Allcargo planning to acquire Indian firm to expand express logistics footprint

All these factors combined to affect Gati’s earnings, as it witnessed a drop in net profit for the second quarter of 2019 to $670,000 from $2.52 million, even when its total revenue grew to $64.22 million from $60.12 million. 

Goldman Sachs now owns a 6 percent stake in Gati, which again was a result of a legal altercation between the two companies. A problem arose in 2016 when Gati had issues in settling outstanding payment on $22 million of foreign currency convertible bonds (FCCB) it issued to Goldman Sachs in 2011. The settlement was made in terms of equity shares of Gati.

That said, Allcargo’s interest in beleaguered Gati is understandable because Allcargo is looking to expand its services into warehousing, which Gati already has a sizable stake in the Indian market. Allcargo is building warehouses across four cities in India and is bolstering existing warehouses near ports to expand its footprint in the booming Indian ecommerce scene. 

The equity valuation of Gati is estimated to be $183 million. If Allcargo manages to acquire Gati, it would potentially be an exit for companies like Goldman Sachs and Japanese shareholder Kintetsu Group. For now, Gati’s founder Mahendra Agarwal owns 14.4 percent of the company, and the overseas investors jointly control 17.1 percent. 

The ecommerce boom and a rapidly growing economy have made India a favored destination for foreign logistics and investment firms. Gati predicts the country’s logistics and warehousing industry to be valued at $217 billion by 2020.