Best CEOs: How Shashi Kiran Shetty wants to make Allcargo India's preeminent logistics player

As a young boy in his early twenties, things that fascinated Shashi Kiran Shetty were quite out of the ordinary. From the bustling sounds of containers being loaded onto cargo ships to the salty seaside breeze that filled his lungs and the endless splashes of water stretched out before him, all of it held him in thrall. And soon after leaving his home town of Bantwal in Karnataka for Mumbai in 1978, Shetty realised that his calling was in the shipping industry. By then, he knew that he would strive hard to make his dream a reality. And today, that dream has grown into a business worth some $2.5 billion.

“Looking at the enormity, the process of unloading ships, the movement of goods from one place to another—ocean transportation was an adventure in itself. You have to go through that loneliness, those choppy waters and navigational channels. Everything was very fascinating, and I fell in love with it,” says Shetty, the 66-year-old Founder and Chairman of Allcargo Logistics, the winner in the Transport & Logistics category of the BT-PwC India’s Best CEOs ranking this year.

Shetty credits his confidence in the India story and the requirements of efficient transportation in the country, for the phenomenal growth of his business. “The services side was not very sophisticated, while the shipping side was well developed. There was no middle ground; that’s where I fitted in. I was kind of a bridge between the two,” he says, adding that entering the less-than-container load (LCL) segment immediately gave his business a national scope. “Within one-two years, it gave me an opportunity to establish 20-plus offices across the country,” he adds.

Allcargo’s growth has been gradual, though. It started small in the early 2000s, when foreign funds started flowing into India. It sold 6 per cent of its stake to the US-based New Vernon Wealth Management to raise $12 million. “We used that money to buy shares in our Belgian partner (ECU Worldwide). That’s how we became five times the size. But it was very challenging; we had never managed a multicultural organisation like this. Soon after, we expanded to 60 countries,” Shetty recalls.

While no growth is possible without taking bold decisions at the right time, Shetty believes one’s ability to manage risks plays a vital role in running a business. “We set up our container freight station business when there was nobody else. We were the first ones to set it up in the middle of a thousand acres,” he says. Ravi Jakhar, the company’s Chief Strategy Officer, attests to Shetty’s risk-taking appetite. Describing him as an enterprising first-generation entrepreneur, Jakhar says, “This is a living organisation that breathes his values of foresight and scale”.

Currently, Allcargo is in the midst of transforming the way it does business. And the past four years have been pivotal in this journey as the company has kicked off a demerger and sold off various businesses, among other changes. “We have transformed the entire business landscape, starting from the shareholder perspective… invested in a new business like Gati; also acquired outside India on the corporate side; and on the business side, the biggest change has been digitisation,” Jakhar explains.

For Shetty, both his strengths and weaknesses stem from his impatience. “The shortest thing you have is the bandwidth; that has to be dealt with. I ask a lot of questions and try to get things done quickly,” he says. That is why Shetty is quick to headline the company’s digital-driven transformation. “In LCL, we have almost 63 per cent of our cargo booked online; significantly ahead of competition. Our financial accounting systems are also being standardised,” Jakhar says. The concept of playing at scale also comes directly from the leader. “We won’t continue in a business if it’s not scaleable enough. We don’t want to be No. 4 in any business. That’s very clear in how we operate and it leads to cost advantages,” he adds.

One of the things that Shetty learnt early on in life was to not run a business on too much debt. Having built the business with some Rs 20,000, when he saw debt becoming a cause of major distress, he developed a theory of only going for optimal leverage. “This is the reason why we’ve been able to grow faster than the market. Both scale and growth don’t come together unless you’re doing something right,” he says.

For now, the task at hand for Allcargo is to integrate its multiple businesses. And there are plenty of challenges. For instance, in the domestic market, Allcargo’s Gati competes with Safeexpress, TCIEXPRESS, Blue Dart Express and Spoton Logistics (a Delhivery company). Globally, there are Vanguard Logistics, Alliance Logistics, etc., and in warehousing inventory management, there are Mahindra Logictics, Venus Container Line Logistics, Toll Logistics, etc. “Different players are focussing on small niches, but we’re present across platforms. Now with digitisation, we will have a super-app like platform to integrate all our functions,” Jakhar says. “The company has grown through multiple acquisitions, but in some sense, they aren’t truly integrated.” So far, Allcargo has done about 18 deals. “Acquisitions are always strategy-led for us.”

But today, Shetty’s biggest challenge comes from start-ups which, he believes, is easy to handle on the back of digitisation. “Our business is all about density and creating a network globally. Anyone who wants to start today will have to lay down a billion dollars to reach that level. Internationally there’s no competition; on the domestic side, there may be a time when they [start-ups] try to disrupt us, but we will try to build what they have and integrate it with our legacy organisation,” Shetty explains.

Aiming to be among the Top 10 integrated logistics players globally, Shetty has ambitious plans. And although his strategy lieutenant Jakhar concedes that it’s a bold statement for a market leader to make, he confidently says, “Next three years are all about executing our strategies, which includes global diversification and domestic becoming a much larger part of our business.”

For Shetty, his favourite sport golf—that he picked up 25 years ago—is full of life lessons. He believes that his ability to be competitive, strategy-led, detail-oriented and consistent will not only guide him on the greens, but in the ocean of business as well.

@PLidhoo