Allcargo Logistics Ltd

NSE:ALLCARGO

Earnings Call Transcript 2022-Q4

[Operator]

Ladies and gentlemen, good day, and welcome to the Allcargo Logistics Limited Q4 FY '22 Earnings Conference Call hosted by PhillipCapital India Pvt. Ltd.

This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions]. Please note that this conference has been recorded.

I now hand the conference over to Mr. Vikram Vilas Suryavanshi from PhillipCapital India Pvt. Ltd. Thank you, and over to you, sir.

[Vikram Suryavanshi, analyst]

Thank you, Faisan. Good morning, and very warm welcome to everyone. Thank you for being on the call of Allcargo Logistics Limited. We're happy to have the management with us here today for question-and-answer session with the investment community. Management is represented by Mr. Ravi Jakhar, Chief Strategy Officer; and Mr. Deepal Shah, Chief Financial Officer.

Before we start with question-and-answer session, we'll now open comments from the management.

Now I hand over the call to Mr. Ravi Jakhar for the opening comments. Over to you, sir.

[Ravi Jakhar, executive]

Thank you, Vikram. This is Ravi here. I hope that all of you and your families are safe and healthy. On behalf of Allcargo Logistics Limited, I extend a very warm welcome to all participants on this call for discussing the fourth quarter and the financial year '22 financial results.

As mentioned by Vikram, I'm joined with my colleague, Mr. Deepal Shah. I also hope that everyone has had an opportunity to go through our investor presentation and the press release that we have uploaded on the exchanges and also shared on our website.

I'm really pleased to talk about this year's performance, which has been a historic year for us at Allcargo Logistics when we witnessed significant momentum across our businesses. It is important to note that while the numbers we present the story of the year gone by, in reality, this is an outcome of transformational programs and strategic initiatives undertaken by the group over the last few years, which have come to a full play in the financial year '22, providing strong momentum to various businesses across all segments.

Specifically speaking about quarter 4, there were some challenges in terms of minor disruptions in the export business in the month of January with some COVID-related disruptions and slowdown in the north in India -- north part of India. On global scene, usually, February being the Chinese New Year is generally lower as compared to the Christmas holiday season, October to December quarter. This time, there was also a lockdown in Shanghai. So therefore, the volumes and the performance in China was somewhat muted. But despite all these challenges in the macroeconomic front further impacted by the geopolitical situation in Ukraine, it provided some sort of headwinds to the business. But despite those strong headwinds, the business has managed to perform very well, and we recorded the highest ever Q4 performance making significant improvements year-on-year in this quarter.

I would like to highlight the key pillars of growth that we are driving at Allcargo. To begin with, over the last few years, we have been prioritizing and reorganizing our businesses. And we had shared last -- about last quarter when in the month of December, we launched the demerger plan to restructure some of our businesses, which would provide them greater financial flexibility and strategic independence, thereby fueling higher growth momentum.

We had spoken about demerging the Transindia Realty, which is the real estate Logistics Park business of the group, which moves out of logistics by way of the demerger. We also spoke about the CFS/ICD business being demerged into all cargo terminals, leaving Allcargo Logistics to be a completely asset-light digitally enabled company with businesses underlying with EQ worldwide, which is the international supply chain business; Contract Logistics business, which is housed under ACCI at the moment; and the export logistics business and e-commerce business, which is undertaken with Gati and the GKEPL, which is a subsidiary of Gati.

We have also notified in the recent past that the Board has approved that management should evaluate further and in discussion with our joint venture partners, which is KWE, who is our joint venture partner in GKEPL, which is a subsidiary of Gati, to explore and evaluate if there are any further rational steps to be taken in context of restructuring, which we are evaluating. And we shall share updates with everyone as we come to some conclusion. The idea is very simple, to keep the structure simple and enable businesses to grow in the best way possible. And in trying to achieve these simple structures and prioritizing these businesses, it is also equally important to continue to divest the businesses, which are not on the priority landscape.

In this context, while the 4 businesses, which is international supply chain, the CFS/ICD business and express logistics business and the fourth Contract Logistics business, we have continued to see significant momentum in growth. And my colleague, Deepal, will talk further about that in some time.

We have also continue the path on divesting for other businesses, which we started with some subsidiaries in Gati. Subsequently, the coal chain business was also divested in the past 12 months gone by. We subsequently sold off the Project Transportation business, which is one of the non-core business, which is also announced in the transaction. I'm glad to share that it has been completed. I believe we'll also share updates on the Logistics Park with the transactions and when we give the order of the business.

But primarily on the business side, we are clearly focusing on the 4 core businesses, which are being driven further by transformation and digitization. So once we have these prioritized businesses identified, over the last few years, we have really transformed these businesses undertaking a disruptive approach. In the international supply chain business, we have yet a significant program for digitization. A few years ago, about 3 or 3.5 years ago, there was a single-digit number for a bookings done through our ECU 360 platform. Today, I'm glad to share that almost 60% of all our key export bookings across the world happen through digital platform or digital interchanges.

Further, we face acceleration, which is also about the transformation initiatives, and the reorganization to build it as a truly world-class global organization has also paid dividends, which we have witnessed in the strong growth we have seen over the last 2 years.

On the India side, we have turned around Gati and the underlying GKEPL business with significant initiatives bringing down debt, improving operational capabilities, making the company much more efficient. And as we move forward, we are expanding the infrastructure, opening new high-quality transhipment centers and hubs, which will enable in the next wave of growth.

On the Contract Logistics business, we have continued the momentum now over a good 3-year horizon wherein the business has continued to be new customers, build new quality infrastructure and operate them as an asset-light Contract Logistics company.

On the CFS/ICD business, the FY '22, we have also witnessed a very strategic acquisition of Speedy Multimodes, providing undisputed leadership in the CFS markets to Allcargo Logistics and providing a stronger platform for growth from here on.

So with that, I'm glad to share that all the businesses have very positive momentum. The transformation initiatives have largely been completed. And as we move forward, we are looking at the next phase of transformation where we are evolving our financial systems, digital ERPs and host of other tools, such as using data science models to optimize networks, be it the Express Logistics business in India or be it the international supply chain business globally. And with these initiatives, we are confident of continued positive momentum, which should allow all these 4 core businesses to continue to grow faster than market, thereby enabling improvement in market share for us even in businesses we are already market leaders, such as being the #1 player in the global LCL trade and being the #1 CFS operator. And we expect that the market share should increase across all businesses.

Now to specifically talk about the business highlights and the financial performance for the quarter 4 and FY '22, I invite my colleague, Deepal. Thank you. Over to you, Deepal.

[Deepal Shah, executive]

Thank you, Ravi. I will now discuss the financial year '22 performance.

Allcargo Logistics reported consolidated revenue of INR 20,000 crores for the year. And EBITDA stood at INR 1,516 crores. Profit before tax stood at INR 1,186 INR crore, including INR 81 crores share of profit from associates and JVs. This has been the best ever performance recorded by the company setting stage for next phase of growth on the back of strategic acquisitions, transformational and digital initiatives undertaken by the company. There has been a sustained increase in revenues coming from digital platform ECU 360, which now accounts for almost 60% of export bookings across all key markets. The company has divested in the Project Transportation business, in line with the asset-light strategy and make strategical concessions in India and across the world.

Just to highlight some thoughts on the presentation format. Now as you've seen, we have attempted to give you a simple disclosure on an indicative basis of what the demerged entities would typically look like. But we note that this is purely indicated, and it would vary as we go along.

Now I would like to discuss the performance of each of the business segments in detail for the quarter, starting with the ISC business, the International Supply Chain business. The International Supply Chain business, which is the MTO segment, operating under the EQ worldwide business robust growth on the back of volume growth driven by expansion in market share and favorable market conditions. Companies set up a JV in Scandinavian region, which you're aware, which has grown significantly both acquisition and the EQ worldwide. It is now a 40% market leader in Sweden, Norway, Finland and Denmark. The JV in South Korea also performed exceedingly well along with key regions like India, China, Europe, Americas, all exhibiting best ever business performances.

MTO segment reported a revenue of INR 17,643 crores, higher by 109% year-on-year against a INR 8,449 crores from the corresponding year. EBITDA stood at INR 1,305 crores, a growth of 186% as compared to INR 436 crores from the previous year. The ROCE for the International MTO business improved to its highest level of 52.1% in FY '22.

Now the growth of the year. Now for the Q4 FY '22, India segment reported a revenue of INR 5,122 crores, higher by 88% year-on-year and EBITDA stood at INR 403 crores, a growth of 170%.

Moving on to the CFS business and the ICD business. The CFS and ICD business was bolstered with acquisition of Speedy Multimodes, and the company is now a market leader on the private side in the CFS business in India with presence across major gated ports of India. Volumes handled through the year increased by 59%. Those includes the Speedy acquisition in volumes as well and 4,50,000 TEUs -- 4.5 lakh TEUs as against 2.82 lakh TEUs compared to last year. CFS and ICD vertical reported a gross revenue of INR 578 crores, growth of 25% year-on-year against INR 464 crores in the corresponding previous year. EBITDA stood at INR 155 crores compared with FY '21 of INR 176 crores. ROCE for the business stood at a healthy 27%.

In Q4 FY '22, CFS/ICD vertical reported a revenue of INR 172 crores, registering a growth of 31% year-on-year. EBITDA stood at INR 41 crores, lower by 11% Y-o-Y, and EBITDA margin stood at 23% for the Q4 FY '22.

Going on to the express logistics business, the express logistics business under the [indiscernible] umbrella, subsidiary GKEPL, reported highest ever volume of FY '22. So something building quality infrastructure to drive next stage of growth. For the year FY '22, the revenue stood at INR 1,489 crores as compared to INR 1,300 crores in the FY '21, such registering a growth of 13% Y-o-Y. The market share loss has bottomed, we believe, in Gati, and this revised focus and new management team is in place, we believe it's poised to deliver a turnaround in FY '23.

As Ravi highlighted, we are evaluating various restructuring options this year with our JV partner, and we will keep you updated with the sale.

Contract Logistics and rental and other businesses. The Contract Logistics business successfully diversified across new industry segments like auto, FMCG, pharma to record highest ever revenue and profit growth. The business is under the ACCI umbrella, where Allcargo owns 51% shareholding. ACCI has a custom [indiscernible] business, which is in the process of demerger.

ACCI Contract Logistics business command a higher margin base its market leadership in chemical warehousing. The company provides Grade A customized warehousing solutions, managing almost 5 million square feet. The ACCI witnessed a 49% growth in revenue and a 42% EBITDA growth.

Under the Process & Engineering Solutions business, which would be now Engineering Solution, as you're aware that we are hiving off the project business, we have been constantly reducing the capital employed. We are doing it with the nonproductive crane, and we're bringing -- I mean, retaining only the very productive cranes. So with that, there has been an improvement in the EBITDA margin. And at the exit level, the crane utilization -- the equipment utilization stood at a record of 98% levels.

We have been consistently providing other key comparative performance indicators in our investor presentation. One can refer that for more details.

With this, I would like to open the floor for questions and answers. Thank you.

[Operator]

[Operator Instructions] The first question is from the line of Siddharth Oberoi from Prudent Equity.

[Siddharth Oberoi, analyst]

So in your opening remarks, you had said that the performance was muted due to the China lockdown as well. In China, the Shanghai lockdown started on March 20. So does this affect on the 10-day period -- 10, 11 days period? And that is for then the bottom lasted for the next first quarter as well. So are you expecting a very major impact in volumes in this Q1?

[Ravi Jakhar, executive]

Yes. So I would take that up to share with you, like I mentioned, there has been an impact of lockdown. And Shanghai lockdown has been the most prominent one, which has continued for a longer period of time. There were other minor lockdowns as well in other provinces in China. However, as I also highlighted that the performance has been an extremely positive performance despite all these headwinds, today, the business of EQ worldwide is highly diversified with significant distribution of revenue across all geographies. So while some partial lockdown such as in Shanghai may hamper the growth prospects as the entire global trade sees a little bit of immediate growth, we do not see that 1 geography making a significant impact on the overall volumes. So it will be a contributing factor to limiting the growth as the trade itself slows down out of China. But beyond that, it is not going to have a significant impact as such.

[Siddharth Oberoi, analyst]

All right. Also, Mrs. Parthasarathy was on TV the other day, and then you said that the company is operating at an almost 90% capacity utilization. So I just wanted to know, where do you see the growth coming from for growth? Is this acquisition? Is it going more further into digital or where?

[Ravi Jakhar, executive]

Yes. So let me highlight, there seems to be some confusion. I'll clarify what that number was. The largest business of the company is International Supply Chain, which is completely asset light. It is like Uber shipping. We do not own any ships, but we operate dedicated services. So in fact, we run direct savings at nearly 2,400, 2,500 trade lines, which means that a customer can book on a virtual EQ ship. We might be using underlying capacity from any shipping line, but we operate it like a daily service or every Thursday or every Tuesday, Friday, those kind of services from Busan to Hamburg or New York to [indiscernible]. That's how these services run, and we operate like a shipping line without any underlying capacity.

The comment that you're referring to of 90% of equipment utilization, that was in specific context of the equipment business, which is a noncore business, a small business that we operate. While the business is noncore and that we have continued to reduce the capital employed in that business, we've also ensure that, that business also operates in the most efficient way. And as an outcome of the sustained efforts there, the equipment utilization, which is in the crane segment, which used to be in the 50% and 60% has now come to the 90%. That is the number, which by you are referring to when it comes to equipment utilization, it is not in the context of any of the 4 core businesses that we are talking about. I hope I'm clear.

[Siddharth Oberoi, analyst]

Yes, that is clear. But then generally, how do you see the growth panning out here in this maybe first quarter may be effective because of long term but otherwise? What are the factors that triggers that you're seeing into the acquisition [indiscernible] or just better on the global trade?

[Ravi Jakhar, executive]

Yes. So if you look at the growth that we have been able to showcase in the International Supply Chain business, we have 2 key products. The LCL volumes grew by 18% year-on-year, and the FCL volumes grew 21% year-on-year.

In the FCL, we have had this growth over the last 7 to 8 years, and it is sustainable because we still have a very small share in the market. On the LCL business, while we have the largest market share in the world, we have still been able to grow at very high growth rates driven by digitization initiatives, operating at scale and strategic acquisitions. A combination of all these 3 has allowed us to be operationally most efficient, and it is a business of scale. Ultimately, the profitability and ability to serve customers better depends on how well can we utilize the space in a container because we are executing various cargo shipments into a common container.

So therefore, there is further headroom for increased utilization improvement. There is headroom for growth in market share, driven by higher competitive play. We, today, own about 14% market share in the world in LCL business. And we see opportunity to increase this market share, which means that we can grow faster than the market growth rates.

In here, there could still be some pockets where we are not present or we have relatively lesser presence when we could look at more acquisition opportunities as well in a very strategic way. But if you look at on the organic growth itself, the 2 biggest drivers of global trade today are cross-border farmers with smaller businesses participating more and more with the advent of technology platforms or cross-border trade. And we see e-commerce trade, both which is within the country but being serviced by manufacturing across the border or even the cross-border e-commerce.

So all of these are leading to a further increased growth rate of the LCL business. And this is not over a 3-month or a 6-month or even a 2-year horizon, which has been a sustained trend over several years and is estimated to continue for a very long period of time, wherein the small business cross-border commerce and the e-commerce will continue to drive the global trade growth, leading to a significantly higher LCL trade growth as compared to the overall calendar growth rate, which still is significantly higher than the overall global trade growth for the last 5, 10, 15 or even 20 years.

So there are enough growth opportunities in the market and opportunities for us to continue to differentiate further and grow market share for us. So all the opportunities remain open. We do not see any headroom limitations for growth in the international supply chain business. And in the Express Logistics business in the country, it is among the fastest-growing segments, and Gati has lost significant market share. There is an opportunity to regain that market share by building world-class infrastructure and operating the best-in-class services.

Similar approach on the Contract Logistics side, we have a significant headroom for growth. And in the CFS/ICD business, again, we have witnessed a very robust growth, and we see there are opportunities to expand in other related domains such as Indian government efforts, the ICDs, which we are working on. So these are the factors which have contributed to the growth in the years gone by and would continue to drive the growth in a more efficient way as we use technology to our best advantage.

[Siddharth Oberoi, analyst]

All right. Sir, I have a last question. So the...

[Operator]

Mr. Oberoi, the audio is breaking from your line, sir. Please check.

[Siddharth Oberoi, analyst]

Hello. Can you hear me now?

[Operator]

Yes, sir.

[Siddharth Oberoi, analyst]

Yes. I didn't know about the Blackstone deal. So what is holding back the deal?

[Ravi Jakhar, executive]

I would request my colleague, Deepal, to share an update on the Blackstone transaction.

[Deepal Shah, executive]

Yes. So on the Blackstone deal, as you're aware, when we signed up the deal, back then, the construction was still underway. So most of the warehouses are almost towards completion. And we expect all the approvals and permissions to come in the next couple of months, say, 2 to 3 months, and we should be able to complete with that.

[Ravi Jakhar, executive]

Yes. And just to add to that, there was certain procedures which were beyond our control wherein we were not in a position to offer 2-year guidance, and it was an estimate. However, I'm glad to share that those steps have already been completed now over the last few weeks gone by. And therefore, the time line that we are indicating are more definitive, and we should be able to see the continuation of that transaction in the next 2 to 3 months.

[Operator]

[Operator Instructions] The next question is from the line of [ Prashant Kumar Hazariwala ], individual investor.

[Unknown Attendee]

Congratulations on a good set of numbers. I have 2 questions. First one is that we have seen a tremendous growth year-on-year. So how do you see going ahead? What kind of growth we can expect that all part range -- you can -- what about the CFS/CID numbers, operating margins that came around 7%? So how do we see that set in margin going forward?

The second one is regarding Gati. So is it -- are you planning to delist Gati from here and emerging to the Allcargo? That was my second question.

[Ravi Jakhar, executive]

Yes. So to answer your first question, which is around the growth from here on. As I mentioned, we estimate the top line to grow faster than the underlying market growth rate. The market growth rate is driven by dynamics we do not control, but they are all estimated to be in robust growth rate as estimated by various advisory and research firms. We, as management, are confident of outperforming the market and increasing the market share. That's the extent to which I can share the revenue guidance.

And with all the digital initiatives led about on the back-end operations or on the customer trading touch points, it should allow us to operate more efficiently. And therefore, the cost should also stay in control, which means that there should be an opportunity to grow the bottom line at a faster rate than the top line. So that's the extent to which we have been able to share the guidance. We cannot provide any specific currency numbers. But like I said, we would grow faster than the market and improve the margins, but use digital initiatives.

And over the last 2, 3 years, there were a lot of transformational steps undertaken. So therefore, naturally, the growth rates have been significantly exceeding the underlying market growth rates. So this is the kind of guidance I can share for the quarters or the couple of years to follow. The good part here is that all these segments that are high priority segments contributing to almost the entire top line and bottom line are all very well placed for strong growth as an industry as a whole. So therefore, we are well placed as far as the growth is concerned.

Secondly, to respond to your question on Gati, there are no such plans. What we have shared as an update is that the Board has advised to see what is the most rational structure, keeping 2 objectives in mind. One is simplicity and second is to provide the best enablement to the corresponding business to drive its growth. It should have the financial flexibility required. It should have the strategic independence. And in -- with these guidelines from the Board, we as management would explore options along with our joint venture partners there and make recommendations to the Board. And as we move forward in the transaction, we'll keep everyone updated. So that's all we can share on that. Thank you.

[Operator]

Next question is from the line of [ Jatin Shah ] from Abacus Asset Management.

[Unknown Analyst]

Congratulations for a good set of numbers. Just two quick question, if you can help me understand. You kind of mentioned that in our LCL and FCL business, we've grown at 18% and 21%. Our market share is roughly about 14% in this case. Could you just give us some flavor about the competitive scenario in this area and which are the routes or the locations where we see next couple of years where there is a good amount of consolidation is possible so that we can have a relatively better market share and we can grow ahead of call? That is my first question.

And second question, which I have is about the CFS business. Are you -- in one of the slides, you have mentioned about the Jhajjar expansion and all. If you can tell us when this ongoing CapEx is done, how do we see growth happening in this business going forward, please? These are the 2 questions I have.

[Ravi Jakhar, executive]

Sure, sure.So I would provide you a brief commentary on the competitive landscape in the International Supply Chain business. Naturally, it's cargo network business, which requires presence on origin and destination. And there are global networks, which compete with each other. There are few key global operators such as Allcargo EQ Worldwide, which is the world's largest LCL consolidator. The second, we have an American company, which goes by the name of Vanguard. Third is an alliance between 2 companies, Shipco and SACO. And then there is a global network. So there are these 4 global networks, and then there are a large number of small operators confined to a specific geographic region or to a specific country who operate on various trade lanes.

Number of trade lanes that they operate in and number of geographies that they operate in typically is much more limited. No one else has scale completely comparable to us. The nearest competitor would be sitting at about 10% market share. And we have significantly expanded the gap wherein at one point in time, we were #2. We crossed the #1. And every year, we continue to expand the gap by growing faster than the market.

The competitive landscape is such that customers require service, and they require a wider presence as well, which means that an exporter shipping to multiple destinations may not call to operate with different logistics partners directly or indirectly. And therefore, companies which have a global footprint tend to benefit. It is for this reason why some of the well-established regional players who are part of other global networks are also strategically aligned to seek cooperation with EQ worldwide. It was in this direction that we identified as strategic opportunity and pursue it for a good couple of years to ensure that it was the right fit, and it was not -- and this is something, which we went in with an ambition to achieve our market supplements in the Scandinavian region.

And because of the strong global network and the footprint and the way we have been modernizing our infrastructure and digitizing our customer touch points, we were able to convince Nordicon to get acquired form the joint venture, which acquired all the businesses across all 4 countries. This is a testament to the fact that EQ worldwide operates the world's strongest LCL network.

Now as this happened, this company was operating with a competing network and as we acquired this in the month of July last year, effectively from November onwards, those volumes also started coming into our offices across the world. So these are the kind of -- I'm just giving you a flavor since you asked for it in terms of how our capabilities on the digital side and the scale at which we operate allows us to strategically target entities to acquire. And also within the organic landscape, we are able to offer customers far to be of service by having both reach and the service capabilities. The number of trade lanes that we operate perhaps far exceed even the majority of the world's largest shipping lines. That's the scale at which we operate in terms of offering fixed committed departures across the sailings and across the world. So that's what allows the platform to continue to drive growth on the International Supply Chain business.

Speaking on the CFS side, you asked about the expansion plans into the ICD side. So naturally, the container terminals in the country require extended arms to manage the container throughput in an efficient way. And we are glad that the country has had the CFS ecosystem, which allowed the ports to remain fully operational without any compromise on the functionality like what we have seen in the most developed economies of the world as well facing significant port congestion because of evacuation challenges. So we saw how CFS infrastructure plays a critical role in the container logistics of the country, which is poised for significant growth on the back of increased consumption as well as export growth driven by various government initiatives and the private enterprise efforts.

Now as we move beyond the CFS business, where we already cover all the key container [indiscernible] in the country, the biggest opportunity lies in the ICD business, which is going to go through a paradigm shift with the dedicated freight corridor becoming fully operational. The speed at which the rates move would significantly improve to more than double and with the lens also doubling with [indiscernible] and high-speed double-stack electrified track becoming operational, rail logistics will become significantly more competitive than it has ever been in the country, and that should lead to a conversion back from the road traffic to rail traffic. And we intend to benefit from that shift by strategically placing our assets in connectivity with the dedicated freight corridor.

We expect the DFC, the first major [ SNB ] fully operational by end of the next year. And there is a time line that we should also look at aligning our ICD development chart here. And we continue to evaluate other such opportunities where we stand to benefit from the dedicated freight corridor, and we can contribute to the efficiencies and service levels in the trade, primarily for the EXIM cargo and for the domestic cargo as well. So that's the opportunity ahead of us.

And as we have seen, the government has committed to more dedicated freight corridors being set up across the country, as these get set up, we also estimate that the older railway track with line -- with connected Logistics Park may not be as competitive enough as compared to new logistics parts being set up or some of the old ones, which will connect to be the real freight corridor as well. So Allcargo are scaring the dominant business is to explore the ICD business completely aligned with the new edge infrastructure and for already freight corridors. And then there is ledger the first one, which is already work in the progress, and we will evaluate other options as well. I hope that answers your questions.

[Unknown Analyst]

Yes, yes, yes. I just would like to collect amazing answer. Just can I ask a couple of small clarification, please, if you don't mind?

[Ravi Jakhar, executive]

Yes. Please go ahead.

[Unknown Analyst]

Yes. Yes. So just one quick thing, when you spoke about the opportunity, EQ worldwide and the market share gain in a few of the opportunity, can you just tell us the acquisition which we did in the last couple of years? How does that shaped up in terms of integration? What is that?

And second, in terms of our digitization of the entire business model, there is some mention of that in our PPT. But if you can explain in terms of percentage, where we read them, in what time frame you think we'll be like 100% completely digitized so that we can take an advantage and improve our efficiency dramatically in this business. That's my question, please.

[Ravi Jakhar, executive]

Yes. Something like I mentioned some time back, the digitization has significantly improved. It used to be about under 10% a few years ago, and it is already near 60% for all export bookings. So digitalization initiatives have been going very well. And then as far as the acquisitions are concerned, our joint venture in Korea has performed exceedingly well. It was a fresh business, and we have been able to significantly scale it up, making it among the top 10 performing countries across the world.

On the Nordicon acquisition, the base on which we had acquired the company, the company has more than doubled its profit post integration with the EQ Worldwide network with all the -- and there are clear indicators driving, be it in terms of continued utilization, conversion to more efficient 40-foot containers, more direct trade links. All of the things which we are strategically planning for through this acquisition has been achieved and which is what has led to a very robust performance in that acquisition.

[Deepal Shah, executive]

Just Ravi, to add. So if you see the history of Allcargo for that matter, EQ also, there has been a fair amount of inorganic growth over the last few years, starting from U.S., China, some in Europe and all. So all along, we have been fairly -- done this fairly well in terms of the integration and growth for all of the acquisitions that we've done and more so the recent ones as well. So I don't think so from an integration perspective, there are any challenges across any of these acquisitions.

[Operator]

The next question is from the line of [ Akshay ] from Envision Capital.

[Unknown Analyst]

Sir, just wanted to know that Sweden and Finland have recently announced their decision to join NATO. So how would this impact us? And any, what we can say, negatives which we can see from this development?

[Ravi Jakhar, executive]

We do not see any impact of this on our business. We are -- we do not hold any expertise in geopolitical matter. But with the limited knowledge, even Mr. Putin has remarked that he does not have any objections to Sweden and Poland joining NATO. So beyond that, we are not in a position to comment any further understanding from both our local offices and from what we learned from our economic advisers and experts on geological matter that we read about and listen to. It does not appear that it should have any impact on the trade disruptions in those regions, and therefore is unlikely to have an impact on our business either.

[Unknown Analyst]

Okay. What would be our revenues coming from those areas?

[Ravi Jakhar, executive]

So I would not be able to share the exact percentage breakdown for each countries. But it would be one of the top 10 regions, all 4 put together.

And if you look at the latest, if you look at the state of the business, like I said -- mentioned earlier as well, that is what allows us to kind of mitigate some of these regional geopolitical situation is that, today, we have almost 20% coming in from Europe, almost 15% are coming from Americas, 25% of our business comes from Indian Succoth Middle East and Africa and about 35%, 40% comes from the APAC region. So it's a very well-diversified trade flow that we manage under the EQ worldwide network.

[Unknown Analyst]

Okay. That's great. Also, sir, you did mention about dedicated freight corridors and increasing what we can say, trust of the government on these corridors. Recently, there was a news regarding railways is considering scrapping up of some dedicated freight corridors already and existing the -- expanding the existing lines. So any development regarding that on our business?

[Ravi Jakhar, executive]

So these are extremely long-term projects. I do not see them having an impact in the short to medium term. If you look at the history of the western freight corridor, it has taken almost a decade for it to come from policy to execution. So these are going to be structurally advantageous long-term infrastructure initiatives for the country. But in the short to medium term, which is if I look at the next year or next 3 years horizon, I would say most of the development would still be focused on the first phase of freight corridor, which is the EXIM Western and Eastern BFCs, which are going to be operational -- fully operational soon.

[Unknown Analyst]

Okay. That's good because government was facing a lot of acquisition problems in these corridors. So that's the reason they were planning to scrap these things.

[Ravi Jakhar, executive]

Yes. So like I said, these are -- these have always been long-term infrastructure projects, which have always taken time. There have been many acquisition issues. So which is why, as far as we as a company are concerned, we tend to focus on things which are in our control. And therefore, it's a huge opportunity coming our way as a country by making full use of the Western dedicated freight corridors as it becomes fully operational. And if you look at that, NCR is the biggest origin in that cargo route as well. So which is where we are focused on that, and we are building up the Logistics Park with ICD capabilities in Jhajjar. And we would keep our focus on the soon-to-be operation logistics corridors rather than the ones which are in the pipeline or in the policy level.

[Operator]

The next question is from the line of Harsh Jhanwar from Centrum PMS.

[Harsh Jhanwar, analyst]

So we are considering merging our Contract Logistics business with the Express Logistics. So if you could help us understand conceptually how these 2 businesses are co-aligned and what are synergy benefits you can get in terms of network optimization, that would be helpful.

[Ravi Jakhar, executive]

Yes. So at this point in time, like I mentioned earlier, we are evaluating various options involving our Express Logistics, Contract Logistics, e-commerce and other businesses underlying the GKEPL and -- at Allcargo. We are in a very preliminary evaluation stage and discussion with joint venture partners. Deepal, can you provide more color on this at a more definitive stage?

[Deepal Shah, executive]

So just to add, I think Ravi what he's trying to say is that how is it aligned. So basically, if you look at our business segments, there's an International Supply Chain business, which is international. The Contract Logistics, the Warehousing and Distribution business, the Express are of both domestic businesses, and they're aligned. So that's the reason it typically makes sense that both of them set together. So that's the logic of the business we've been thinking about being it together.

[Harsh Jhanwar, analyst]

I was trying to understand what are benefits it could possibly have if we go -- if we decide to go ahead with that.

[Deepal Shah, executive]

So from an industry perspective, the Contract Logistics business has extended arm of express distribution for its warehouse and the distribution. Whilst we provide the Contract Logistics on the warehouses and one of the businesses, the express distribution business is handled by Gati. So that's the kind of interplay between the 2 businesses.

[Ravi Jakhar, executive]

So there are opportunities, as we mentioned, which we are evaluating the opportunities on the network optimization as both businesses and Pan-India footprint. There are opportunities on the client servicing models as both get to the same set of customers seeking diversified logistics services. And there are a multitude of synergies, which we are exploring in arriving at what's the right structure, whether to keep them separate or merged or look at some of the restructuring options. And there are multiple options to that, which we'll evaluate in when we come back at an appropriate time.

[Harsh Jhanwar, analyst]

Okay, sir. And my second question was regarding the freight rates in our MTO business. So now that supply side issues are normalizing, it seems from June, July as China opens up again, so how do you see the freight rates going forward in medium term?

[Ravi Jakhar, executive]

So we believe that as the China lockdown ease and it opens up, there could be a short term spike in the freight rates, driven by significant demand in the short term, which is the next couple of months. In the medium term, which is, say, next 6 to 12 months, we believe the freight rates to be largely stable. And in a 12 to -- and maybe marginally declined as they normalize with increased efficiency in the trade flows with some of the congestion issues being resolved, we believe that there could be a marginal decline on the freight rates. But in the immediate term and China immediate term, there could be an upward spike in which could then normalize over the coming months. That's the broad estimate we have.

[Operator]

The next question is from the line of Jatin Shah from Abacus Asset Management.

[Unknown Analyst]

Sorry, Ravi, just one small question in this ICD business. Could you just give us some flavor that on this DFC gets completely operational clear down the line, what kind of volume growth is possible from what it is today versus what it can be in the next 3- to 4-year time horizon? I'm not talking about -- I'm talking about, in general, the growth of the volume potential.

[Ravi Jakhar, executive]

So basically, there are 2 categories of cargo. One is the EXIM cargo and second is the domestic cargo. As far as the EXIM cargo is concerned, there could be an additional shift of about maybe a plus 5% to plus 7% really broad level estimates. I'm sharing based on our -- or rather my understanding on this, which could be a further shift towards the rail business.

What would be the key thing would be that within the rail business today also is coming on the old rail network coming through the network of ICDs. But as the DFC becomes operational, the state will become far more efficient. It will arrive in a much more timely manner. The same inventory could be utilized. So therefore, it may be -- a significant development on the EXIM side would be in terms of improvement in efficiencies, in terms of time as well as the cost of transport as we get more rationalized.

On the domestic side, over the last 3 decades, really used to be the primary carrier of domestic railway, which shifted to road over the past 3 to 4 decades in a consistent way over the next 5 to 7 years. So with a good network of Logistics Parks, driven government policy incentives and private operators coming together. There could be a potential opportunity of an up to 8% to 10% shift back from rail to road in terms of the share of [indiscernible] on the domestic side. Then the high-level ballpark estimates, which I would say are a significant impact on the reversal of trade flow from road to rail.

[Operator]

The next question is from the line of Vipul Shah from RW Equity.

[Vipul Shah, analyst]

I have two questions. First is sometime last year, we had announced that we had appointed Jefferies to advisers on the ECU business. So just wanted to understand where are we in terms of that process?

And the second question is on the NCLT on the scheme of arrangement, I believe the stock exchanges gave us the NOC sometime in the last week of March. And now we are very close to entering the month of June. So have we actually -- I believe the next step would be making an application to the NCLT. So have we made that and where are we in the process?

[Ravi Jakhar, executive]

Yes. So on the NCLT process, basically, we have got the NOCs from the exchange, and there were a couple of further updates which have gone back and forth. And we estimate the process to conclude in another week to 10 days. And then the next step, as you rightly said, is to file the scheme with NCLT, which should happen subsequently. And then from there on, if you take about 9 to 11 months, that's the broad estimate that we have. So that's as far as the NCD is concerned.

And yes, we had appointed Jefferies as an adviser, to explore the landscape and the opportunities that exist. And also while we appointed Jefferies to evaluate the opportunity on the fundraise side, we also continue to evaluate our own requirements in terms of the acquisition of growth and strategic partnerships. It was an appointment, which has been made, and it's been at a very preliminary stage in terms of exploring the landscape. There are no significant updates on that to share at this point in time. And we would perhaps share updates as we progress in any direction on that. At this point in time, I'll not be able to share anything significant on that.

[Vipul Shah, analyst]

So are we to consider that the potential Jefferies mandate is right now on hold, and we will pursue anyway the growth, which we have shown which is phenomenal. So we will pursue our own strategy or are we still engaged with Jefferies?

[Ravi Jakhar, executive]

Yes. I wouldn't say it's on hold. I would say we continue to evaluate our strategic capabilities and opportunities. Naturally, we have been able to successfully perform on the 2 acquisitions, which have witnessed significant growth, which we did in the last 2 years in the international business, which is where Jefferies has been acting as an adviser. And we've been able to also grow the business significantly, therefore, both these acquisitions are under funded through internal accruals without having to increase the debt in that sense. And therefore, there is an ability to drive some of the acquisition opportunities in -- through the internal approvals.

There are also opportunities to continue to affect top talent across the world, which we have seen in the last 12 months as well, which is also helping us drive the organic growth across various key markets. So they continue to be our advisers, and we evaluate the funding options among other strategic priorities that we have and we'll do what is in the best of the business, and we'll share update at an appropriate time.

[Operator]

Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing comments.

[Ravi Jakhar, executive]

Yes, thanks. Thank you all for joining. On behalf of myself and my colleague, Deepal. I would like to thank you for taking the time out and learning about the company and asking relevant questions. We are thankful for your participation on this call. And as management, we are committed to sustaining this growth momentum and will continue to work towards it and keep you updated on any strategic decisions or initiatives that we undertake for boosting the growth of the company. Thank you very much.

[Deepal Shah, executive]

Thank you.

[Operator]

Thank you. Ladies and gentlemen, on behalf of PhillipCapital India Pvt. Ltd., that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.