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Allcargo Logistics - Highlights of Blackstone deal - ICICI Securities

Posted On: 2020-09-22 00:46:55

Allcargo Logistics' (AGLL) FY20 annual report highlighted few additional details from the Blackstone deal. The agreement involved six subsidiaries and Blackstone Real Estate Asia Urban (BRE). BRE is expected to pick majority stake in these subsidiaries. FY20, however, has witnessed initial investment of Rs2284mn from BRE in the form of debentures and only Rs89.3mn as equity. Majority stake in 4 out of 6 subsidiaries has been divested by AGLL for Rs89.3mn. The business transaction agreement was carried out with four of these subsidiaries (two where stake has been divested and two where stake is yet to be divested), where Rs4.08bn worth of warehousing assets were transferred. BRE has a put option, valued at Rs30.2mn by AGLL, to get out of the deal in 12 months. Further, shares of eight subsidiaries (of which six subsidiaries are a part of the agreement) have being pledged by AGLL to BRE. Maintain HOLD.

- Details of the transaction with BRE. AGLL executed agreements with its six wholly-owned subsidiaries - Malur Logistics and Industrial Parks (MLP), Allcargo Logistics & Industrial Park (ALIP), Madanahatti Logistics and Industrial Parks (MLIP), Venkatapura Logistics and Industrial Parks (VLIP), Kalina Warehousing (KW), Panvel Warehousing (PW) along with BRE. Business transaction agreements have been carried out with ALIP, MLIP, MLP and VLIP transferring ~Rs4.08bn of warehousing assets of AGLL through slump sale (Table 1). Total business transfer consideration converted to debentures for these four entitites is Rs4.14bn.

- As feared, the nature of the inflow till FY20 has been more debt than equity. BRE has made an initial investment of Rs2284mn through debentures and Rs89.3mn through equity acquisition in these subsidiaries. Accordingly, AGLL divested its control in MLIP, ALIP, KW and PW on a fully diluted basis and retains a minority stake in these subsidiaries. AGLL has retained controlling stake over MLP and VLIP.

- BRE's put option valued at Rs30.2mn. If certain conditions are not satisfied within a set timeframe (~12 months ending in 13th Jan 2021), AGLL will have to buyback the debentures and the equity money invested by BRE. AGLL has valued BRE's 'put option' from an independent valuer at Rs30.2mn, which has been accounted for as an investment in MLP with corresponding creation of financial liability.

- Shares of 8 subsidiaries pledged in favour of BRE; presumably against the debentures that BRE has extended. The annual report also highlights that shares of Allcargo Inland Private Park, Allcargo Multimodal, KW, PW, MLIP, ALIP, MLP, and VLIP have been pledged in favour of BRE. So, apart from the six wholly-owned subsidiaries with whom agreement has been executed, two additional subsidiaries' shares have been pledged - Allcargo Inland Private Park and Allcargo Multimodal.

Shares of ALLCARGO LOGISTICS LTD. was last trading in BSE at Rs.118 as compared to the previous close of Rs. 119.45. The total number of shares traded during the day was 11900 in over 337 trades.

The stock hit an intraday high of Rs. 120.8 and intraday low of 116.4. The net turnover during the day was Rs. 1418128.

Source: Equity Bulls

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