Business Today

Riding the tide

twitter-logo Anand Adhikari        Print Edition: April 17, 2011

A remarkable, post-liberalisation success in an unusual sector is Shashi Kiran Shetty, 54. Ably assisted by his younger brother and brother-in-law, he has turned his freight forwarding company, Allcargo Global Logistics, into a Rs 2,600 crore giant, the biggest player in the niche segment of those which carry 'less than container loads'.

Shetty, a commerce graduate, reached Mumbai from Bantwal in Karnataka in the early 1980s with entrepreneurship in his blood. Two years of employment in the shipping business convinced him he could strike out on his own. At 25, using his modest savings of Rs 25,000, he set up his first company TransIndia Freight Services to move cargo.

Brother Umesh, after reaching Mumbai in Shetty's footsteps, spent a few years working elsewhere before teaming up with his elder sibling. "I needed someone I could trust to look after the expensive equipment, especially the cranes," says Shetty. "The cranes need regular preventive maintenance." Soon after Shetty married, and a year later roped in his brotherin-law Adarsh Hegde, a mechanical engineer, who had lost his job after his employers went bankrupt. Hegde, too, made a brief, independent foray before returning to work permanently with Shetty from 1990. "He is our business development and marketing person," says Shetty.

Allcargo Global Logistics Ltd

Founder: Shashi Kiran Shetty, 54
Wife: Aarthi is a director on the Board
Brother: Umesh works with Shetty
Brother-in-law: Adarsh Hegde works with Shetty
Why I did it: "I worked for a shipping company for four years and I saw a big opportunity as trade to and from India was increasing big time."
Total turnover: Rs 2,600 crore in 2009/10
Main companies: Allcargo Global Logistics, ECU Line and TransIndia Freight Services
While TransIndia Freight Services confined itself to transporting cargo within the country by road and rail, Allcargo Global Logistics, which Shetty began in 1993 - just as liberalisation had begun breathing renewed life into the Indian economy - went into shipping cargo overseas. "It was then that I started recruiting professionals in key positions, since none of us in the family knew the cargo shipping business too well," he says.

Allcargo's business grew quickly as, due to its relatively small size, it displayed an ability to provide quicker service than its rivals. The existing players were not overly interested in shipping small quantities of cargo, which occupied less than a full container. Allcargo also filled this gap. "We had to make the best use of the container box. We were paying for the box anyway whether we filled it nor not," says Shetty. He also expanded the business by offering credit facility to select clients, which was not the norm then.

How did liberalisation make a difference for Shetty? It brought about a vital change in shipping regulations with the passing of the Multimodel Transportation Goods Act in 1995. It allowed even companies that did not own ships to become registered carriers of goods by sea, using ships belonging to others. Acquiring the licence to do so in 1998, Shetty teamed up with a Belgian company, ECU Line, to collect cargo and aggregate it into full container loads for shipping. Subsequently in 2001, Allcargo acquired a 16.2 per cent stake in the company, increasing it in 2005 to 34 per cent and a year later, to 100 per cent.

Indeed, Allcargo was booming helped by the domestic cargo business. "I used the profits of my transportation business to build the shipping business," reveals Shetty. Having consolidated in Mumbai, he expanded the business pan-India, with over 5,000 global destinations under his reach.

Slowly, Shetty realised there was still a missing link. "We were totally dependent on poorly maintained government warehouses for storing our goods," he says. "I decided to set up our own container freight stations." Currently, Allcargo has three such freight stations in Mumbai, Chennai and Mundra, Gujarat.

In 2005, Allcargo also entered the capital market with an initial public offering of Rs 150 crore. "We have left the company to professionals now," he says. Shetty's dream is to become a global market leader in logistics.

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