ADAG makes first move for DTDC-Gati alliance

BANGALORE: Anil Dhirubhai Ambani Group (ADAG) is looking for a game-changing deal in the logistics space. Reliance Capital has initiated early moves for M&A involving DTDC Courier & Cargo, in which it holds 44% stake, and Gati, the listed cargo player controlled by Mahendra Agarwal.

According to sources, Gati was on the radar as Reliance Capital was aggressively pursuing deals in the logistics industry, especially in the cargo segment, through DTDC. Reliance Capital could even look at an audacious Rs 800-900 crore ‘reverse takeover’ of Gati by partly leveraging on the DTDC balance sheet, they said.

However, Mahendra Agarwal, MD & CEO, Gati, told ET, “Gati is not up for sale and is only looking to give up a minority stake.” Declining to name any particular suitors, Mr Agarwal said, “Gati is in an expansion mode and we have no issues with offloading stake to a suitable partner.”

When contacted, Reliance Capital and Subhasish Chakraborty, CMD, DTDC, denied they are in talks with Mr Agarwal.
Gati’s FY06 turnover stood at Rs 456 crore, while DTDC, a zero-debt entity, reported Rs 150 crore in revenues during the year. The Hyderabad-based Gati, with a current m-cap of around Rs 600 crore, had earlier declined a Rs 500-crore offer from TNT.

Sources are betting on a merger deal between Gati and DTDC if talks move on. If talks succeed, sources said that Reliance Capital would swap shares for an exposure in the latter. “We tend to believe that Reliance Capital is looking at DTDC as a financial investment, and wants to take it into a bigger play,” a source said.

The development is interesting as Gati and the Bangalore-based DTDC have been embroiled in a prolonged legal battle over the use of DTDC brand. Meanwhile, DTDC has also been looking at smaller deals in the courier segment. India’s logistics business is poised for consolidation with big corporate houses and foreign players like GeoPost setting eyes on the growing market opportunity.

Gati, which raised $20 million for Asia Pacific expansion earlier this year, boasts of over 29,000 retail customers, owns 42 warehousing facilities totalling 1m sqft and offers third-party logistics, retail logistics and full supply-chain management.

Gati Asia, currently, provides daily express courier services to customers for their logistics and supply-chain management. The market for logistics, express distribution and integrated freight services in Asia Pacific is pegged at $1 trillion.