How Allcargo Logistics became a global player in LCL

Becoming number one: Allcargo Logistics Ltd, a port-based logistics company founded by Shashi Kiran Shetty, is working to become the world’s largest LCL (less than a container load) operator by the end of this fiscal year, overtaking Vanguard Logistics Group of the US, according to analysts and company executives. Vanguard has a revenue of $800 million while Allcargo’s earnings are at $750 million. In late September, Allcargo acquired US-based logistics company Econocaribe Consolidators Inc., which has over $125 million in revenue.
Building a niche: Shetty, executive chairman, moved to Mumbai from Mangalore in 1978. After a brief stint in a shipping agency, he started logistics park TransIndia in 1983, which was later merged with Allcargo, formed in 1993. He decided to operate in a niche area—LCL. The upshot: Allcargo, as an LCL consolidator, was less hurt by the current weakness in the container market, LCL volumes being more immune to such sluggishness; a large part of full container load volumes in tough times gets converted into LCL volumes. It worked. In 1995, Belgium-based ECU-Line NV, the world’s second largest LCL firm, appointed Shetty’s firm as its agent for Mumbai and New Delhi, recognizing Allcargo’s position as India’s first LCL operator with growing volumes of such cargo for aggregation to destinations worldwide in those days.
More than containers: Shetty realized that without a global footprint, Allcargo would end up as a small firm in India. In 2005, Allcargo took a 33.8% stake in ECU-Line and the following year, acquired the remaining shares. The takeover of ECU-Line, which had five times the acquirer’s revenue in 2006, for an enterprise value of approximately €50 million, made Allcargo the world’s No. 2 LCL firm overnight, after Vanguard. The management gradually added new lines of business verticals such as project and equipment engineering solutions, running container freight stations, multimodal transport operations, inland container depot, coastal shipping and air freight. Allcargo also adopted a complementary strategy. The company depends upon shipping lines for its CFS (container freight station) business and in return it gives shipping lines container volumes of its MTO (multimodal transport) business, making both the parties interdependent on each other for some part of their businesses during bad times too.
Connecting the last mile: Allcargo continued to make strategic acquisitions in other markets. It bought companies in the UK and Hong Kong to increase market share and presence. The company has opted for a corporate re-branding exercise to create a master brand, Avvashya Group, a vehicle to enter into new businesses. But it still had gaps in the US, Australia, South Korea and Taiwan. In September, Allcargo acquired Econocaribe, which happened to be the agent of ECU-Line, for its US business. The acquisition gave the company entry into the US and Canada markets, and a front runner position in the LCL business.