Allcargo Logistics Limited (ALLCARGO) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. My name is Steven, and I'll be the moderator for today's conference call. I welcome you all to Allcargo Logistics Limited Business Update Call. We have with us from the management, Mr. Deepal Shah, Chief Financial Officer; and Mr. Ravi Jakhar, Chief Strategy Officer. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ravi Jakhar. Thank you, and over to you, sir.

Yes. Thank you. Good afternoon to all the participants. Thanks for joining the call. I hope that your family and friends are all keeping safe, and I pray for their well being. Amidst the rising cases of new variant, let's all continue to exercise greater caution. Coming to the point for today's discussion. Today is a historic day for the company as we speak about the proposed scheme of demerger, which has been approved by the Board of Allcargo Logistics. This proposed demerger would allow our businesses to drive the next phase of growth as they gain strategic independence and financial and operational flexibility. All businesses will continue to be part of our [ Asia group ] and continue to enjoy the support of all the group-wide centers of excellence created to support business and drive growth. Over the last 15 years since the company was listed on public markets, we demonstrated strong growth at nearly 15% to 20% feedstock between December '06, which was the first annual results and September '21, the latest audited results, increasing revenue to nearly 14x and EBITDA to nearly 11x. This growth has been made possible by entrepreneurship, innovation and commitment of people. We have managed to build, nurture new businesses, grow and scale existing businesses in the way of organic and inorganic growth. Over the period, we have become global market leaders in LCL consolidation, made a significant presence in Express as a premier player with acquisition of Gati, a dominant player in contract logistics, particularly in the chemical segment, market leaders in CFS operations and also have robust businesses in greater warehouses with best-in-class asset lease out to market clients. All of this has meant that the company has continued to grow. And now that some of these businesses have gained scale and require strategic independence to operate with greater flexibility, both financially and operationally so that they can be more efficient and drive the next phase of growth. Keeping in line with this strategic requirement with a long-term view of creating more robust businesses, which can drive better growth, the Board has approved the proposed scheme of demerger, which would lead to demerger of CFS ICD business into Allcargo Terminals and the demerger of real estate including warehousing, logistics parks and other rental businesses into TransIndia Realty & Logistics Parks Limited. Allcargo Logistics would continue to focus on international supply chain business and explore organic and inorganic opportunities. It will also continue to hold the shareholding in Gati and ACCI driving growth in express and contract logistics businesses. The CFS and ICD business would now get demerged into Allcargo Terminals, which would operate all the CFS and ICD. And as an independent business undertaking, the company would have the required sharp focus from management, the ability to attract the right capital, the ability to operate with the right flexibility and the right strategic structure to expand and grow in possible business opportunities. I would like to highlight that this is a very efficient business, which does not focus on ownership of assets, rather currently, 5 out of our 7 CFS and ICDs are already on a lease model, whether leased from JNPT Board, Container Corporation of India, PWC or other organizations. And now under the proposed scheme of demerger and the real estate part of the 2 CFS and JNPT in Chennai would also go to TransIndia. CFS and ICD business will become even more efficient with on a completely asset-light approach. And as the market leaders in CFS, the business would be poised for growth in ICD, where we are expanding our footprint on the back of transformational change in the rail infrastructure in the country with commissioning of the dedicated freight corridor with a particular focus on the western dedicated freight corridor, where the company already has an ICD in Dadri and an upcoming ICD in [indiscernible] and NCR. The Allcargo Logistics would also be demerging the real estate business, which would now operate post the approval of the demerger scheme by shareholders, regulators and all the necessary approvals required under the TransIndia Realty & Logistics Parks. Under this business, we would continue to build a portfolio of high-yielding rental assets. This includes the equipment rental business, which provide for strong cash flows and also all the Grade A warehousing assets that have been built over the years. A part of that is already under discussion with Blackstone, and the shareholding in Blacksoil Advisors would also be held in the Transindia Realty. In addition, the CFS infrastructure in Chennai and JNPT would also be transferred into the realty division, which would lease it back on a term lease as required by the operational needs for the CFS/ICD business. In doing so, we would create a very powerful realty and logistics parks company, which would continue to build the best-in-class assets. If you look at Grade A warehouses, there's a huge demand in the country right now, which is likely to sustain in the medium to long term. And the company having built close to 5 million to 6 million square feet of such warehouses leased out to marquee clients like Amazon, Flipkart, Decathlon, and [ thus it's ] already in a strong position to now drive the next phase of growth. As this business gets separated from the logistics business, it would find its much-needed strategic independence and be able to attract the right pool of capital and find sustained growth opportunities. So therefore, the proposed scheme of demerger would facilitate the CFS/ICD business to grow under Allcargo Terminals, the Realty and Logistics Park business to grow under Transindia Realty & Logistics Park. And the other businesses on international supply chain express and contract logistics to also find sharper management focus and the ability to continue to drive growth at higher than market growth rate, thereby increasing market share with an asset-light digitally enabled growth approach. In terms of the scheme of demerger, it has been -- it is a very simple scheme for shareholders, taking care of all the shareholders, including the ones in smallest shareholding to minimize the hassle to them. And therefore, the Board has accepted the recommended structure of 1:1, which means that for every 1 share held in Allcargo Logistics, the shareholders would get 1 share each of TransIndia Realty & Logistics Parks and Allcargo Terminals in addition to continuing to hold 1 share of Allcargo Logistics. The shares issued in Allcargo Terminals and TransIndia would be listed on BSE and NSE. And the entire process is likely to take anywhere between 12 to 15 months, considering the approvals required from exchanges, baby shareholders and then it goes into NCLT approvals. And subsequently, post-NCLT approval, additional time is required for the listing of new created public companies. All this entire process is likely to take 12 to 15 months. During the course of this 12 to 15 months, the businesses would continue to drive the growth, focusing on strategic opportunities, keeping in mind the long-term vision of creating large businesses in each of these strategic business undertaking, which are being created by way of this proposed scheme of demerger. This is all that we wanted to share with you on the proposed scheme of demerger and happy to answer any questions that you may have around the details. I also hope that you all have had a chance to look at the presentation, which has been updated to take into account the demerger details and we have shared the further details about the rationale as well as the implications of the proposed scheme of demerger. So that's all from my side, and I would like to open the floor for questions. Thank you.

[Operator Instructions] Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of [ Prashant Kumar Hazariwala ] from Solitaire Financial.

Congratulations for such a good demerger scheme. I would like to know just -- I have one question that TransIndia Realty has a very high capital employed, it's 16,000 -- INR 1,696 crores, right? So once we complete this Blackstone deal and what will be the capital employed after this? And how much will be the interest portion for the TransIndia Services?

Yes, I would request my colleague, Deepal, to respond to that.

Yes. Thanks, Ravi. So yes, you're right. The capital employed for TransIndia is higher because all the assets, including the Blackstone portion of the assets have also been moved there. But it would not be right for me to share an exact number, but we would say almost 50% -- more than 50% of the assets would actually go with Blackstone, and balance will stay back with us. Depending upon -- there are some controls of the deal where they would want to acquire some more assets. So only time will tell which exactly the assets, which are moving. So there is a large part of assets which are definitely moving. But if they take interest in acquiring some more of them, we would evaluate at that point of time. So -- but the short answer to this is, yes, more than 50% of the assets will move out of this in terms of capital employed.

The Blackstone deal is going on since more than last 1 year, right? So how long it will take to complete this deal?

Yes. So let me -- Vishal, let me update you that most of the -- so more than 1 year because there was construction which was there, which was pending. So most of the construction is already through. In fact, like we mentioned earlier, many of the assets -- most of the assets, in fact, 4 million square feet was forward leased. So all the leases are also started to operate now. There are 1 or 2 CPs which are still pending, which we expect to complete in the next few months. And we all have to recognize that many government offices in many areas were not fully operational through the whole COVID period, due to which the period has got a little bit elongated. As far as what is within our control, that is the construction, onboarding of customers, starting of the lease and getting an LRD around that, most of this is as per time lines that we expected, and it's going well.

All right, sir. How much more time we can expect, like 6 months or something like any tentative, like, I'm not -- just like this...

Just -- yes, if I can just add to that. There are 2 parts to it. One, there are certain approvals, which are part of larger government plans, master plan for the particular area, which needs to be worked upon, which are completely beyond our control. And if not for the COVID, those things would have already happened. Our current estimate is still about 3 to 4 months. We should see that concluded, which means that within this financial year, that should get concluded. But this is only a best estimate because we cannot predict how some of the government initiatives would run depending upon the priorities and closures in the working of government offices. But I would like to clarify and highlight, like my colleague, Deepal said, this does not have any impact on the business whatsoever. The construction has been completed on schedule. The leases have been signed. We have even been able to draw down the LRD financing. So all -- from a business perspective, these are highly best-in-class assets in high demand. Most of them are pre-leased before even the construction begins. So these are like marquee assets leased out to marquee clients. And there's absolutely no disruption on the operational side, be it construction, which you have managed to complete on schedule despite all the COVID restrictions. And the facilities are already leased to various clients. And in the course of last 3 to 4 months, significant construction is also completed, which means that it will start accruing more increasing rental in the next 3 to 6 months to come as the rental accrual begins. So on an operational standpoint, these are marquee assets, high-class clients and everything on schedule. In terms of the agreement with Blackstone that required certain government regulatory approvals to be in place, some changes which are beyond our control. But at this point in time, again, our best estimate is that in the next 3 to 4 months, it should get concluded.

All right. Sir, one more question is like -- the same thing, this lease rentals of 120 million for Chennai and JNPT CFS lands. So is it like from TransIndia Realty, we have leased these 2 assets, like Chennai and JNPT CFS lands to Allcargo Terminals. So how does it work?

Yes. So it is not being leased. This is the proposed scheme of demerger. Once the demerger gets all the necessary approvals and becomes effective, the appointed date is 1st April 2022, and the scheme approval is estimated in anywhere between January to -- around January, February 2023. So once the scheme of demerger is effective and these companies exist with the demerged businesses, at that point in time TransIndia Realty would be owning these assets and would lease out to Allcargo Terminals. So that is the [ height ] in this setting, but it is not as of today. It is out of the proposed scheme of demerger. As of today, everything is part of Allcargo Logistics. The demerger has to take place for this to be effective.

All right sir. My question, I would like to know, right, why we have kept these 2 property in TransIndia Realty because it's a CFS business, right? So why we have not transferred it to Allcargo Terminals and kept it to -- into the TransIndia Realty?

Yes. So basically, from a CFS perspective, one, we want to keep it an asset-light business. We don't want it to be linked to certain assets. It has -- gets its operational flexibility. If it finds opportunities to get more locations, explore new locations, all of those flexibilities remain in the business. Business is not bound by any capital commitment. The business can take its own strategic direction. It already has an access to this land for a long-term lease. The business has flexibility to plan as per its strategic needs and which is why owning the assets is not something we see as of any significant advantage in managing and operating the CFS business. Long-term lease is perhaps more effective if we think as just a pure CFS/ICD operator. And that is exactly what has been the broad rationale for this demerger, to allow businesses, to gain that strategic independence and operate in the most efficient and optimal way. And given that, like for an example, like I mentioned, 5 out of the 7 CFS/ICDs are already on a lease model, and we find that to be a very effective and efficient model for the business. And which is why we have converted the other 2 also in the same model.

All right. So these 2 are our own, but we have transferred it to rental at this TransIndia and then they'll leave it to CFS, right?

Yes. And the other is already in that lease model.

All right. So everything will be on the lease model. So going forward, if we want to -- this is a continuation of the question, right, last question. So our business model will be -- we'll buy -- if we are going to expand our CFS business, we'll buy land from TransIndia and lease it to Allcargo Terminals, right?

No, that is not the interpretation. Both businesses are independent strategic business undertaking. They will take a decision in their interest. It is not that Allcargo Terminals has to depend upon TransIndia Realty. TransIndia Realty will look for opportunities to buy a highly attractive best-in-class assets, which can be leased out. Allcargo Terminals would look at opportunities that are of strategic interest. It could be CFS. It could be ICD. It could be leased from TransIndia. It could be leased from any other party as well. Like I mentioned, 5 other CFS are leased from other partners. So they are strategically going to be independent. There's not going to be any interlinkages of that nature.

[Operator Instructions] The next question is from the line of Prateek Kumar from Antique Stockbroking.

Congrats to the team for this kind of demerger announcement. My first question is, so why we have announced this now, so -- and I mean this is after like we have added a couple of businesses in these last couple of years. So has this kind of mine -- I mean, this kind of announcement or -- but I have gone through promoters or company earlier as well in the past 5 years because as we are known historically that the company has always been sort of a multidimensional, multisectoral company. So I'm sure there would be -- have been investor feedback in prior times also regarding such kind of demerger. So why now, particularly? And yes, so that's my first question.

Yes. Thanks. And that's a very valid question. And the strategic rationale clearly is driven by our business needs, and we value our investor and analyst feedback that we receive as well. However, what we recognize is it is important for a business to get the requisite scale as well. Otherwise, strategic independence may not necessarily be a step forward. And therefore, we did not feel that maybe 5 years ago, to answer your question, it was at the right scale. Now with the growth that we have seen and with some acquisitions that we have done, let's say, in the CFS/ICD business, we believe that the company has the requisite scale. And with the opportunities ahead, we believe it is the right time for the strategic independence and financial and operational flexibility. Similarly, on the real estate side as well, it was work in progress. Now there's a good portfolio of assets, which have been created, delivered and leased and therefore, the company, again, is in a strong position to build upon this foundation and drive growth. And that is where when the company's Board considered this proposal at this point in time, it was convinced that this is the right step forward, providing the strategic independence as the businesses have the optimal scale to be demerged.

Okay. My second question is on TransIndia Realty & Logistic Parks business. So now this business is primarily a real estate business, right? This will not have a service component, unlike for other segments where we are like a service operator. This will largely be a warehouse, which we will lease to, I mean, warehouse or land company, where we will lease assets to whoever wants to build warehouse or operate warehouse there and will not be providing any service?

Yes. So to answer that, just a few -- broadly, you're right. Just to add a few clarifications. It would own various rent-yielding assets. This could be warehouses. It could be CFS. This could be cranes and equipment that we own, but they are largely -- largely the focus is on creating assets, which can be leased out. It won't be land on which somebody can build warehouses. The company would look at constructing logistics parks and then leasing them out. That is the model that it operates it, so it acquires lands, then warehouses are built, and then they are leased out to clients like Decathlon, Flipkart, Amazon or some of the logistics companies, including [ our group ] companies. So that's the business model. That's what will continue. And it could potentially explore now with the strategic independence, if we draft out its own business plan, it can find opportunities in similar space. But yes, the fundamental point would be to invest in assets which can create long-term sustained lease or rental returns. It would not be an operating service entity as compared to the other businesses, which are all operating service businesses and which is also the reason for the demerger since it is potentially different and requires the strategic independence to push for growth.

Regarding the project and equipment business, I see that the equipment business is included in this segment of real estate, and Project Logistics I'm not sure if it is in mid segment. And we have also talked about selling some of the core assets in this equipment business. So yes, just clarity on where is project logistics and what is the status on -- I mean...

Yes, so project -- yes. So that's a great follow-up to your last question, as you also mentioned, Project Logistics is a service business, and therefore, would continue to form part of the Allcargo Logistics, which it is part of today. The equipment business is more rental business and which is why it will strategically fit in with the lease and rental business of TransIndia. In terms of the [ betting ] the businesses, we have continued to divest noncore businesses, noncore assets between [ feed and specialized ], all of that would continue. The demerger only provides for greater flexibility in making plans for future.

One last question on the logistic park, which is, I think, one of the 7 ICD/CFS, which we have added. So I remember in 2015, '16, these two -- own land also there. So while we don't mention -- we are not mentioning land ownership and this [ depending on ] land ownership.

Yes. So let me clarify on that. So [ judges ] is a combination of logistics park, which has warehouses built and leased out. And it is also the proposed ICD. So considering the same, the entity that owns the land and buildings and [ judges ] is already undergoing through a scheme of demerger, which is near completion. It was announced almost a year ago, 10 to 11 months back, whereby we are in the process of segregating the ICD part and the logistics parks assets. Under this scheme of demerger of logistics parks assets, which are your real estate play, will go to TransIndia Realty, while the ICD part will stay back with Allcargo Terminals.

This will not have land ownership?

There's a very -- there's a very minimal land ownership. The 95% of the capital employed is towards land and building for warehousing, logistics park, which will go to TransIndia Realty.

The next question is from the line of Abhijit Mitra from ICICI Securities.

I have 2 questions. Firstly, on debt, if you can sort of draw down the distribution of debt in these 3 entities now post the demerger process? And my second question is on Gati. How does Gati now fits in this entire structure? It has been retained in the main entity, as we can see. But what are your plans with this entity going forward if you can lay down that as well in whatever way you can?

Yes. So let me take the second question first. At this point in time, there is no change in strategy or approach or holding in Gati. The current scheme of demerger pertains to the CFS/ICD and the real estate and rental business. All the other businesses continue to form part of Allcargo Logistics. And we see those businesses be synergistic in terms of being asset-light, [indiscernible] enabled businesses. And there are no further plans on Gati as part of the scheme of demerger, which pertains to the CFS, ICD and the realty business. On the debt side, I would request my colleague, Deepal, to throw some light on the principles on which the debt distribution happen across the demerge and the continuing business under Allcargo Logistics. But let's also highlight before that, that the process is going to take 12 to 15 months. And during the course of this time, the debt, there will be a repayment of debt from internal approvals. So the debt position is something which may be a little dynamic from what it is today to what it would be at the time of formal listing of the [ entity ]. Deepal, if you could throw some more light on that.

Thanks, Ravi. So yes, you're right. So that will be a little dynamic as we go along. But the principles are very clear. So whatever debt is for a respective business, we will move with that respective business. So if there is debt which is purely for construction and if it's a lease rental discount, which is part of the TransIndia Realty business, those portions will clearly move there. Debt which is primarily for working capital, which EQ business holds a lot of working capital debt and in the business for MTO, we will stay back. And if there are any other loans which are related to the MTO business, we will stay back. As far as CFS, that would be very little bit, which would be moving because CFS has been generating a significant amount of cash flows over the few years. And there is not much other than some recent acquisition [ debt ]. Other than that, nothing will move there. So that -- these are the principles. But yes, this is dynamic. And if, for example, some of the deals like the Blackstone deal or anything is concluded, then debts will shrink accordingly or will change accordingly. Thank you.

Sure. But those numbers, the debt number in Allcargo Terminals and TransIndia. So Allcargo Terminals, Allcargo Logistics and TransIndia Realty, I think the biggest debt will be TransIndia Realty. And as you said, that terminals would have had any debt.

So. Yes, yes. It's not necessarily true that TransIndia will be having the biggest debt because -- debt -- because Allcargo Logistics will carry also the debt for -- at a console level for also the EQ portion, which is the working capital debt and also the debt which is part of the Gati business. So -- and there are some common debts, which will be distributed as per the principles of the demerger scheme. So these details are being worked out. And as and when the time is appropriate, we will share the details with everyone.

Sure, sure. And just a follow-up on Gati, now in a majority of the businesses hosted in follow-on subsidiary, which is Gati KWE, where there is a 70% stake. So how to sort of simplify the structure now? So under Allcargo Logistics, there is Gati and then under Gati there is Gati KWE but main business is sort of hosted, so is there any thoughts -- where there is a 70% stake? So is there a thought of sort of simplifying this structure further? Or that is not yet...

So yes, so like I said earlier, at this point in time, the thought process and the scheme of demerger is restricted to the CFS/ICD and the realty businesses. We would continue to evaluate what's in the best interest of the business. And if there's any update, we'll relatively share.

Sure, sure. And there is no change in CapEx plan also, I'm guessing, between Allcargo as a consolidated entity.

Absolutely. There's no change in CapEx plan. There's no change in business plans in the immediate short term. In the medium term, naturally, the 2 businesses which are gaining strategic independence will now have greater flexibility and we'll have an opportunity to expand their business ambitions and those business plans are likely to change aiming for more growth, be it CFS/ICD or the realty businesses. But there is no impact on the CapEx plan or any short-term changes.

[Operator Instructions] The next question is from the line of Chetan Shah from Abakkus AMC.

A very congratulations and best wishes to entire team. Just 2 quick questions. First, in a couple of questions, you spoke about opportunity post demerger into various entities, we do got about ICD/CFS part and also about the real estate part, and you nicely articulated about the Gati's opportunity, which is also there in your presentation, which you shared in the morning. Could you just give us some sense about our overall MTO business? How do we see this evolving? We have done a couple of acquisitions in the last 2 years and which is also under consolidation and getting it aligned with our core activity. So if you can give us some sense how do we see that part of business and in the changing business dynamics, how things will evolve in the next couple of years because now it will be independent to the 2, I would say, capital [indiscernible] business, mainly the real estate part of the business.

Yes. So basically, like I mentioned, Allcargo will continue to have the international supply chain business for which the India business is part of the parent company itself, and the international business sits under the subsidiary EQ Worldwide, and express business is under Gati and contract logistics business is under ACCI. Across all the 3 businesses, the businesses continue to maintain robust growth outlook. We have been increasing our market share across all these businesses, and we remain confident of continuing to increase our market share, which means that all these businesses would continue to grow faster than the market growth rate. On the acquisition, we have had a strong track record historically, and the recent acquisitions have also been highly value-accretive, be it the acquisition of Gati, which got completed in April last year or the acquisition in Nordicon, which was done in July this year. We also had a small follow-up acquisition in Denmark to further build the present Nordicon. All the CFS business that has been just concluded last month. All these acquisitions have grown significantly from the time that we acquired. So whatever transformational initiatives we took in Gati, strategic initiatives we took in the Nordic region, our support to the CFS business is continuing to grow these businesses. So that's a quick update on all the acquisitions as very healthy and continue to grow significantly. And under this demerger, these businesses now would have the strategic independence because the other businesses are being demerged. So that would also make these businesses stronger while providing the opportunities for growth to both CFS/ICD and the realty businesses, which have very unique different requirements and how they can take care of them.

Just a small follow-up on that. This Nordic acquisition, which we did, could you just give us because during that accretion we have spoken about some of the synergies and cost savings and things like that? And also in terms of our market share gain in that part of the geography and that time also, you've spoken that we may -- there are some still missing jigsaw. So will that make the whole process a little faster that is independent to this entire demerger process? I'm just trying to understand the better market share gain in the geography and there are some countries which we are still missing, which we were always exploring irrespective of this whole corporate restructuring process.

Yes. Yes. So I would say that irrespective of this corporate restructuring, those opportunities continue to be evaluated, and we continue to work on various acquisition opportunities in countries where we believe we can get stronger by the way of inorganic growth. On Nordicon, just to give a broad ballpark idea, if you look at the year 2020, which was the doubt before we started engaging with them, whatever the quarterly run rates were in terms of the bottom line performance for Nordicon, in the recent quarter since EQ acquired, the numbers are already more than double. So that's the kind of impact on growth we have seen in the Nordicon acquisition. And these are strategic opportunities for us where we are able to add significant value and drive growth. And there wouldn't really be any impact because those have always been a more strategic priority to find such opportunities, and we will continue to look for that. So this restructuring would not really make any impact on that, to be honest.

The next question is from the line of Sailesh from B&K Securities.

My question is pertaining to logistics park business. To support the pending logistics, [ it is that of ] logistics work and the interest payment, this Blackstone has given INR 300 crores proceeding to SPV. This is good option. That means either entity should go for listing or we need to give a minimum percentage of interest obligation to the Blackstone. So what is the actual agreement between us and Blackstone? Can you give more color to this? That would be helpful? And also, can this be extended in case of any delays in getting government approvals? So what are the exact terms between us and Blackstone?

Yes. So just to add a few points before handing over to Deepal, for a [ gained ] response, these time lines have already been extended a couple of times. Because as I said, these are marquee assets and very attractive for any investor. And the challenges are external to us, and it is well understood by the partner as well. And therefore, there is flexibility on that side. In terms of money, which has come in as convertible instruments, which is still seen as debt, would naturally form part of the TransIndia entity because that is where the entire realty business is going. However, the Blackstone transition is likely to get consummated before the demerger gets approved, and therefore, that may not be really relevant in the final demerged entity. I'm not sure what other deals can be shared from the Blackstone agreement, but I would request my colleague, Deepal, to throw further light on it.

So Ravi, thank you. Yes, we are bound by confidentiality. So there are not much of the details that can be shared. So you very rightly said that we strongly believe that the Blackstone will be consummated before the actual demerger takes place. As far as I think, there was a concern regarding the interest portion. So we would like to bring to your attention that in a couple of months starting April, I think for next year, we should be able to generate almost more than INR 100 crores in terms of lease rentals for that entity. So that would be a fairly good amount to fund service any obligation that, that organization has until the Blackstone deal is completed. So I hope that answers all the questions.

[Operator Instructions] The next question is a follow-up from the line of Prateek Kumar from Antique Stockbroking.

My first question is on like what kind of annual CapEx requirement would be there for all these 3 entities now? I mean, now we've known that they are separate. So yes, CapEx requirement in the 3 segments?

Yes. So on the CapEx side, there wouldn't be any change from the current plan. However, to give a color on the different entities, the international supply chain, express and contract logistics business, doesn't have any significant CapEx requirement. Most of the CapEx requirements are towards IT infrastructure and building digital capabilities, which is not very significant and is a very miniscule part as percentage of revenue. The [ moving ] in CapEx is required in any of the businesses, which are under Allcargo Logistics. There are some minor investments in contract logistics to the tune of INR 15 crores to INR 20 crores a year, which is towards various fitments or additional items to be put up in the warehouses when they've beeen operated, but those are again not very substantial CapEx, and those are literally amortized over a short period of time and then back to client. Beyond that, on the Container Freight Station side, the idea is to minimize the CapEx investment. And in the immediate term, there are no CapEx requirement. We would evaluate the opportunities to set up additional ICDs around the Western dedicated freight corridor, and we are also evaluating opportunities to partner with realty companies as well as on a stand-alone basis or some opportunities based as well on both CFS and ICDs on how those [ would be built ]. Immediately at this point in time, there's no proposed outlay in the near future. And for a midterm plan, we would perhaps be in a position to share more details over the next 4 to 6 months as we look ahead. On the TransIndia Realty side, construction is almost complete for the entire land bank, which is in position. Now however, with the strategic independence, it is a great business model. And the way it can operate as a strategic independent unit is that you invest into building an asset, and that asset gets leased. As the asset gets leased, you are able to draw down LRD, which is lease and discounted debt, that can be reinvested into building additional assets. And the LRD is self-serviced by the lease, which gets generated from these warehouses and which is what makes this business also very lucrative because over the period of 10 to 11 years, which is the usual lease contract period, you are able to service back the entire LRD. And therefore, by the time you would have had capital [indiscernible] those assets and the debt would have been paid off. So which is where you could have this business affects significant capital, as we have seen from large investments being made across the country in such opportunities. So we believe that now as a strategically independent unit, this business division would now be a stand-alone company and would look for its own business plan. At this point in time, there isn't one that is ready. We would work upon the right management structure, business plan. And post demerger, there should be substantial CapEx investments in this company, which would be coming from capital recycling basically and some additional investment by way of debt or equity that may explore. Too premature at this point in time to comment upon the quantum. But yes, directionally, this would be an asset-heavy business, which would look at investments, which we highly value creating by investing into high-quality rent-yielding assets.

My second question is on this Blackstone deal. So in relation to this delay, either from our side, likely not from our side, but probably from government approval side. So is there some kind of penalty or compensation with any of the parties or to anyone?

No, there is no penalty as such or no, negative impact of these delays. These are structured. As I said, the partners appreciate and understand that delays are beyond our control. And therefore, there are no penalties as such, which we are taking for the [indiscernible].

And last question on the Allcargo multi-model transport operation segment, supply chain segment. So recently, as we also published on exchange that we were looking at fundraise in that segment, and we have appointed a banker there. So investment coming into the company now versus investment now with the scheme of demerger or the investment in earlier case when the company was kind of together, would that have made any difference? And this may be a reason for this kind of state?

No, that's not really the case because as you would have seen from the announcement, we have shared that the bankers have been higher in EQ Worldwide, which is a subsidiary company, and it does not get impacted by any of the restructuring because that remains a subsidiary of Allcargo Logistics. There's no impact of the restructuring on that business. We have appointed advisers who advice us on potential fundraise opportunities to drive the next phase of growth. And naturally, there aren't any CapEx requirements. So the opportunity for growth in that business are built around further consolidation to achieve scale and also on the digitization. So we are evaluating opportunities, and we have appointed advisers to evaluate them, but there is no bearing of the scheme of demerger on any of those plans. Those are completely independent plans to evaluate those opportunities in that business.

But unlocking of value for those investors, which may be financial investors for EQ Worldwide would have happened by stock price of Allcargo? Or how would have that happened otherwise?

No. Our investor coming into an EQ Worldwide would not really -- so basically, the fundraise discussions are at EQ Worldwide level. They do not have any sort of subsidiary level like. There's no impact on the scheme of demerger. And Allcargo, there's not an investment being raised in Allcargo as we have clearly stated in our communication, the advisers have been appointed for evaluating fundraise opportunities in EQ Worldwide subsidiaries not at Allcargo level.

The next question is a follow-up from the line of Sailesh S from B&K Securities.

Yes. Thanks for the opportunity again. So any updates on the management team with regards to the new entities. Will it be professionally run and managed with [indiscernible]?

Yes, absolutely. I can confirm that like we have had the approach currently wherein all the businesses are run by independent professional management teams. In the revised structure under the proposed scheme of demerger also, it would continue to be the same approach with professional management driving each of these companies and the underlying businesses. We would be working on the management plan that you would appreciate for it to be operational. There is a significant amount of time at hand. And therefore, during the course of coming months, we would be making plans on the amendment to the management structure which might be required in view of the demerge entities being created, and we would share the details at an appropriate time.

So that would now remain in TransIndia after the completion of Blackstone deal? Any key business which we are exploring under this entity in future?

So out of the logistics parks which are part of Allcargo Logistics, some of those logistics parks are part of the Blackstone transaction. One is an optional entity, which needs to be discussed further. And then there are a couple of logistics park assets, which are not part of the transaction. So those will continue to be part of the TransIndia Realty. Then the Chennai [indiscernible] and the equipment rental business, which is also -- we have already divested the -- whatever we felt was not core and strategic in terms of the equipment that we own. So all these high-quality rent yielding assets would continue. And like I said, as strategically independent business undertaking, the company would now have the opportunity to look for growth avenues.

Any rough [indiscernible] bifurcation of first half April '22 debt number, I don't want an exact number, but still a broad segregation over...

So broadly, I would say that Allcargo Terminals, the CFS entity would not have any significant debt that will be near [ the exit ]. The Allcargo Logistics will retain the debt, which has been taken towards working capital in EQ Worldwide [indiscernible] operations, Contract Logistics, Gati, all the other corporates that -- which has been taken, let's say, for the acquisition purpose, et cetera, in those businesses. However, any lease rent discounting and the loans which are pertaining to Allcargo Terminals would go into -- pertaining to TransIndia Realty would go into TransIndia Realty. I would recommend since that is more dynamic, if you want to evaluate and understand how the businesses would looks like, it will be better to correct from an enterprise value perspective, keeping the debt numbers to be a bit dynamic in that sense. And from an enterprise value perspective and from a -- so what will happen is clearly, as you would have seen a significant amount of capital employed, which goes out, which makes the business more efficient, the return on capital employed goes up significantly. And the CFS/ICD is also another unique model that we're creating of all the CFS -- and the current CFS is being on lease also makes it very lean efficient operation. So that's the way one could look at it. In terms of the [indiscernible] numbers, in the coming quarterly results, we will share the latest position as of 31st December because in the scheme currently, already some numbers are based around 30th September, while sometimes I think it will happen beyond that as well. So I think it will be most appropriate to start looking at on a quarterly basis. We will share details on how it's like across the proposed structure as well in the coming quarterly results. So for the month -- this month ending December quarter, we will share details.

[Operator Instructions] The next question is from the line of [ Kashyap Sambhavami ] from Negen Capital PMS.

My question is related to the CFS/ICD business, which we have. So we have grown at roughly 8% to 10% CAGR over the last many years, and the expected growth rate in the industry is on the similar line. I'm referring to the presentation. So I just wanted to get a sense of the growth profile. How much growth can we expect, let's say, over the medium term? I also see that we have done speedy acquisition recently. So combined organic growth, which we can have from our existing ICD plus inorganic growth, what kind of growth profile are we looking at?

So we will not be in a position to share guidance on future numbers, but like we have shared in the past as well, I would like to reiterate that we would consistently increase our market share, which means that despite being the market leaders in CFS business, we are confident of growing it faster than the market growth rates.

Okay. Okay. I didn't want the exact number, but we'll be continuing focusing on the inorganic opportunities as well?

We are -- we believe that organic and inorganic growth opportunities are equally important from a strategic point of view. And if you look at the history of the company, we have demonstrated it successfully having completed over a dozen associations across the globe, diverse culture, diverse geographies, and all of them have been successful for the group. So there's an inherent strength in acquiring companies and integrating them and turning them around. So all of those capabilities will continue to be put at use and in driving the growth of the businesses.

Thank you. Ladies and gentlemen, due to time constraint, we won't be able to take further questions. I now hand the conference over to Mr. Ravi Jakhar for closing comments. Over to you, sir.

Yes. Thank you all for joining on the call. We hope we have been able to provide the answers to all the key questions. And as we move forward, quarter-on-quarter basis, we would continue to provide additional information until the time the demerger actually gets effective. We would keep it transparent and make an endeavor to provide the maximum information that we can provide to our shareholders, investment analysts to understand the company's business better. And thank you for joining us on the call, and we look forward to continuing to drive strong growth as management of the company. Thank you.

Thank you. Ladies and gentlemen, if you have any further queries, please address it at [indiscernible] @linkintime.co.in. Thank you. With that, we conclude the conference call. Thank you all for joining us, and you may now disconnect your lines.