Allcargo's rejig plan gives investors a confidence boost

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Mint. Leverage is also expected to be minimal. “Allcargo ECU’s gross debt is expected to be approximately ₹350 crore, while Allcargo Logistics’ net debt is projected to be around ₹250 crore," he said.

Market share gains in the express and logistics business could also be on the horizon. After the rejig, the express and contract logistics businesses will come under Allcargo Logistics. “Currently, Allcargo Logistics commands a 17% market share in the organized express business and is a market leader in chemical warehousing in the contract logistics business," Jakhar said.

The Street’s initial reaction suggests that this is a step in the right direction. The restructuring is expected to be implemented in 10-12 months and is subject to a slew of regulatory approvals. Meanwhile, the stock of AllCargo Gati plunged 13% on Friday.

As part of the restructuring, shareholders of Allcargo Gati will get 63 shares of Allcargo Logistics (after the demerger) for every 10 shares held in Allcargo Gati. Although the restructuring exercise seems mostly positive, investors are nervous about the concrete advantages for Allcargo Gati shareholders. “It is premature to determine whether the impact on Allcargo Gati shareholders is positive or negative due to uncertainty over the listing price for the combined entity which is expected to get a re-rating post simplification of holding structure with synergy benefits," Vikram Suryavanshi, vice president equity, PhillipCapital, said.