-term value for shareholders. We are not simply responding to the future, we are shaping it thoughtfully, at scale, and with purpose. Thank you.
I now call upon Mr. Ravi Jakhar to take the stage. Sorry. Okay. Sorry. My mistake. I now call upon Mr. Stephen Dunn, Global Finance Director, ECU Worldwide, to take the stage.
Okay. Where is my slide? Good afternoon. Good evening. Hi, I am Stephen Dunn. I am across from Dubai, actually from New Zealand originally, so hopefully my accent is not too confusing for everyone in the room. I am really excited to be here. I am here to lead a finance transformation for ECU Worldwide, and my role is pretty simple. It is to dramatically lower the cost to serve the finance function to the business, as well as improve the quality and service delivery to the business. The really good thing is ECU has such scale and breadth that it is the right time to deliver the finance transformation. With technology coming on thick and fast, there are some very strong things that we can do to deliver in that area. Basically, when I started this process, what we analyzed, we divided finance into its six or seven core functional areas.
For example, you can look at areas such as AP, AR, GL, FP&A, treasury, and tax. Each of those we divide into three areas: systems, process, and people. It is pretty simple. We want to optimize in each of those, as well as having synergies between those sub-functional areas. The general theme that we want to do, first of all, as I said, build the machine. So build the machine essentially is about deploying world-class technology and then also bringing in world-class leaders who know what good is to then deliver and optimize in each of those areas. Already in this process globally, we have deployed Microsoft Dynamics 365, which is one of the best global accounting platforms out there. It comes out of the box with a lot of AI enablement, a lot of integration into analytical tools.
At the same time, we have deployed Oracle Hyperion for budgeting and consolidation, which is used by about 40% of Fortune 500 companies to support analytics, rapid reporting and a very secure business planning process. The second phase, really after build the machine, is actually to look into centralization. I will go through some of those functional areas in a second. The centralization enables us to realize savings as well as to reduce the cost to serve. Some of those savings can then be reinvested into other value-added activities such as FP&A. So looking at some of the functional areas and where we are at. If I look, for example, at what we call financial operations, which covers accounts receivable, accounts payable. The vision there really is to centralize as much as possible and then to wrap AI enablement around all those core functionalities.
We are already well into that path. We have chosen one of India's leading digital automation partners, and we have already moved a lot of people into our centralized shared service center. Now we are moving into the AI enablement to automate as many core processes as possible. We have gone live in three or four pilot countries, and the results are really quite outstanding and quite exciting. AI is completely transforming what can be possibly done in a finance function. The next stage then is to take those pilot countries and rapidly expand it around the rest of the world to materially reduce the cost to serve for the finance business. We are complementing that strategy with then regionalizing our accounting activities. The aim is essentially to decentralize a lot of the finance functions around the world, because currently we are quite globally distributed.
To bring those into three regional shared server centers where we can apply scale economies, we can get consistency of outcomes. Once we have scale economies, you can then wrap technology around those as well. If your finance function is spread around 100 + locations around the world, it is quite hard to get those scale economies. The first thing you need to do is bring everyone together and then apply technology. That is pretty exciting what is happening in that space there. Within areas such as, for example, FP&A, which is really what a modern finance function should be delivering. This is about delivering service to the business to enable the business to help drive stronger commercial outcomes. We are pretty excited in that space, too. We have brought in strong leadership in there.
We are investing in the technologies, and we are really looking at what AI can do. What Kapil was saying before, it is about getting instant value-added information onto the desk of everybody in the company that needs it to make better decisions that impact financial outcomes. There is a lot of exciting things I feel are happening in that space, and this is where I see the modern finance function really, really delivering a lot of value to the business. On top of those areas there, now that we have built the machine, now that we essentially have strong analytics and we have lowered the cost to serve, we look at some of the other financial areas, such, for example, as tax and treasury management and control. From a treasury management point of view, there certainly is a lot of opportunity for us.
We are strengthening treasury leadership, and we are looking at ways we can fully optimize working capital. There are many more solutions on the market today than there were 10 years ago. Some of the ways that we are looking to drive and optimize working capital are by looking at deploying a global factoring program. We are looking at supplier trade credit programs which enable you to finance your payables and receivables. We are in many, many countries around the world, and some of those countries it is challenging to get some cash out of. But there are digital innovations and there are methods and ways to start getting more of that cash out of some of those hard-to-get countries, which we are then bringing into a central pool. Other initiatives that we have achieved recently is we have migrated our business with a global bank.
Global banks enabling us to then have global cash pooling, which means that we can suck all the surplus cash out of those countries around the world into a central hole. That central hole means we do not have to draw down a revolver on a day-to-day basis. That is actively driving daily cash management. Within that space, I do believe that we can add a lot of value to release more cash to the business to fund growth, and service any future dividend flows. We are pretty excited in that space. Within the tax area too, there is a lot of opportunity for us. I think ECU Worldwide has grown over the years through acquisition, and we have taken a look at the whole structure of the group, and we are re-optimizing all the tax processes. There is the way the companies charge each other.
There's the way the dividends flow in and out of the group with withholding tax. Now that we have strong expertise building in these areas, we're able to optimize and essentially bring a lot more value from a tax management point of view. We're very excited in that space as well. I guess in other areas too, it's just about finance delivering small wins to the business. For example, in a complex freight forwarding operation like ECU Worldwide, intercompany is a major factor. In many of the companies I've worked in, intercompany has been a challenge for many companies to solve. We are deploying technology and AI to mean that we can get rapid settlement and rapid understanding of our numbers, which then means that we have more visibility and control of all the group accounts and netting processes.
We're just right now launching a global netting portal, which is fully automated. I think that where we are in our journey, we've got a lot of things happening. In each of the functional areas, we're bringing in strong leaders who know what good is. They've had time to then develop their plans, and we're now implementing the plan. I do believe we're at the cusp of starting to deliver some tremendous value to the business. As I said, for me, it's personally exciting to build a modern finance function that can be seen as a value-added business partner. Along with that, the final stage is to make sure in all of our countries around the world, we don't really have bookkeepers who just do debits and credits.
We want to have leaders in the field in finance who are business partners, people who can help support management to drive commercial results, to interpret numbers in the business, to do storytelling, and then help improve the overall performance of all of our regions in the world. The word that I like to use is democratizing information. Making sure that the branches of the world have the same quality of information, analytics, thought process as the most senior parts of the organization. If we can do that, we can, I believe, build a finance function that's a true value add to the business. Thank you.
Thanks, Steve . Basically, if you look back at all the growth initiatives which Adarsh Hegde spoke about, the cost initiatives and also all the financial initiatives, fundamentally what that leads us to Can you put the slide, please? If you look back at financially what it means, what are we trying to deliver as a business, as the entire management team? If you look through the last four odd years or rather five years, the red line is the World Container Freight Index. That's how volatile the freight rates have been. Naturally, there was some volatility in our gross profit as well, while the volumes remained steady.
But if you see what we've been able to do over the last 12 months, and that's been consistent with the efforts, all the initiatives that Adarsh spoke about, the freight has continued to be downwards over the last 12 months, but the gross profit has been moving northward. That's what is creating the ability for us to drive profitability even in a challenging market. The very principle that we are trying to apply as a management team is that we drive volume, we maintain the ease, which means that we can expand the gross profit on the back of all those initiatives. If we can keep our costs in control, and Steve spoke about a lot of these things, shared services, automation, Kapil gave an idea about how every process is being transformed. The cost of operations comes down when we have a technology enabling it.
So all of these things mean that our gross profit should go up and the SG&A cost should grow at a much lesser proportion. It's the arbitrage of gross profit to SG&A margin that basically helps us create enhanced profitability. That's what the direction broadly is. We have tried to put together what our aspiration should be in terms of these numbers, and the presentation is uploaded, so it's available. I just broadly say that we believe that we can continue to grow across all the business segments. Naturally, the smaller base businesses will have a higher growth rate, but across all the businesses, we believe we would continue to grow over the years to come by. From a profitability standpoint, the numbers should more than double from where we are over the coming years.
The way to look at this from a company structure point of view, like we spoke earlier, Allcargo Global Limited, which would be the new listed company for the international supply chain business post the demerger getting concluded, these numbers would basically be reflecting the performance of that entity. All of this, like what we are trying to do here together is a combination of efforts between the group management team across functions, driving technology, digital, HR, and finance, along with our Managing Director, Adarsh, and also an impeccable team which is driving the international supply chain business in particular. We have functional expertise across commercial operations, FCL business segments. Then we have six regions. That is how the business operates.
Each of these regions are independent profit centers, driving growth initiatives, controlling their costs, and operating like independent company, which is a part of the larger enterprise. So that's the structure which basically helps us to work on our plans, strategy, and drive performance. So that's all from our side. Maybe I can invite back Adarsh and my colleague, Kapil, to join in, and we can possibly take up some questions.
Thank you, Ravi. It's always a tall order to follow up to you. Ladies and gentlemen, we now open the floor to questions. We have our two lovely hostesses who are there with a mic. If at all you have to ask a question, raise your hand. The hostesses will come close to you.
Hi, sir. My question is about this newly or will be demerged global company. This U.S. 50% tariff, how much it will have disrupted the trade of the business?
Are you? Sorry, just to get it clear.
Yeah.
You are asking what is the impact of the tariff?
Yeah. On all our, the industry.
Correct. Basically, if you look at it, India, of course, does have a little, but if you look at our entire global volume in that perspective, effect is not going to be much.
While I presented something on the screen at that time, there have been new areas that we have already identified to compensate for those small drop that would happen immediately. You would not see much of impact. In the immediate perspective, if you look at some volumes, yes, there would have been drop from India on the FCL part of it, the full container load part. There is close to anywhere between 50%-60% lower as well because the tariffs have gone up. In China, if you look at it from China to U.S., there is also a drop. But for us, what has happened is from China to other countries, in the other countries, the volumes have picked up. There is sort of overlap compensating. It shouldn't be a big impact for us.
In fact, I would look at it that we should have some more impact in fact getting more volumes on the LCL because people probably would only send only small quantities, is what I look at it till things settle down.
Thank you.
Yeah. Hi, sir. [inaudible] from Jefferies. A couple of questions. If you can maybe take it back to the previous slide where you put your 2030 targets. Just trying to understand, are these aspirational numbers or are these stated targets that you have? Also if you can provide some color on the math behind it. I mean, what is the kind of market share assumption that you have put in on working these numbers on the LCL side or industries or certain specific end products, a little bit more color on that, please.
So fundamentally, we have started with a product-wise breakup. That's how any plan is built. Across product categories, the growth is largely driven by various initiatives, which my colleague, Adarsh Hegde, spoke about. We are entering some new markets. We have started some new products. All of those initiatives lead to a compounding effect on the growth. We are not looking at market share expansion in the existing markets where we already have a stable, mature market like in European markets, et cetera. We assume the same market share, no expansion there. But there are pockets of opportunities where we are not present, we are entering in. Adarsh Hegde spoke about Brazil or some of the Latin American countries where we have rapidly grown market share. We have built the volume assumptions product-wise, which are leading to the increase in the volumes.
As you know, our business is focused on gross profit. Revenue is more of an outlier depending upon the freight rates. We are hoping that the yields will remain same. We are not looking at yield expansion-based growth despite the fact that as you increase the door percentage, as you increase value-added offerings, as you increase the long-haul trade lanes, it should have a positive impact, but largely the assumptions are more volume driven. Volume growth is initiative driven. On the cost side, like I said, there's an inflationary adjustment which we've assumed, and Stephen Dunn spoke about various shared services that would lead to efficiencies. Kapil Mahajan spoke about the technology initiatives. All of those initiatives have been baked into planning inflation, offset by initiative net impact. The profit is just outcome of that.
Sure. So these are essentially the stated targets. I mean, they've been matched against, understood. Fair enough. Sir, secondly, on the initiatives on the cost side, there are two parts to it. One with respect to the manpower reallocation and also optimizing on that front. For the past few con calls, you were also speaking about relocating some of the costs to lower cost economies, maybe moving from U.S. to Brazil kind of example. So where are we on the journey at this point in time? From an initiative standpoint, from SG&A to, or from GP to EBITDA conversion, I mean from current ratio, what is the potential opportunity you look at on that conversion aspect? Secondly, on the finance initiatives side, is there a certain number identified with respect to law either through the dividend flows or centralizing operations?
Is there a number that's been identified and potential reduction on the front that you're looking at?
Yeah. So in terms of the operational shared service centers, we have already done that for some of the large countries like U.S., and we are currently underway for some of the European countries and some of the high-cost Asian countries as well. I will let Stephen Dunn talk about the financial shared services, where we are on that. But each of these targets, we have a very clear visibility whether it is tax optimization or shared services. Each of the initiatives is broken down into a specific office, specific number of rationalization on cost. So it is not a high level approach. It is a very ground level approach in terms of it is possibly broken down into maybe 50- 60 initiatives, each of them are tracked separately.
If you want to give a color on where we are on the financial shared services.
Yeah. So essentially we are already underway with one region around the world, which is the first regionalization, which is for AR, AP, and GL, and that should be largely finalized by end of Q1 of next year. And then, following that, we have detailed plans for the other two regionalizations as well. So everything is fully planned out, and it is a matter of sequencing it at the right pace that the organization can handle. If you transform too much too quickly, it adds too much risk. So we will do one region, then we will do another and do the rest. So we have very clear targets as cost savings, which we feel very confident we can hit.
Sure, sir. Thank you very much and all the best.
[inaudible].
Thank you. You mentioned that the current profitability of the business is under pressure given the global situation. In this environment, how are we doing relative to competition? What will be the profitability of some of the larger global peers at this point? You also mentioned that from initiatives you want to add new markets. As you add new markets, would that mean lower utilization and initial losses in those markets? How confident are you about sustaining margins given new market entry and so on?
Yeah. I'll share some of the insights and then let Adarsh Hegde share onto that. Primarily, as we spoke about being the only global single brand company in the true sense, many of our competitors are in specific country or regional markets. If you look at our own performance also, it is not secular. We have countries which have operated in the losses in the last couple of years, and there are countries which have demonstrated growth and profits. What we find is some of these struggling markets where the macroeconomic environments have been complex, so the European countries, those local players have been under pressure and operating in losses. These are not listed companies, so we tend to get data delayed by maybe about a year sometimes. In September to November, we get the data.
But you know, a lot of industry players have been operating in losses. Among the global peers, there is no exact benchmark, but I would say our sense is that based on how we efficiently utilize our boxes and price our services, I would imagine that we would be among the most profitable in the industry in terms of the current environment. Of course, everybody would be on the lower side, but on a relative basis, as you ask, I think we should be on the higher side.
Yeah.
Yeah, absolutely. I think the other main thing that has kept us, if you look at our EIS that we have been able to hold, which I shared during the presentation as well, has been possible because of our new markets, the new initiatives that we have taken, and of course, we've worked on a lot of cost parameters because the selling is market-driven, right? The only thing we can do is the cost. Cost can be controlled by us. By digitalizing a lot of processes of ours, the RPA projects that we introduced, the shared services that we spoke about, all these have culminated to holding onto the numbers well, EIS numbers well.
Having said that, if I look back, like what Ravi said, within the competition, there are a lot of trade lanes that we operate, which probably they don't operate, and that's one of the reasons that we've been able to better them, in terms of numbers, whatever we get. Obviously, I wouldn't want to comment on it. Maybe it's right, it's wrong, but I'm pretty confident that we are way ahead of them. Yes, it's a difficult market, but I think we still have a lot of room to do, and which we are doing, and that has kept us going. Also, if you look at the FCL part of the business, if you look at the share of our market share, and globally, if you look at it, we are very minuscule.
We might be ranked among 17, 18 in the world, but we still have a lot of room to go there, and that's one other opportunity that we continue to work on, which keeps us on.
Can I ask you a question?
Yeah. Probably, yeah.
[inaudible]
Yeah. On the cost of people cost, how?
[inaudible] .
Good afternoon, everyone. I think it's a pleasure to address all of you and be here and speak on behalf of the organization. There are multiple initiatives, HR initiatives, people-related initiatives that we have launched in the past, and some of them are already implemented. One of them being a global payroll system through one of the largest payroll provider of the world, which is ADP, which is listed in the New York Stock Exchange. We have engaged them 18 months back to implement the global payroll system, the objective being to have one single source of truth for all people-related costs, and have a better transparency and control over the costs. We are very, very happy to say that almost 85% of the project has been implemented successfully with a very good feedback from our stakeholders.
We are having around seven countries which are already underway to get implemented. End of next year, we will have the entire organization on that. What we will get out of it is, of course, one single source of truth. Second is we will get the full clarity on the cost, something that we all are very conscious about. Third is, of course, the better management of all people-related information through single source of truth. Thank you.
Thanks, Indrani. If you look back at all the things that we have done, if they were not done on the cost control, outsourcing of, I guess U.S. itself was about $4.5 million impact. If you look back at all the initiatives, centralizing payroll, controlling, if we had not done, we would ourselves be in a very different situation. In terms of the overall market, I think we do not see initiatives at scale being done like what we have tried to do over the last few years to meet the challenging environment. That is why possibly the profitability, as Adarsh said, should be on the higher side compared to competition.
Oh, there is a question right there.
Hello. Yeah. [inaudible] from [inaudible] Capital Management. Since you have explained your focus on digitalization, are you planning to move from 3PL player in logistics to 5PL logistic player?
Not yet, but you never know. If there is an opportunity, if you see the business makes sense, then obviously we would look at it. But for now, no. We want to focus on our core, and we continue to focus within those areas what we serve.
Sir, you have given the targets or the guidance for the next five years in terms of the top line and the EBITDA. Can you also tell what will be the capital employed and the profitability ratios, which we can expect in year 2030? The other question to the management is: what do you focus on? Do you focus on profitability, or do you focus on growth? Because if you believe that after you reach a certain size, then profitability will always automatically follow, then that's a good strategy. But what's the target in the next five years? Thank you.
Yeah. If you look at our business, it's completely asset-light, and barring some investments in technology, there's no major CapEx. Which means that essentially our capital employed will continue to remain flat, maybe rather some of the historic assets will depreciate. Therefore, our capital employed should remain the same, and therefore the entire expansion on the EBIT should lead to an expanded return on capital employed. In terms of your question on what we focus on, I think, the beauty of our business is that profit is an outcome, like I mentioned, of arbitrage between inflation and growth. So it always focuses on driving growth through initiatives. We're not looking at driving growth through aggressive pricing or any of those initiatives. We are very conscious of that. We try to drive growth through all the initiatives which Adarsh spoke about.
When you drive growth and contain cost, that's the operating leverage that expands profitability in the best possible way.
Thank you.
Are there any more questions? If there are no more questions, shall we close Q&A session? Thank you, gentlemen, and thanks to the audience for those questions. It was an engaging conversation. With that now, we turn our attention towards Allcargo Terminals, which facilitates trade through its pan-India presence of CFS and ICDs. May I invite the management team of Allcargo Terminals, starting with Mr. Suresh Kumar, Managing Director.
Good evening, everyone. After that very engaging session with our International Supply Chain, it is the turn of Allcargo Terminals, which is a CFS ICD business of the Allcargo Group. First of all, let me thank all of you for accepting our invitation to meet us today and hear the story of the group companies. Over the next 30-45 minutes, me and my colleagues will take you through the ATL journey, what is it that we have achieved over the past few years, and what is it that we have planned for the coming years. Starting with the first CFS in Nhava Sheva in 2003, the CFS ICD business of the Allcargo Group has grown steadily to becoming a market leader in the CFS space. We have seven facilities across five locations in the country, and these five locations kind of manage about 80% of India's external trade.
Out of these locations in which we are present, there is JNPA and Mundra, where we have two facilities each, given the fact that these are the two largest port clusters in the country. We have our other facilities in Dadri, which is an ICD, and we have got facilities in Chennai and in Kolkata. ATL, at this point in time, operates with about 230 acres of yard space across the facilities that I've mentioned, and we have got close to 1 million square feet of warehouses, which is a combination of bonded and general warehousing that we have. We handled about 6.79 lakh TEUs in the last financial year. This is the laden volumes that we handle. Along with this, we also handle close to 3.5 lakh empty container movements, which is a critical part of extern trade, as you are aware of.
We offer the full range of portside logistics services, right from transporting containers from the port to the CFS, stuffing, de-stuffing, custom-related work, special cargo, haz cargo. The entire suite of services is what we handle. Over the past 20 years, we have built a very strong brand, and we are valued by our stakeholders for a bouquet of things. Firstly, for our pan-India presence. In an industry which is extremely fragmented, there are about 170 CFS players and about 45 odd ICD players in addition to that. We are one of the few operators who have got presence across multiple cities, and as I mentioned to you, we operate in ports which are handling about 80% of India's extern trade. We have synergies with the Allcargo Group, which gives us an opportunity to support the international supply chain in their LCL and FCL businesses.
We have strong and deep shipping line relationships which help our customers. We are versatile when it comes to different operating models with which we work. For example, we have a SAMO operating model with CWC in Mundra. We have got a joint venture facility in Dadri with Container Corporation of India. We operate landlord royalty-based lease models in JNPA. Across the CFS spectrum, the different operating models is something that we are quite familiar with. We bring in our expertise into it, and we ensure that these partnerships are win-win for all stakeholders. Of course, the focus on ESG and sustainability, like our chairman spoke, this is something which is ingrained into the group. We do our bit on that front, and about 19% of our electricity consumption across the facilities is powered by solar. A quarter of our 3-ton forklifts are electric.
All our facilities are ISO 9001, ISO 14001, and ISO 45001 certified. This is in the realms of safety, environment. These ISO certifications ensure that we are industry-leading. We have been pioneers when it comes to various things in the CFS industry. Years back, we were the first to introduce RTGs in the CFS yards. We continue that tradition, and some of the latest things that we have done in this is we are the first to introduce digital enablement for exim cargo clearance. We have got our app called MyCFS, backed by a portal, to which access is given for our customers. 2/3 of the entire exim cycle can actually be operated through the app or the portal without even visiting the CFS.
After we have launched this about three years back, there are a couple of others who have followed it, but we continue to set the standards in digitally enabling our customers to do the exim process. In the international supply chain presentation, you heard a lot about AI, which is something which is starting to touch every aspect of our business. There is AI enablement that we have started to do with regard to cargo management by introducing tagless yard management, by which the containers are placed appropriately, stacked in a certain manner so that retrieval is possible. This is something that we have piloted in one of our CFSs and will extend to others in due course of time. We have an experienced team, a small team of 355 people who are on roll, supported by about 2,000 associate team members.
We have a gender diversity of about 9%, which is quite commendable in the logistics space in the country, and we have experience per team member which is more than 10 years in the logistics space. I talked to you about the operations excellence in terms of the ISO certifications that we have. This is backed by stable vendor relationships and a vendor ecosystem which supports us to maintain an asset-light approach wherever we require in terms of transport, security, and equipment. The scale efficiencies that we have by operating multiple facilities come in and help us keep the costs lower. All this finally translates into great experience for our customers, and we have industry-leading net promoter scores of over 65%, and this has been consistent over the last four to six quarters. The other thing which our stakeholders value in us is our financial discipline.
If you were to look at our balance sheet, it is strong. There is very minimal debt. We will talk about it as we go ahead. We have a very efficient working capital management. Our DSOs are in the range of 15-16 days. In the last three years is something that I want to talk to you. The last three years, if you were to look at it, was preceded by COVID, and before that, the huge thing called DPD. Let me spend a couple of minutes talking about DPD, because in every forum that I have gone, the first question that comes my way when I say that I am part of CFS is the impact of DPD. If all of you were to look at it, DPD started sometime in 2017-2018.
It's a great move to ensure lower cost of logistics and a whole lot of other things which come along with it. We support it fully. When it comes to DPD impacting the CFS business, we have JNPA, which operates currently at about 75% DPD. Chennai is at about 35-40-odd percent. Mundra is at a lower level. The addressable market or the addressable volumes which come in into the CFSs haven't significantly been affected. This is simply because CFSs play a role in smoothening out what you would call freight rate hikes, which you saw in one of the earlier presentations, and the commodity prices. Therefore, customers see us as custodians of cargo for a certain period of time, and we also add value-added services to it.
Therefore, the addressable market which has been there for the CFSs have grown at a steady clip, maybe a shade shorter than the overall container growth, but the addressable market continues to grow stronger, and we get our share of that. The other thing is, during COVID, when the overall supply chain systems across the world were severely affected, there was congestion in shipping lines. There was cargo which was piling up. I think India was a very good exception. Credit to all the good work which the various ports have done and the ecosystem have done. The small role which CFSs played in terms of evacuation of cargo was a critical thing which enabled that ports function smoothly. Therefore, our position with regard to DPD and the way in which CFSs progress is that CFSs are vital in the Indian port ecosystem.
They are natural extensions of the port, and the value additions that we do for customers ensures that our addressable markets grows at a consistent pace. In that consistently growing addressable market, we have held our market share steadily between 12.5% and 13.5% over the last 8- 12 quarters. We have kind of defied industry norms in a way as we have grown our EBITDA per TEU consistently over the last eight to 12 quarters. What was INR 1,800 per TEU EBITDA about nine quarters back is currently running at about INR 2,100- INR 2,150 EBITDA per TEU. This is on the back of a lot of efforts that we have done in cost optimization, yield management, and also ensuring that we do the right things when it comes to operations. We have transitioned from an asset-light model.
When we listed about three years back, we talked about an asset-light model. As we continue to do business, we realize that there are strategic opportunities where we will have to invest directly, and we have done that. We have a hybrid model of operations in which we use leased facilities in some of our locations, and we have also invested where it makes strategic sense. Some of the investments that we have done is in HORCL, which is the Haryana Orbital Rail Corporation. This gives us access to the dedicated freight corridor for the upcoming Farukhnagar ICD, which we will talk to you about. Mundra is an extremely important market. We have been operating the two facilities within the Adani SEZ.
As we look forward, we believe we need to create a larger facility and therefore we have invested in land outside the Adani SEZ while the other two facilities continue. This model of operations is asset-light, which you heard our CFO also talk about. We completed acquisition of Speedy Multimodes. Speedy Multimodes is now 100% subsidiary of Allcargo Terminals. We have renewed our contracts with CFS Mundra last year, and that gives us visibility till 2030, and we have recently enhanced our capacity in JNPT. In summary, what we have done in the last three years is we have, as one of the front-running CFS organizations in the country, consistently run our business in a manner in which it delighted customers. Our capacity utilization is one of the best in the industry, and we are in a position now to scale up.
In terms of opportunity, I would now request my colleague, Ashish, to join me to take you through the opportunities that we have. From now on, some of the slides we will run together because I think there are a lot of information that we would like to share, and it does better when we work together as a team here. With regard to the opportunity, I will just set the initial thing. There is this graph which talks to you about the port volume growth in the country. If you look at FY 2020 to FY 2025, 12.6 million TEUs is what we had in FY 2020, and this is now close to 20 million TEUs, and I am talking about the ports in which ATL is operating. On top of this, there could be another 20% because we operate in ports which handle about 80% of our volumes.
We expect the port volumes in the ports that we work in to grow to about 28 million in the coming four to five years. There are multiple reasons why these volumes will grow. One is India is on the back of one of the strongest growth stories among the largest economies in the world. That drives export volumes. There is capacity creation across the various terminals, which Ashish will talk to you. Ashish is the CEO of our organization.
Hi. Thanks, Suresh. Suresh has taken you to what Allcargo Terminals has been doing, and I think that's a good flavor. Good to know that all these years we've never been in the red. We've always been green. We are expanding and ever-expanding story. I think what we are also trying to say is the port expansions, right? What's generally happening now is in the last, from 2020 and if you take it to 2030, we have already doubled the capacity of the terminal in India. Nhava Sheva has just come up with its second phase of PSA, which has kind of enhanced and doubled the capacity of Nhava Sheva. Tuna Tekra, which is coming in Mundra, is going to come in with another capacity, adding to what Adani SEZ is already doing.
What we are also heading towards is 2030, which is going to be Vadhvan Port, and I think the story really defines ports that. In 10 years, India has not only kind of doubled, it's actually making it three times the capacity of the terminal. What does that mean to our business, right? That's the connection that we're trying to bring in. With 2020, if you see the number, we were somewhere around 12.6 million TEU capacity in the terminal. 2025, we are looking at 19.6 million, and 2030 we are going up to 27.5 million, and this is minus the Vadhvan Port. Presently, where we stand with our facility, we have completely come to a situation where we are 85%-90% of capacity utilization.
What we're trying to do now is enhancing our capacity, and that's what our next plan is. What are we expanding now? JNPA, which is our flagship facilities, we are presently running two facility out of there. What we've already done since last year to now, we've added another 25 acres of land parcel to our existing facility, and we are also kind of redeveloping the Speedy Multimodes facility, which is a 53-acre facility. By redeveloping that facility, I think we're coming up and we're increasing our capacity over there. The second thing that we've done is what Suresh already mentioned, that we've taken about 60 acres of land, which is in Mundra. Now, this is kind of not only going to grow our facility, but it's also kind of the location that we have brought in. It's in between Tuna Tekra and Adani SEZ.
What we are already trying to do is we're already trying to cover the kind of market that is going to start arising in Tuna Tekra. That's a very interesting expansion that is coming up. Chennai, we have two terminals now. One is like the Chennai Port, the other coming, which is already now Kattupalli. We are now building capacity in Kattupalli. The volume we see is increasing in Kattupalli, and we are already getting ready for that volume increase. Our biggest one is Farukhnagar, which is going to be an ICD rail link, HORCL connected, and that's going to be the expansion that we're going to do in North India.
Suresh?
These four projects kind of define what we intend to do over the next three years, and these are projects for which we have absolute visibility and that we are working on. Cumulated CapEx on this is about INR 400 crores. There is already investment of about INR 110 crores that we have done for HORCL and about another INR 30-INR 35 odd crores that we have done for Mundra. So about INR 150 crores of investment we have already done. We will talk about investment and how we propose to fund this as we go ahead. Quickly on the capacity addition, what we intend doing, and this is a summary. FY 2025, we started at about 8.3 lakh capacity. CWC Mundra, we have done the renewal with an additional 10 acres, giving a 50,000 additional capacity. JNPA, Ashish just mentioned what we have done with regard to additional 25 acres.
The balance three blocks is what we need to do now. The Chennai new facility, Farukhnagar and Mundra. That will take us to about 13.5 lakh capacity under our immediate visibility and control. I would also like to draw your attention to the fact that the asset-l ight strategy that we are following helps us to acquire leased land, develop them quickly, and increase capacity depending upon opportunities that we see. So in terms of capacity expansion, there is a clear blueprint that we have laid, and this blueprint rides on the India growth story, on the EXIM story. Therefore, we believe that there is a great opportunity that we are tapping into.
I would just like to take you quickly through one of the opportunities to give you a flavor of what we are talking about, which is the Farukhnagar opportunity, which is also the largest investment that we have amongst the four things that I have spoken to you. The ICD opportunity in the NCR market, if you were to look at it, the market size is about 12.5 lakh TEUs per year. Of which the addressable market size for CFSs ICDs is about 2.5 lakhs. The throughput capacity that we are building in Farukhnagar is about 1,20,000 in terms of capacity. We expect to get to about 70% capacity utilization given the kind of industries in that area.
If you look at it, there are two other existing operators, but we bring in through the HORCL connectivity, the unique advantage with lower transit times, which we estimate to be about 15%-20% for transit from Farukhnagar to Mundra or whenever the DFC gets completed into JNPT. That's a unique advantage that we offer. We have mapped the market there. We have met a whole host of customers who are in the auto parts, electronics, metal, pharma. There are a whole lot of industries which are there. There is a model electronic township which is coming up there. There is a lot of stuff which is happening in the NCR region, which is the gateway to the Northern India market.
In the India growth story for 2030 and in the Viksit Bharat growth story of 2047, North India is supposed to be the driver, and that is where we are positioning the Farukhnagar ICD. Basis all this, what is it that we are aspiring for in FY 2030? Current volumes of 6.8 lakhs, we expect to hit 1 million laden volumes by FY 2030. Our revenues hover around INR 750 crores at this point in time. We would like to double that with the addition of capacity and the facilities that we talked about, and the EBITDA to be growing at a faster pace than revenue. The asset-l ight approach that we spoke to you about, the geographic expansion, getting into Northern India at this point in time, significant portion of our business interests are in West and in South.
We get a gateway into North with Farukhnagar. That's also a rail link ICD. We will continue our commercial excellence and operational excellence, keep a sharp eye on digital enablement wherever it is possible, keep a sharp eye on costs, SG&A, and then make the partnerships that we have run successful to reach the aspiration that we talk about.
To run this aspiration, we have got a very capable management team, some of it, which the pictures are here. Ashish is here. I request Pritam Vartak to join me on stage. We will have question and answers after this. It's a very experienced team that we have, and we have divided our business into key regions. There is a southern region, west, which comprises of JNPA and Mundra, and then there is a north and east, which is handled by three regional heads that we have. Then you have the HR, the operations side, and the finance side. Three of us are here. With that, we come to an end of what we wanted to share with you.
Thank you for patiently listening to us. We turn it over to you. We would like to hear from you what you think about what we said and any questions or clarifications that you may have.
Our hostesses are ready with the mic. In case you have any questions, please raise your hand. You already have the first question.
This question is to the CFO. I read somewhere that there is INR 685 crore of contingent liability. Can you elaborate on that?
Major portion of INR 685 crore contingent liability is on account of port guarantees and bonds, which we have to give to the customs and various port authority as a part of doing business. The real contingent liability in terms of claims and the tax-related issues stand only in the range of INR 30 crore, plus INR 5 crore of customer dispute. Rest all the portion of contingent liabilities which we disclose are part of bank guarantees and bonds, which are considered in the normal in case of CFS and ICD business.
It is only INR 35 crores, which is a possibility of not-
These are, I will say, income tax disputes plus customer claims, which are again, normal business cases.
I will just add over here. What you read, INR 685 crore, so actually, when you are running a CFS business, we have to give a custom bond. That is basically a part of business and not only Allcargo, I think so all the CFSs, ICDs are linked with customs. It is a bond that we are giving which is being retrieved as a liability. It is not an actual liability on us.
Thank you.
Hello.
Hey. Hi.
In the last con call, you mentioned that due to DFC, you have started to see throughput increase due to faster turnaround time. Cargo handling and cargo transportation revenue, will it increase? How much revenue the company earns from handling the cargo versus warehousing the cargo?
Yeah, I think, let me clarify. Let me try to understand what you're asking. There are two portions of the things that I mentioned. One is the Farukhnagar, which is the future that we are talking about, which is a rail link ICD, and maybe that is what you're referring to. Is my understanding, right?
It's related to CFS.
The current operations?
Yes, the current.
Okay. The current operations, if you were to look at it, the revenue model of import, export that we have. We have ground rent, we have handling charges, then the value-added work that we do. These are the things that we do for the customers. Ground rent, which used to be a larger portion of our revenue, has shrunk to possibly about 15%. The rest of the revenue that we get is on account of transportation and the value-added service that we do, plus the work that we do with regard to stuffing, de-stuffing of cargo. If that were to kind of answer your question.
I will add over here. When we say our revenue, right? If you see what we just mentioned, the capacity of the terminal increasing.
What has not happened in Nhava Sheva is the capacity of CFS and Container Freight Station has not increased. If you see what has happened in the last 10 years, there has not been any additional CFS or land that has become a CFS in the last 10 years, right? The only addition that has happened is the 25 acres that we have added to our facility. What that means is that as the cargo and the volumes increasing in Nhava Sheva, the supply demand is now going to be changed. Earlier, there was an oversupply of CFS with respect to the terminal volumes that we were handling. As years passed and by 2027, as we have mapped, by 2027, we are actually kind of getting into the deficit positioning of CFS with respect to the volumes of the terminal.
This actually starts giving us better revenue, better yield, and better ground rent storage stories coming in the future. That is not too far, except we are talking about 2026, 2027, 2028 is where we see this happening once PSA second phase is completely running into the system.
Okay. Thank you.
Sir, to the last point you made that the demand supply situation is now reversing. Can you comment on what sort of utilization is the industry at in some of the key ports that we have, maybe JNPA, Mundra, Chennai?
Let's put it like this. I'll give you demonstration from our numbers starting from, let's say, from 2017 vis-à-vis to what we are in 2025 and how we look at 2028.
In 2017, we were actually about 2.5 x capacity CFS more than the volumes that we were handling within Nhava Sheva as a local Nhava Sheva volume. In 2025, we have come down to where we say most of the facilities are 80% to 85% full or being utilized. By 2027, your capacity will be 15% lower than what the terminal capacity is going to be. By 2027, 2028, we are actually a 15% deficit capacity in CFS with respect to the port volume that is going to be added into Nhava Sheva. If you look at the other port terminals, the facility at Chennai is already over-capacitated at the moment. Most of the Chennai facility is working at 85% and 90% efficiency. What we are doing, we are building our facility in Kattupalli.
We are looking for facilities in Kattupalli to build our capacity, and that's where the work is in progress. Mundra, again, whatever the SEZ capacity of CFS is there, most of all the CFSs over there are again 85%-90% full. We have taken the extra initiative of getting into a land parcel of 60 acres outside the SEZ, which kind of brings us again in between Tuna Tekra and Adani, and we build our capacity there. Overall, I think what has happened in the trade is because the government had actually kind of stopped giving CFS licenses and ICD licenses. They have managed to kind of bring the supply-demand story in line now, and we see now the things are going to be more reversed because the capacity of port has increased faster than what is the CFS ICD capacity.
Hope that answers your question.
Thank you so much. On the Farukhnagar facility, can you comment a bit more how much investment would that take in absolute terms, and what sort of revenues and profits do you expect from there? Would you want to own the land and the infra, or would you lease that?
To answer the first part of your question, we are expecting to invest close to INR 200 crore in Farukhnagar facility. It will be a mix of own as well as lease land parcel, which we are looking to have here. In terms of profitability, traditionally ICD business do have slightly marginally higher profitability as compared to CFS ICD business, which will be a case for Farukhnagar as well. Farukhnagar would also have rail revenue coming in because we will be venturing into rail freight business as well. That would basically give us better yield, and also marginally lower EBITDA because rail freight business would be more a volume-driven business, where the volume would be a key factor.
Just to answer your question, basically, INR 200 crore of investments in Farukhnagar project, which we are looking at right now from here on, and ICD margin in line with our existing business, slightly higher maybe.
Got it. Thank you. The existing competition in Farukhnagar, the two that you had identified, how much capacity do they have?
Farukhnagar, NCR, we are basically surrounded by six other ICDs at the moment. We are looking at Dadri, we are looking at Panipat, we are looking at Sonipat. Where Farukhnagar is present is we are exactly in the center of all these ICDs. What we have done is we have done a mapping of 0 km- 90 km with existing factories and companies that are evolving cargo from there. Our Mundra to Farukhnagar, the timeline that we save is, I think, covering that 90 km of deficit or the 90 km of extra kilometer that we might have to work with, but the one-day saving is going to be more beneficial in terms of cargo connectivity. For us, it is the six ICDs who we are going to not compete with, but possibly beat it, and that is what we are working on now.
You have the diagram over here, so you can just see what we are talking about.
[inaudible]
Can you share some thoughts on our existing investments in Dadri joint venture with Container Corporation of India? Where do we stand? How do you see it? Where there is this, whatever new plans you have. What is the EBITDA per ton there? Oh, sorry, per TEU.
Dadri investment we have done a few years back. We have invested INR 5 crores in our joint venture at that point of time. We are holding 51% stake in Dadri joint venture. The profitability has, I think the revenue profile of Dadri ICD business is more or less in line with our CFS business. I would say revenue per TEU, which currently overall business we are doing INR 12,000 per TEU as a revenue per TEU. In Dadri also, we have got similar profile. In terms of profitability, currently we are doing EBITDA per TEU close to INR 2,200. Dadri profitability is slightly higher as compared to that. I would say not too much of a difference in terms of what we are drawing from Dadri ICT as of now, and what we are doing in our rest of our CFS business.
Yeah. Going forward for next five years, what is the view on this?
Dadri joint venture will continue. We will continue that joint venture and we will look to add more capacity as the market is growing there also. But as of now, there are no firm plans on Dadri. We are focusing on the four projects which we have mentioned here, and that's how would be our growth drivers going forward.
Just to conclude, the capacity of Dadri is now over. The joint venture that we've had with CONCOR, there are four other joint ventures which run into Dadri. There is no more scope of expansion within Dadri, neither for CONCOR, neither for us. What we've done is we've already exhausted our capacity there. We are doing a very stable business. If you see our eclipse over here, it's basically taking care of Farukhnagar. We are talking about Bawal, Sohna, Faridabad, Sonipat, and then Mewat. This is our attachment area for Farukhnagar. Dadri is a very stable business. It's a kind of annuity business that is going to continue, and it will continue with our JV with CONCOR.
Yeah. The second question is, your EBITDA per TEU is moving from almost INR 1,880 or INR 1,900 to INR 2,750 in next five years. Can you share what is that actually going to contribute, and which is the major leverage which is coming in?
If you have gone through the projects which we are executing, the first project which we have already executed is JNPA capacity expansion. This is purely on OpEx model. We have invested minimal CapEx there. This particular facility is just adjacent to our existing ATL JNPA factory capacity. This addition has happened without any increase in overheads. Straightaway, whatever margins we are doing there is getting added to the bottom line. That is the one big push which we are having when we are talking about EBITDA per TEU. Another example I can give you for our facility at Mundra. Mundra, we have acquired 60 acres of land, and the plan there is to basically, in future once the facility is ready, to consolidate our operations there. That will give us substantial saving in terms of rental and also the cost efficiency.
I think our projections of improvement in EBITDA and improvement in EBITDA per TEU is based on these plans which we have there. It will be driven by lot of consolidation initiative, lot of operational efficiency, which we are planning going forward. That is how we are looking to improve our EBITDA per TEU in the long run.
Thank you.
Just to add the earlier point with regard to Farukhnagar coming in will also help in driving the EBITDA per TEU.
I was puzzled by revenue per TEU moving by INR 2,800 and TEU delta coming somewhere around almost INR 850 . That is why I was wondering whether 30%-35% can be captured so easily.
Can you just repeat the question for more clarity?
Revenue per TEU is moving from INR 11,400 to INR 14,000. There is a hike of just INR 2,800. Whereas EBITDA is moving from INR 1,880 to INR 2,750. What we are capturing is against INR 2,800 rise, almost INR 900 is getting converted into EBITDA.
I think if you were to look at the current EBITDA, we are running at close to INR 2,200. That is the first number that you might want to check. I do not know where you are reading these numbers from. We can just talk to you offline and the current EBITDA, the previous quarter EBITDA per TEU was INR 2,290.
We will take it offline and we have the numbers which is from the same slide.
Yeah. We can look at it.
Yeah, two questions from my end. Am I audible?
Yeah.
First question is, with port operators venturing into the logistics space and predominantly the top two operators, do we envisage headwinds to our volumes, especially at the locations where these operators operate?
Can you just rephrase the question? I didn't.
Sure
get the first part of it.
Sure. So with port operators like Adani and JSW venturing into the logistics space, and trying to capture that part of the supply chain, do we envisage headwinds or competition from these port operators? I mean, they will obviously have an upper hand in getting the volumes from customers which usually park their containers at our locations, at our CFS. Do we envisage any headwinds or competition from these two guys?
Yeah. I wouldn't say headwind. I think it is a healthy competition. I think what JSW is building, JSW is not building a container freight station story. JSW is trying to build a more domestic ICD story. JSW is actually trying to cater to a lot of their in-house supply, and that is how they are acquiring certain positions and stuff like that. In terms of terminals, JSW still is running very small ports, and now they have entered into Kolkata. That is not a market that really comes into our game play. Adani, again, is not a CFS player. Adani is again a more domestic ICD player along with its terminal, with a rail connectivity. It is a healthy competition, but not a headwind, I would say.
Sure. Second question is on a comment that you made that customers basically use CFS to sort of ride out spikes in container shipping rates or freight rates. In the current environment where container shipping rates are moderated, does this opportunity sort of downsize for us?
I think it's a good question. If you were to look at it, we stand to benefit on both ends. If there is a longer dwell time, which ends up happening at the CFS, that is a certain amount of ground and realizations that we do. But given the capacities in which we operate, if the containers move away fast, then we make money with regard to faster turnaround. It is in a way a win-win situation. It's not really something which impacts us. If you were to look at it, there are times in which dwell times increase, and there are certain set of customers and certain set of commodities which end up being in the CFS for a longer period of time. That will be there.
There are a set of customers and a certain set of commodities for which the dwell time is less, for which multiple turnarounds help us make money with regard to the transportation, with regard to the handling charges and the allied services that we do. It kind of balances. That's how I would put it.
Sure. Just one last question. On our aspiration targets, I think we are forecasting about 8% volume growth and 13% revenue growth. Are we building in certain value-added services? How are we building this realization growth?
Yeah. That's where the Farukhnagar angle also starts to come in. In the 1 million TEUs that we are projecting by 2030, there is about 10%- 15% of those volumes which start to come in from Farukhnagar, which has better revenue profile compared to the rest of the CFSs. That is one. Second, over the last multiple quarters, we have started to see tariffs not slipping back like what it used to do between 2022-2023. That is linked to what Ashish said. In most of the locations, CFS capacities are starting to get filled up. I think that will kind of ease the pressure on tariffs, which is something that we have been going through. That also is something that we have factored in.
Got it. We are not building in any tariff hikes, or we are building in marginal tariff hikes?
Marginal tariff hikes, and then wherever there is an opportunity to value add with regard to labeling or any of those kind of opportunities which are possible, I think we will get into that, and that are additional revenue streams that we will build in.
Thank you.
Hello.
Yeah.
Yeah, here. Hi, this is Anand from MyTemple Capital. Thank you for the opportunity. Sir, what is the total capital expenditure that we are planning to do till FY 2030 for the targets that we want to deliver? Are we further planning to dilute any equity beyond the warrants that were recently issued to the promoter?
The overall CapEx that we have envisaged, I shared with you, we are envisaging on top of what we have already spent, another INR 400 crores for the projects. We have currently spent about INR 150 crores for these projects. On top of that, another INR 400 crores. How this will be funded, the warrants, I will request Pritam to kind of share those details with you.
The key source of funding this CapEx expenditure, first source would be our internal cash reserves, which we are having currently, plus the strong internal accruals which we are having. As of now, the existing business, as we have said that there is a very efficient working capital management, is generating good cash flow, and lot of this investment would be funded by existing cash flow. We are looking to have equity infusion up to INR 120 crores for CapEx purpose, basically. Most of these investments are coming in FY 2027, wherein we would also go for a bank loan to bridge the gap for a short-term purpose. Otherwise, I would say a major portion of the investment would come from our internal accruals, then equity infusion, and some bank funding for a temporary period.
The investment that we have done in HORCL, the INR 110 crores, that is mainly a strategic investment to secure the rail network to DFCC? I mean, what kind of profitability do you envisage from that investment?
I think the primary purpose is to get the rail connectivity. I think this is a very large project, the HORCL project, and it is a very long gestation project. We are not really looking at that capital appreciation or the returns from that at this point in time. For us, Farukhnagar is important. This gives us access to the DFCC, which builds a USP for the customer. That is how we have thought about it.
The investment in Farukhnagar that you mentioned, about INR 200 crore, that is on top of the INR 110 crore that we have invested in the HORCL, right?
Yeah.
Thank you.
Are there any other questions? If there are no other questions, can we close the Q&A session? Thank you, Mr. Suresh Kumar, Managing Director of Allcargo Terminals, Captain Ashish Chandna, Chief Executive Officer, and Mr. Pritam Vartak, Chief Financial Officer of Allcargo Terminals.
Moving on. We move on to our surface express and contract logistics business and Allcargo Gati and Allcargo Supply Chain. May I request Ketan Kulkarni, Managing Director and Chief Executive Officer of Allcargo Gati, to kindly come up to the dais.
Thank you, Jyotsna. I see a lot of people from the back moving out. Should we take a two-minute break? Those in favor, please raise your hand. Yeah, there are a few who have raised their hands. So let's take a two-minute break. I think it's been two long hours, a lot of heavy-duty presentation and numbers from my colleagues in the group. So I'll give you some time to loosen the limbs. Thank you, and wait for all of you all. Yes.
[inaudible] . Should we ask some of our colleagues to go out and call the members? That's done. Thank you. Generally, they have this bell that rings in most of these convention halls. Do they have one outside? [inaudible], can you check? Are we good to start now? Yeah, but it's good. I would request everybody to settle down. I'm very eager to present to you and glad to see the eagerness as the room is back to its capacity now. Thank you. Thank you, everybody. Welcome to the analyst meet. Thank you for coming. The group and the member companies are very, very grateful for you to spare your valuable time and come to listen in to our plans as we get into the years ahead. This presentation is about Allcargo Gati. We run two businesses.
One is the express business, which is essentially moving brown boxes at speed across the country. The second business, which is a subsidiary of Allcargo Logistics, is the contract logistics or the supply chain business, which we in the company call consultative logistics because the supply chain business, warehousing business is so much consultative. You sit across the table with the customer and design a solution for him. Whereas on the express side, it is such a network and standardized business where the customer's shipment or box has to fit within that standard and network. I'll also invite my colleague, Deepak Pareek, our CFO, on the stage, because there is equal distribution of slides. He was very keen to present a few, and wonderful of him to join us here.
In the Q&A session, I will also invite our Director of Supply Chain, Mr. Sushil Rathi, to join me on the stage during the Q&A session. What is it about today that is special? Essentially, going ahead, what the results will be, and all of you are keen to know the how and the why. The how and the why is very, very simple. It's a very, very strong execution plan that we have put together. The logistics market today in the country, as we heard from our previous speakers, is a very attractive growth opportunity. There are sunrise industries, sunset industries that come in and go over decades, but this is one industry that stays very, very, very stable. We as a team are committed to realizing the company's potential for future growth and expansion.
The strategy of stronger, leaner, innovative, and tech-driven, which you will see in the coming slides, focuses on delivering results above market growth, thereby enabling us to consistently improve our market share by targeting macro indicators, which are the tailwinds of the economy, and high-performance micro indicators. By micro indicators, I mean the customers and the industries we work with. Profitability improvement, the core of any business that is sustainable by focusing on the financial health. You will see our deep dive into that through quality revenue growth and margin enhancement. That elasticity between the cost and what we get from the customer is very, very important, and we are going to be very focused on that. Strong commitment to deliver increased ROC and attractive shareholder returns. To do all that, we have a team with a proven track record of exemplary execution.
The capabilities they possess, we are very, very confident will deliver a lot of value for our stakeholders. We'll see the team at the end of the presentation. What does stronger, leaner, innovative, and tech-driven mean? As we go into the slides, we'll see that. Since the group bought into Allcargo Gati, what are the things the group has done to further enable those four pillars of stronger, leaner, innovative, and tech-driven? Allcargo invested about INR 900 crores. We have repaid about INR 250 crores of debt. We have recovered from income tax returns about INR 150 crores. Available funds today are about INR 300 crores. We raised INR 169 crores in a qualified institutional placement. We've improved our DSO, which is collectible from customers, days sales outstanding, by 12% over FY 2020, resulting in faster collections impacting the cash flow. We've reduced employee cost by 9%.
A lot of work has happened together, and these measures have truly transformed Allcargo Gati into a financially resilient company with a clean balance sheet and net cash position. We're very, very focused on growth, and we are very focused on the bottom line that the growth brings. Let me invite Deepak to take the next two slides. Over to you, Deepak.
Thank you. Thank you, Ketan. Thank you all the analyst team present here. Taking the slide further, what we are dwelling on into the last five years. The chart slide which you can see here is a summary of Allcargo Gati, the company which the group acquired in 2020 and 2025. What we admit here is, the revenue and gross margin have been flat. That's on a backdrop of a lot of management bandwidth which has gone in measures which Ketan explained in the first slide in terms of putting the model right. The pillars of the company, which you see infrastructure, we are hub-and-spoke model, where we are scattered across the country, geographical presence. To consolidate that into a model which was an asset-light model, that took a lot of bandwidth of management.
I would say the working process is over now, and we are into a phase of- To build the growth story on that infrastructure now. People, yes, whether it's customer, whether it's employees, all had different ethos, which Allcargo ethos has to be inculcated, so that was another consumption of effort happened. Processes, we have the legacy processes of the company which had to be re-tinkered and also the technology. There was already a strong gems platform of Gati which had to be front ended. All those took a lot of effort, but notwithstanding, we have to admit that we could have done more on the revenue and gross margin front. But notwithstanding that, what we've achieved is the EBITDA improvement, in this five years, we grew at 14% CAGR. That's the philosophy of Allcargo group. Actually, if you see, ROC and improvement has been a key focus area.
If you see PBT from a negative of INR 48 crore in FY 2020, we are at INR 5 crore as we speak on FY 2025, which is a significant CAGR growth. Also, the ROC, again, as Ketan mentioned and also Chairman sir mentioned, is one of the area where we keep focus on all the mandates. That has been kept under eye, and though it's a small number but at 200 basis improvement has happened in this year. I think now from here, last investment of five years into building the structure and the model will help us to build our growth strategy as we look into the next five years' journey from here on. Moving on from Allcargo Gati company, what is happening here is the Chairman mentioned about the scheme of demerger which was approved yesterday. The order is awaited.
That will add further to the growth story of Allcargo Gati. If you can see the chart, the structure, I will just dwell for two minutes on the scheme of demerger because we've started it quite some time back and now we are getting into reality because I think it's the right time to refresh ourselves from the analyst standpoint. The existing structure, actually, there's an overlap of shareholding internally from Gati to-- GESCPL is an operating entity which you see here on the screen, where the main operating business of Express is domiciled. That's how you can see the Express business worded there. Ketan mentioned about the consultative logistics business. That's domiciled in ASCPL, which is Allcargo Supply Chain Private Limited. That's a 100% subsidiary of Allcargo Logistics as of now.
So what we have achieved now with the scheme of demerger is a domestic logistic clean slate structure, where consultative logistics and Express business will be domiciled under the brand name of Allcargo Logistics. Allcargo Logistics, which will be focusing the earlier, which had domestic and international coming together under one company, will have international ocean freight business under Allcargo Worldwide brand. That is the two structure which will come into effect. The significance of telling this here now is the supply chain business, which has a substantial revenue in FY 2025, will get start added to Gati, and what will happen from FY 2026 onward, we will see a consolidated revenue number of consultative logistics and Express business under the fold of Allcargo Logistics. This will make the structure more simple.
We will have a domestic business under one entity, and also the international entity, which you saw in the first presentation, will be another separate entity. I think I will like Ketan to take us the strategy part from here on. Over to you, Ketan.
Thank you, Deepak. Any more questions on the merger/demerger, we will definitely take in the Q&A. What are going to be our growth enablers and volume developers for revenue and profit improvement? We are going to focus essentially on three key areas to grow the business. One is the Surface Express business, which is a large component of our Express division now. As we merge the Consultative Logistics business. As I said earlier, Express is a standardized end-to-end logistics solution. It is a network business. Customers fit into that model. We use a lot of multimodal deliveries. We have over 9,000 trucks, and it offers 24/ 7 tracking services. It is a live model. Customers are embedded on our platforms, and digitization plays a very important role. The second is consultative logistics, customized solutions for multiple industries.
Bespoke solutions, different for auto, different for e-commerce, different for consumer durables, different for consumer electronics. Whether it is distribution centers, soft centers, or warehousing, whether it is milk runs for e-commerce or retail major, whether it is implant logistics for automotive or various value-added services. For example, in the chemical industry, where we are the market leader, or if it is long-haul transportation for FMCG or retail. Everything is designed in a solution manner. One important area that we have got into and has given us a strong hold in the auto segment, which is the best-in-class industry-leading offering that we have, is the JIT and JIS. Just in time for production and just in sequence for production. This is a gold standard in contract logistics, and we have displayed our capability very strongly with customer segments that need it.
On the air express distribution side, we are a very small operator. We have a lot of headroom to grow. From the time we have brought in the focus on the business a few quarters ago, it has been growing exponentially. We have strategic alliances with India's leading airlines. We use multimodal delivery. We deliver on-time assured deliveries, and we operate over 150 flights daily. The business is on a very strong growth potential and is also a great value enhancer to our profit pool. Apart from that, special products like Student Express, where we engage with Gen Z and talk to future influencers, future logistics leaders. Bike Express, again, a market-leading product for us, where we move motorcycles across the country door to door. Laabh and Surface Lite focused on MSME and SME businesses.
Tier two India, tier three India, Bharat, that we essentially call SMEs and MSMEs, are going to be the trajectory of growth of value creation in those markets as producers, and we are incumbent as logistics players to enable their connection to all the pin codes, 100% of the country that we do. Which is in the next slide. Those growth enablers that I showed you earlier, they will be delivered through a very strong geographic governance model. We do 100% of the 19,000 odd pin codes in the country. Allcargo Gati, in its previous avatar, was known for its reach and transit time, and after it has joined the Allcargo Group, it has strengthened its reach and transit time.
We have over 700 facilities across the country, 90 hubs, 80 logistics parks, eight air logistics centers, 12 million square feet of space along with our CL business, and over 3,000+ business associates that deliver the business for us, whether it is pick up or deliver or enable anything else that value-added services that would be needed by the customer. 3,000+ business associates servicing over thousands of customers that we service every day. All this strong governance allows us to have the fastest transit time in the country, and we were not satisfied with that. At the end of the month, our project on how to become much faster on transit time and bring costs down and improve service quality to the customer will culminate with one of the top consultants in the express industry. Expansive reach across the country that will be further strengthened. Advanced automation and tech.
We all heard about the focus on tech, digitization, and automation that the group has. We are equally, if not more, committed to taking that backbone of business ahead because shipments essentially move only on two models in logistics. One is the physical model, and the second is the digital highway model. State-of-the-art Grade A hubs. We are a leader in chemical logistics. These require PESO-certified facilities. We have all of them. An extensive tier two, tier three, and tier four penetration through 3,000 of our business associates, enabling SMEs and MSMEs to grow their market and serve their customers. What does stronger, leaner, innovative, and tech-driven mean? If these are going to be the growth accelerators, they better be detailed because only detailing will allow for a flawless execution. Stronger, well-equipped to adapt to changed market conditions.
We are constantly scanning markets, constantly scanning indicators with syndicated data and with consultants to know where we need to go, why we need to go, and when we need to go. A value chain creation system for our customers, which will be enabled with the merger demerger that you just saw. Continuous quality improvement NPS, net promoter score, regularly tracked. Customer satisfaction surveys regularly done with customers. More long-term contracts as we become two businesses into one, and a very strong focus on yield management. Those who are following the company would have seen that on the 1st of October last year, we announced the GPI, and that we have promised will be an annual process. We want to realize every penny for the value-added service that we bring to the customers. What does leaner mean? A well-diversified margin business.
Very focused on the bottom line, not too much skewed towards any particular geography. We are equally balanced, not too much skewed towards any industry. We are equally balanced. Self-financed transformation, stay asset-light. We are a zero-owned asset company. Defocus from low-margin contracts. We have given up a lot of customers where it did not make sense to move a shipment and lose a rupee . Every shipment we move must earn the rupee to the bottom line. Network adaptation, constant and regular. Like I just told you about the transit time project. We will always be agile, which will allow us to become leaner. Innovative. A company that benefits from tailwinds.
As I said earlier, constantly scanning macro, micro indicators, the government policies, which I will show you in the next few slides, building a tailwind for the logistics industry, which is incumbent for all of us as logistics players to take advantage of and enable this country on its growth path towards Viksit Bharat 2047. Sector-specific solutions, I will detail that in the next slide. Top-line acceleration in the top segments that we work with, auto, consumer durable, consumer electronic, life science, healthcare, and e-commerce. Tech-driven, a word much heard throughout the day today. A lot of focus at our company. Data science and AI tools on customer service, HR, sales, operations, SME onboarding already deployed and being strengthened. Very strong cybersecurity scores for the group and the company. Whatever we make will be a delightful customer experience.
All applications of the customer, when we go for feedback, are really delighting them. This is the same customer we know that consumes an Amazon or a Meesho, and his expectation from the logistics service provider is nothing less. We are cognizant of that, and all our effort is to build tech that is really world-class and best in the sector that we operate. The growth accelerators further supported by the B2B express logistics market growth, which will happen between 10%-12% CAGR over the next five years or six, 2024 to 2030. Logistics is a factor of the GDP. Most of us will know that it grows at 1.2- 1.5 factor of the GDP. Supply chain services will grow at 12%-15%, and the combined market 2030 for us addressable will be about INR 1 lakh crore.
What is that we will do to take advantage of that? Macroeconomic growth enablers, Make in India and PLI scheme, boosting logistics spend, growth of MSME sector, leading to better growth of the organized operators, because most SMEs and MSMEs, as they are getting regulated, they want to work with the organized logistics players. Growth in the e-commerce sector growing phenomenally, we partner with the top five e-commerce companies in the country and the top five quick commerce companies in the country. Regulatory changes, GST, E-Way bill, again, making the sector more organized, more regulated. Tech adoption. Customers prefer partners having better digital and tech interface. Nearly 85% of our invoices today are generated through API, which integrates with our large customers.
The government's focus on the national logistics policy, Gati Shakti, ULIP leads to push mobilization of organized logistics, increasing customer expectations, again, leading to the adoption of organized players and the logistics infrastructure investment in Sagarmala, Bharatmala, DFCs, et cetera. Today or yesterday, we also heard the INR 70,000 crore that the government will pump in to encourage the shipbuilding industry. So a lot of macroeconomic tailwinds for the industry. What is the micro-focused growth accelerators for us? As I said, we need to detail out if you need to have a strong execution plan. On e-commerce and quick commerce, we will expand nationally and enhance offering to our current and new entrants. On auto and engineering, we will specialize in growing requirements of VOR, which is vehicle off-road, moving engine parts and high-value engineering parts.
In life science and healthcare, we specialize in pharma transportation through packaging solutions, multi-temperature storage, which we already do, multi-temperature last mile delivery, and various value-added services. In consumer durables and electronics, pre-configure solutions with increased convenience for consumers and also manage returns. Chemical market, the market leader that we are in CL, a strong regulatory and compliance adherence and focus on advanced inventory management, sampling, kitting, repacking, tank-to-tank transfer. We have built expertise in all of this. MSME and retail will continue to be a focus. Our pricing strategy and value-driven commercial approach to maximize their growth, our growth, their profitability, and our profitability. Cross-sell opportunities will happen with the CL and Express businesses now working very closely together. Multi-product app offerings will happen. Logistics managers in customer spaces love to work with a single stop.
We will enable that, all this will enable us to build a very strong balance sheet. Tech. I told you we have a lot of focus on tech driven by the group and also within. It is a very important part of our growth acceleration through tech and digitization. What are the strategic pivots? We will be mobile first. I just told you about the experience that customers want to have. We will be cloud native so that we are asset light. Gen AI enablers. A lot of AI is being embedded in CS, in sales, in operations. Agile framework, modular so that it is resilient and fast-changing. Very secure. I spoke to you about the strong cybersecurity we have, and very social. We will be engaged with customers on all digital platforms. We work with the best partners in the industry. You can see that AWS, Oracle, TIBCO, IBM, et cetera.
Work with the best in the industry. Which are the implementation pivots? We have a control tower and what is the result? Improvement in on-time pickups. We are close to 100% on-time pickups, a high in the industry. A new booking app which our business associates, 3,000 of them, carry every day to pick up the 3,000 tons that we carry every day, building a lot of pickup efficiency. Finance ERP transformation, working closely with Oracle, streamlining the financial process. A WMS system for contract logistics. We already have a WMS. We are upgrading that. Efficient space utilization, improved profitability. Consignee app. Somebody who receives the shipment, how will he know where the shipment is? Enabling that, increasing new customers. Customer portal for customer service excellence. HubEye, which we recently launched for real-time visibility of trucks getting in and out of our hubs. Where do they need to dock?
How much time will they take to unload and load back depending on the dockets and shipments and tonnage they're carrying? All that is known to us much in advance allowing better planning and infrastructure utilization. Gate scan similarly at our hubs to enable accurate mapping of trucks. All our trucks that move across the country are GPS-enabled, real-time tracked 24 /7 . Strategy 2030, stronger, leaner, innovative and tech-driven. I'll call on Deepak Pareek to walk us through the numbers.
Yeah. Just give us a minute.
Sorry about that. Just give us few minutes. [inaudible] .
Coming back.
[inaudible].
Is it okay? Coming back to the plan, what Ketan mentioned in detail about integration and how that will add to operation efficiency. Also from FY 2025, the effort which is done to make the model asset light or how it will pan out in the years ahead. I think this slide talks about that. Here what we have done in FY 2025 are the combined numbers of Allcargo Gati and supply chain business. That is a subsidiary of Allcargo Logistics now on the revenue front. From that we have removed discontinued operations which are adding like a drain on a gross margin which are fuel stations. That business will be closed by next month or so. The agreements are underway of execution. What will happen? I think the strategy what we discussed to have a stronger, leaner, innovative and tech-driven model.
Which I think the accelerated focus would be on yield management, I think, which will be through product mix, air-surface combination, and all of that, including the contract consultative logistics revenue bump-up, which will happen. That will add to enhancement in revenue. If you see from FY 2025, nearly INR 2,000 crore revenue on the combined basis would go up at a CAGR of 10% by 2028 and going up by 12% by FY 2030. That will also move in proportion the gross margin, which is actually right now INR 600 crore going up to by same proportion of revenue. The effect of this will also have on our EBITDA because what we are targeting to do have a free cash flow model, which will actually enhance in our EBITDA.
Also in terms of cost optimization, the focus on SG&A and employee cost rationalization that will add to EBITDA from the INR 200 crore of FY 2025, which will go up significantly by 20% upwards, enhancing the ROC, which is actually right now at a 5% level, going up by nearly 1,000 basis points by FY 2028 and by 2,000 basis points by FY 2030. This is the strategy. It looks difficult but from the work which is already put in over this last six months and we see more or less achievable. The resultant value creation which we aim in terms of enhancing ROC and making a structured profitable growth on a year-on-year basis, that is the strategy from current year onwards. What will happen by this is the pillars which we talked about infrastructure, people, all the work is completed.
I think what we would aim to make them all stronger, leaner and the three stakeholders which are the shareholders, our customers, and employees, that is the process we started on the net promoter score where we started this year. We are in the bottom or slightly better than the average but we are seeking a target on that front also to go to a 60 percentile. Also on the employee opinion survey which is above 80%, which is good, going up to 95%. Notwithstanding, I think the shareholder value is primary in the entire strategy because the main stakeholder achieving higher profitability from a combined PBT of INR 10 crore achieving a CAGR of over 100% or 150% as we move on till FY 2030. So that is the quantification of the strategy which Ketan discussed in detail. Over to you Ketan to take this slide further.
Thank you. I think that brings us to the end of the presentation. That is the management team. Happy to have Sushil Rathi now on the dais for the next session which is Q&A. At the bottom you have the leaders on sales and operations. We recently onboarded our head of operations for CL where we had an exit. These are the partners we work with. As I said earlier, the best of the best. If you pick up the listing of the top 500 companies you will see all of them are our partners. So thank you very much for your patient listening and happy to get into the Q&A session.
The floor is now open for questions. Our hostesses are ready with the mics. Please raise your hand if you have a question. This appears to have been a very comprehensive presentation. No questions appear. Oh, we have one.
Hello. Sir, my first question is, before Allcargo acquired Gati in 2019, the revenue from the express logistics business was around INR 1,450 crore. Today after five years of journey with Allcargo we are at INR 1,500 crore. The profitability has been impacted. Pre-Ind AS we were 5% , today we are 4% post-Ind AS. Just wanted to understand the journey, what kind of difficult decisions that we took to revamp the company and how this is going to progress further.
Yeah, thanks. Yes, I think it has been a flagship journey we admit that. That was the intention of putting that revenue slide on the table. What had happened is, in this year I think the market post-COVID we had a bump up on the domestic business. But post-COVID what we have seen is a fall in terms of various factors actually which could be internal to us, maybe putting up right people that was one thing. But overall I think notwithstanding the stagnation or the flatness in the revenue, and the gross margin, what we see is the ROC and the EBITDA margin focus that has been maintained. If you see in this five years, there is no cash flow burn which has happened. We will continue to add value in terms of retiring the debt on the company and adding more free cash flow.
If you see the slide which Ketan mentioned, the five year effort of shoring up the free cash flow in the company, that has happened. Yes, we compromise that the toll took on revenue. I think now the plan which we have in place, it is visible that the revenue cycle will move up in line with the growth in the GDP horizon, which will be upward of 7% year-on-year, followed up by 10% with the yield enhancement which we have in planning phase. Also you want to add, Ketan?
Yeah, surely, Deepak, you covered quite a bit. But Deepak covered it. The top line was stressed, but you saw some green arrows at the bottom of that slide. Culture essentially eats strategy for breakfast, so a lot of cleanup was needed on the people side, on the customer side, enhancing the brand's image, which has happened over the last three to four years. Infrastructure was upgraded. We added newer hubs. A lot of money was invested. It is a very strong footing that we have now and the business is at inflection point, and that is the confidence that we have demonstrated in that slide, going into FY 2030. That would be my take on the question. Thank you for the question.
My next question is related to automation of warehouses. Just wanted your thoughts. Are we going to spend CapEx on automizing the large warehouses that we have today? Secondly, we have also focused on creating larger hubs from the smaller hubs that we had earlier. Just wanted to understand that what benefit it is reaping at this moment, and going forward, what will be our focus to improvise the utilization and the yield of the asset type?
Yes. Infrastructure, if you know, we are in hub-and-spoke model, actually. As I mentioned, the investment in terms of modernization of all the hubs is already in place, actually. All our facilities are Grade A rated now. Even if you go ahead in future, we don't see a large outlay in CapEx happening. Even if you see it's a number of INR 15 crore-INR 20 crore is actually easily absorbed in terms of year-on-year. Over a period of five years, I think if you see INR 70 crore-INR 75 crore could be investment in modernization of hubs. But with all those gate scan and hub automation control tower initiatives, already that investment has already happened. The benefit of all of that is now going to accrue.
It's not that it will add any cash flow gain, but it only add to efficiency and increase in profitability as we go ahead. You want to add?
No. Just to clarify, your question was for the express hubs or the-
The express hubs.
CL warehouses? Okay.
The express hubs.
Yeah. Thank you.
Thank you for taking my question. My question is on contract logistics business. From Q1 FY 2025, we undertook a deliberate expansion into newer segments. We were first focused on chemicals. Now we are focused on different autos and ancillaries. This expansion has led to a decrease in margins in the contract logistics business. What would be your strategy going forward? Do we expect the margins in the same range, or do we expect it to increase?
Yeah. That's a difficult one. Contract logistics or the consultative logistics business, we call it, we have three, four segments. Chemicals, as you rightly say, we are the leaders in that segment, which is a high margin product or the segment category for us. Followed by auto. We have pharma, some bit of FMCG and e-commerce. The rationale in FY 2021 of putting e-commerce as a product was, one, the top four e-commerce players in the country or rather internationally, based on our service offering on the chemical sector, they wanted to associate with us, which we started the journey, and now what we have consciously allocated our revenue distribution equally among all these four buckets. Margin, as you said, has been consistent. It's not fallen down. I know we can discuss offline on this.
All the three products, yes, some bit of margin up and there would happen seasonally, but e-commerce, as you know, seasonally, the margin impact is more. That's why you must be seeing that variation. Otherwise, the margin expectation on EBITDA front is uniform across all sectors.
Hope I've clarified. Anything specific you want to add?
Yeah, if I can just add to what Deepak has said. Primarily we are into three segments very clearly. Chemical, we have been a market leader for quite some time. Our next level competition would be at least 40% lower than us in the chemical logistics space. Apart from that, to take advantage of the growing e-commerce segment and the quick commerce segment, we have invested into the people, processes, and technology to adopt to that model. Today some of the large e-com players are our customers, and we are growing that business also pretty strongly. The third segment, of course, is the automotive and engineering which is a segment which has outsourced a lot over a period of time, and that is where a lot of 3PLs have grown, and we have also tried to catch up on that segment after the chemical and e-commerce.
It is a pretty strong segment for us. This also has helped, as Deepak Pareek said, the margins are actually more or less consistent over a period of time. We have been able to achieve a phenomenal growth in terms of our top line in last two to three years.
Thank you.
Can you share some thoughts on your air volume? How much is it right now, how you want to take it up in next three to five years?
Sure. The air express business grows in low single digit in the country, between 3%- 5%. We want to go at about 4 x-5x that market, which will allow us to consistently be the fastest grower in air express and also improve our market share. Half the market today is with a logistics player that has its own aircraft, but the other half of the market is for everybody to kind of chip away at. That is a very big opportunity. Our market share is also currently in single digit. The focus we have brought on the product is seeing increasing market share quarter on quarter, more new business and new customers signing us quarter on quarter. We are very excited about the growth of the air business.
Deepak kind of covered it in his presentation where he said the blended yield of the company also improves much more when a lot of air business enters the system. We are very focused on how that benefit will also accrue to the yield of the company.
Can you share in tonnage terms how much it is right now, and what are your aspirations?
In terms of tonnage, as I said, we will grow by about 20%-25% consistently. We are at about number four position now, and we aspire to take number two position in a very short period of time because the gap between two, three, and four is much easier for us to cover. We are kind of realizing that with the growth that we are experiencing over the last few quarters.
Can you share your some thoughts on in terms of operating fixed line between two countries or two where it is assured volume full flight?
Two cities because this is a domestic business.
So two countries is not something that we are doing. We are not doing any import and export on air freight.
Okay. Thank you.
Thank you.
Yeah, there is some question from the back.
Hi sir. Thanks for the opportunity. Just wanted to understand about the competitive scenario. So on one end you have the new age players who have been going aggressive in the past. So how do you see, where do you see we have the competitive advantage over someone like them? Second, on a longer term, with all this improvement in infrastructures and all, I think a lot of these economic PTL players have also been telling that the turnaround time is going down for them also. Do you see in the medium term there would be a massive differential between an express service as well as an economy service? Thanks.
Yeah, thank you. The only product that all of us deliver to the customer in express is service quality and the two very strong pillars of that service quality, one is reach and the second is transit time. We are the strongest in terms of reach. We do 100% of the pin codes. On transit time we are the best in the industry on nearly 70% of lanes. Our project that should end next week will give us the roadmap which we will execute in the coming quarter to become the leader in terms of transit time. These are the two areas that the customer looks at. Express will continue to grow and as we have seen in more mature logistics markets globally.
As economies mature, and that is what is happening in the country, as they become more and more regularized, as the infrastructure improves, customer expectations improve, express plays a very important role than the FTL or the economy players. That is why you will see the large majors in the world call themselves express also. Apart from that, on the consultative logistics side, we operate a FTL business for retail, for automotive, we do milk runs. So that opportunity will also always be addressable in our playbook. We will not let that go away. The divisions will focus individually on the opportunities in the market, and express will be a major focus area.
Hello. Thank you for the opportunity. Sir, correct me if I am wrong, your contract logistics business currently has expanded their warehouses capacity from 7 million sq ft and plans to add around 3 million sq ft over the next three years. According to some reports, the Grade A warehouses approximately cost around INR 2,000 /sq ft . The CapEx is around INR 600 crores. I just wanted to understand how we are going to source the CapEx for the next three years, and if possible, provide me the timeline for this CapEx.
As mentioned earlier also by Ketan, we operate on an asset-light model. We do not construct the warehouse, or we do not buy the land and construct the warehouse, but we take it on long-term lease. These long-term leases are commercially negotiated, et cetera. We may enter into a three-year, five-year kind of lease for these Grade A warehouses, and which we operate for our customer as a multi-customer operation in those warehouses. The only investment which we do inside the warehouse is in the MHEs, racking, et cetera. For that also, now we have moved into an OpEx-led model, which helps us in terms of conserving the cash in the company to be utilized for the other growth and still manage the operation in the best possible manner.
There is technically hardly any investment which goes into the warehousing, despite we increasing our footprint from current 7 odd million to 10 million in a few years' time.
Thank you, sir.
Just to add, Sushil-ji. Here, even on the BTS model what we have, all those investment which Sushil-ji mentioned, which are the residual part, that are also on a buyback commitment with customers. So actually, there is no exposure on company. It is pure asset-light product, and any commitment, any investment which is done for a customer is paid back over a period of three years to five years. To that extent, what you said about the CapEx investment, we do not see that happening because that is not our model.
Yeah. Thank you.
Thanks for the opportunity. Can you just highlight what the debt split will be between the two entities post the demerger? Like how much stays in the Allcargo Global and how much would be with Allcargo Gati?
There is a small portion of debt which will come to Allcargo Gati. That is already documented in the scheme which is approved by shareholders as of 1st October 2023. So, the residual large part of debt is already repaid by Allcargo Logistics over the period of one and a half to nearly two years now. So there will be residual around INR 20 crore-INR 30 crore of debt coming in as a part of this domestic business to Allcargo Gati. Hope that clarifies.
How much would be the number for the global business? In case someone can cover that.
Global business, I think we can have the benefit of Group CFO. Ravi is all there. I think we can have a discussion later.
I think, in the coming days, we will also share more precise numbers since the scheme is likely to get approved now in the next couple of weeks. But broadly speaking, on a net basis, Allcargo Gati as in the Allcargo Logistics with the combined domestic supply chain and the express business would be more or less cash positive. While majority of the net debt which is visible today on the Allcargo Logistics consolidated basis, that would sit in Allcargo Global. Only a part of that net debt, I would say less than INR 20 crores-INR 25 crores of the net debt will be on the Allcargo Logistics side. Rest all on the consol Allcargo, what you see today goes to Allcargo Global.
How much is that number, Ravi, if you have that number handy?
We will share the number in the coming week or two, maybe, as we get the approval.
Thank you.
Thank you for the opportunity again. In one of the slides that you have shared today, you have said that the growth and top line would be 10%. Could you bifurcate that in volume and value terms?
Yes. Thanks. I think I covered actually. There will be two components. One is the consultative logistics business. Yes. I am coming to that. Another is an express business. Express volume plays a criteria. Volume growth, 7% we have factored over two years coming to increasing by 10% as we move on to FY 2030. To top it with the yield enhancement, because yield is one of the important components in terms of the extra service charges which we built in. That will add to another 2% growth on the revenue front on the express, and consultative logistics as such, the business has been growing at a CAGR of around over 25%, so we expect that to continue in the future. That is the breakup of the overall revenue increase. That combined effect will be 10%-12% moving on till 2030.
Sir, and secondly, as majority of the long-haul cost has been taken care till now, my thought was that gross profit should have grown at a faster pace, whereas we have presented that it would be in line with the revenue growth and the margin expansion in EBITDA terms to reach to 13.5% by 2028 would have component of employee and other expenses, which is not the bigger portion. Just wanted to understand how are we enhancing the journey by not improving our gross margins, whereas improving our EBITDA margins?
Yeah, I think that's a good calculation. So gross margin, yes we kept it at a steady level, 30%, which actually we have plans to top it up. Line haul cost, which you mentioned, is one of the key components because it depends on the load factor of volume and the lanes, which have to be very efficient. So that toggle around has to happen based on the volume growth. So that we see it happening as we move up in the festive season and the year ahead. Coming down to the EBITDA the improvement is on various counts actually. One is the tech factor, which has built in and reduced dependency on other costs, which would actually have a larger impact as compared to the gross margin. So that we have kept some room there. But I think as you said, there is a room of improvement there also.
Yeah.
What kind of EBITDA per tonne we are expecting in surface express business?
We don't quantify that way like in the terminal business do it on a tonnage basis, but EBITDA on a margin, on a percentage basis, we are at from 10% to 15% is what we are looking at for the period of five years now.
Sir, my next question is related to the air express. As you said that you are expecting to grow at 20%-25%, today's volume, which is around 10,000-11,000, which would be expected to reach almost 20,000 by FY 2028, a yield where 5x is generally the charge compared to surface. Certain yield expansion is expected to happen by this itself. What would be the reason for us to gain the market share is one. Second is, are we profitable in this business and what kind of EBITDA margins do we do in air express today?
Air express is definitely more profitable actually. If you see on the gross margin front, it's on a northward of the margins which we have on the surface front. Mainly what happens in this business, I think Ketan is expert on this, he can add more. I can just comment on the margin front, which is profitable and the yield enhancement which is on account of the mix diversification of air. We have assumed a sizable growth going ahead from 2028 onwards, upwards. So three years we are building up the network in terms of the new airport infrastructure which has come in play. So that penetration will happen and that benefit will start accruing from 2028 onwards. Ketan, you want to add?
Yeah, sure. Also why will we get the growth on air? I think one or two points I must make here. Number one is the focus on air, which was lacking because Allcargo Gati was synonymous with surface express. We are bringing the focus back. How are we bringing it back? We have identified sectors that consume air, and we were weak in carrying air for them, like automotive, like I showed you earlier, pharma, life science and healthcare. That is point number two. The third is the synergy as we kind of work together much more now on the CL and express side opportunities we are seeing on the consultative logistics side also where we handle the express for some of our large customers who are consuming air but not using us. Profitability point, Deepak kindly covered because the investments are very marginal.
Also it's very asset-light for us. That's the model we operate. So all these kind of mixed together we have realized is a secret sauce to success which we can exploit now and happy to do that going ahead with the focus that we are bringing on the service and the immediate green shoots that are visible quarter on quarter with the focus we are bringing.
If you could just give the ballpark number of EBITDA margins at air express business.
You are talking of future?
Today itself and future if you can highlight that too.
Yeah. Today you have the reported numbers which are- For FY 2025, the operating entity, we are in a range of 5%-6%. Sequentially growth, if you see, which will happen to 10% in two years and going up to 14%. That is the margin.
Surface and air both are considered as-
Yeah, it's a combined margin.
Sir, just one last question. It is related to the restructuring that is taking place. What was the rationale behind investing directly into GESCPL, which is the express business of 30%, rather than going through Gati and taking the rest of the 30% stake from GESCPL?
I would not know the details. I think we would take benefit of Ravi Jakhar to take. Later on, we can answer that.
Sure. Thank you.
Sir, in one of your slides I saw you do also business of 20 kgs- 5 kgs. Right? My question is, the new generation e-com players who don't have any focus on profitability, only on the build-up of customer base, and they are funded by private equity. How do you compete in that space? And actually, why should you be in that space? Thank you.
Thank you for your question. We are not at all in the e-commerce last mile delivery space. The product you saw, Laabh and Flexi Lite, is essentially for SMEs and MSMEs and retail customers. E-commerce is a very big segment for us on the warehousing, fulfillment, consultative logistics side. On the express side, we are hugely focused only on B2B deliveries, a pickup from a business and delivery to a business.
You are not into B2C at all?
Not at all.
Thank you.
Thank you.
Any other questions?
Thank you for the opportunity again. Ketan sir, I just wanted your view on one thing. There is this platform-based company called Valmo, which is a company of Meesho. I just wanted to understand, can such platform-based company come and disrupt the express logistic business in future? If yes or if no, your view on that.
I'll just twist your question around a bit if you allow me. Platform-based Valmo, Meesho's offshoot, Ekart, Flipkart's offshoot, Amazon's offshoot, ATSC, Amazon Transportation Services, whatever that acronym is. They all operate, and they're very heavily into B2C. B2B has seen some disruptors on the tech side. You read about them every day. But I said earlier during my presentation, two very important components, a digital highway and a physical highway to move shipments. I think the stronger capability differentiator, stronger moat that you have is currently about the physical infrastructure to move the shipment rather than the digital infrastructure, which is easily replicable. So I don't see that happening in the near future. We will continue to be differentiated with our service quality on the physical aspect of the business. Tech is a very big focus area. We have those digital platforms ready. We have integrated with ONDC.
All that kind of sums up well for the direction for us to go ahead.
Any more questions? If there are no more questions, we can close the Q&A session. Thank you so much .
Thank you. No, I am just thanking everybody for coming and hope you all had a lovely day and a lovely evening still continues, right, Jyotsna?
Yes. Thank you, Mr. Rathi, Mr. Kulkarni, Mr. Pareek. I now call upon Mr. Ravi Jakhar for the closing remarks.
I will quickly take the question which was pending on the direct investment into GESCPL. When Allcargo invested into the Allcargo Gati Express business, it was structured as a two-layer transaction with Gati being the listed entity when we were engaged with the erstwhile promoter in negotiations. We also had our partners in the Japanese company, Kintetsu World Express, who were partners in the operating entity, GESCPL. The way the deal was structured, there were obligations and discussions with both of the existing shareholders, one in the operating company and one in the listed company. Those obligations were signed for by Allcargo Logistics in a definitive agreement, which had time considerations, and therefore it was done in line with what was agreed at the time of the initial investment in end 2019, early 2020. These were the reasons why it was done structurally.
I just wanted to bring in a bit of a group perspective on the Allcargo Gati business, which stands out a bit different as well, in the sense the international supply chain business run by Adarsh Hegde, which we spoke about in the Allcargo Terminals business. These businesses were pioneered in India by Allcargo. We were the first ones perhaps, and we went on to become and stay the largest and the biggest businesses in India and globally. Allcargo Gati has been more of an investment that we invested in over the last five years on the express business and over the last eight years in the contract logistics business.
Particularly on the express business, I think Ketan and Deepak spoke about the massive transition. From a group perspective, having seen it over the last five years since we acquired, there was a lot of pain on multiple fronts on the express business, but that is all behind us. Now I do not see any challenges operationally, infrastructure, financial, governance. Everything is now behind, and that is the good part, and that is where we feel is an opportunity for strong growth from here on. You saw the number of INR 900 crores on the slide, which is an investment by Allcargo. That only accounts for the express business investment. We have also invested subsequently and prior to the express investment in the contract logistics business.
Which let us say now these two businesses we are putting in about INR 700 crores of investment towards the contract logistics business, INR 900 crores of equity invested into the express business. This INR 1,600 crores of investment made into this business, which is now coming together on a five-year strategy plan into Allcargo Logistics, is primarily made on three fundamental beliefs. One, the story of India and our need to focus on the domestic supply chain. Second, the huge advantage of being businesses which cannot be disrupted easily. The last express distribution company which came up in India was still in the last century. Nothing has come up. Whatever came up, it does not exist any longer. And third was our ability to bring in the best of the people and our founder's very strong belief in the team that is now operating it.
On that note, we believe that we have answered most of your questions across all the businesses, but our colleagues will be around and happy to catch up. Thank you, everyone. Thank you.
Thank you, Ravi. As we come to the close of today's analyst meet, I would like to thank the management teams of Allcargo Logistics, Allcargo Terminals, and Allcargo Gati for their presentations and all of you for your presence and participation. We hope you found today's discussions insightful. Should you have any queries, Sanjay Punjabi from our investor relations team would be happy to address them. Sanjay? This is Sanjay Punjabi for you.
Thank you once again. We have for you a small token of appreciation. Please do not take it before you leave. You have been a wonderful audience, and may I now request the pleasure of your presence for dinner. The buffet is now open. This is your hostess, Jyotsna Morris, signing off.