In May, Gati Ltd exited its cold chain solutions business, Gati Kausar India Ltd, to focus on express distribution and e-commerce.
Aditi Divekar |
Last Updated at June 10, 2021 17:52 IST
After exiting the cold chain business, express distribution company Gati Ltd is now looking to shed some more weight and is currently engaged in doing away with two more of its subsidiaries– trading solution and freight forwarding businesses.
“We are amid closing down our Gati Import Export Trading Limited (GIETL) subsidiary which maintains the inventory for clients on its books. We have already dialed down all contracts under this entity and are in process of shutting down,” Bala Aghoramurthy, deputy managing director at Gati Ltd told Business Standard.
As per company’s FY20 annual report, GIETL is 0.67 percent of its consolidated net assets, which contributed a meager Rs 6.19 million to the total profits.
In May, AllCargo Group-owned Gati Ltd exited its cold chain solutions business, Gati Kausar India Ltd, to focus on express distribution and e-commerce. It is now shutting its others two businesses for the same reason.
“GIETL needs to be closed but the freight forwarding business, we are looking for a worthy buyer,” said Aghoramurthy.
Freight forwarding companies specialise in arranging the whole process for their shippers, from the storage to the shipping of their merchandise.
Alongside, the company owns five fuel pumps, which are currently profit making. In a bid to do away with non-core assets, the company is looking to sell these pumps as well and move towards becoming a core express entity.
“We have been working on the exit of Gati Kauser for the last one-and-half –year, from the time of acquisition. If you do not own the refrigerated business we cannot be in the cold chain business because the concept of leasing reefer trucks is not developed in the country. Hence it made sense to exit this business,” said Aghoramurthy.
In trucking, a reefer is a refrigerated trailer that gets attached to a semi-truck in order to transport perishables and other temperature-sensitive goods.
Cold chain is an asset heavy and capital-intensive business, which is against Gati Ltd’s vision to move towards an asset light company in company months.
Alongwith an asset light model, the company is also aiming to lighten its balance sheet. The debt/equity ratio of the company will go to 0.29 post Gati Kausar spin off from 0.50 when the cold chain business was part of Gati.
Gati Kausar carried a debt of Rs 103 crore as on March 31, 2021.
“The closing of other two subsidiaries and sale of some non-core assets such as land and building will also further lighten the balance sheet in coming months,” said Aghoramurthy.
Post divestment of loss-making Gati Kausar which is currently underway, the company’s consolidated net debt would stand at Rs 290 crore in FY21 from about Rs 411 crore in FY20.
In August 2020, Gati Ltd also sold off overseas loss making entity Gati Asia Pacific Pte Ltd inching towards focusing on express business of the company.
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