Mahindra Logistics Ltd IPO............. Should you apply????

Hello friends

A new month and fresh supply of IPOs are starting. Let’s get you the front row tickets to the premier as it’s gonna be amazing this month as well. The one we are going to talk about today is Mahindra Logistics Ltd from the house of Mahindra.



Let’s get to the basics of it.

Particulars
Details
Issue Open Date
31st October 2017
Issue Closing Date
2nd November 2017
Issue Price Band
Rs 425 to Rs 429
Issue Size
Rs 829.36 Crs
Shares per Lot
34 Shares
Face Book
Rs 10/-



About the Company!!!

Mahindra Logistics Ltd is one of India’s largest 3PL solutions providers in the Indian logistics industry which was estimated at Rs 6.40 trillion in Fiscal 2017, according to the CRISIL Report. It offers customized and end-to-end logistics solutions and services including transportation and distribution, warehousing, in-factory logistics and value added services to its clients. It operates its SCM business through a pan-India network comprising 24 city offices and over 350 client and operating locations as at May 31, 2017. Mahindra Logistics Ltd has a large network of over 1,000 business partners providing them vehicles, warehouses and the other assets and services for their SCM business. Certain key clients for their SCM business include Volkswagen India Private Limited, Vodafone India Limited, Thermax Limited, JSW Steel Limited, Ashok Leyland Limited, Siemens Limited, Bosch Limited, BMW India Private Limited, 3M India Limited, and Mercedes-Benz India Private Limited.

So surely the company operates in the big leagues.

The Industry!!!

India’s GDP grew at 7.60% in Fiscal 2016, up from 5.60% in Fiscal 2013. India is expected to remain the fastest growing major economy and become the fifth largest economy in the world by Fiscal 2020. (Source: Ministry of Statistics & Programme Implementation, GoI and International Monetary Fund (“IMF”).)

According to Press Information Bureau (“PIB”), as at May 2017, India’s logistics cost as a percentage of GDP is 13-14%. According to the CRISIL Report, the Indian logistics industry comprising segments such as road freight, rail freight, coastal freight, warehousing, cold chain and container freight stations and inland container depots (“CFS/ ICD”) is estimated at Rs 6.4 trillion in Fiscal 2017. This is expected to grow at a CAGR of approximately 13.0% to Rs 9.2 trillion by Fiscal 2020. The industry is dominated by transportation, which accounts for approximately 88%, and its share is expected to remain high over the next 3-4 years.

Utilization of Funds!!!

The issue is purely and offer for sale and therefore the company will not get any money from the issue.





Financials!!!

Now let’s dive into the most important factor. The financials! The company has opted to give past 3 years financials in IND AS format and the prior 2 years in IGAAP format. For simplicity and better comparison I am considering only the 3 years financials in IND AS.

1.       The company’s consolidated total Equity attributable to the shareholders has grown from Rs 268.15 Crs as on 31.03.2015 to Rs 352.44 Crs as on 31.03.2017.

2.       The company’s consolidated  noncurrent liabilities are hardly 10 percent of its networth as on 31.03.2017 at Rs 32.87 Crs

3.       The company’s consolidated working capital high in both ends leading to say that working capital management is difficult in this industry. However the company is able to manage at trade payables of Rs 385.83 Crs and trade receivables of Rs 412.08 Crs as on 31.03.2017.

4.       The company on consolidated basis has doesn’t have much invested in fixed assets. It’s PPE as on 31.03.2017 stands at Rs 55.95 Crs. Its current investments are at Rs 58.04 Crs.

5.       The company’s consolidated revenue has increased from Rs 1939.56 Crs in FY 2014-15 to Rs 2676.25 Crs in FY 2016-17.

6.       Consolidated Profit of the company has also increased from Rs 38.42 Crs in FY 2014-15 to Rs 45.65 Crs in FY 2016-17. Now comparing to the revenue, that’s not even 5%. Which clearly indicates that the industry and the companies are pretty much in troubled waters. Comparatively Allcargo Logistics is doing pretty well.

Valuation!!!

The share is priced at Rs 425 to Rs 429 with a face value of Rs 10/- Now the EPS of the company on a standalone basis for FY 2016-17 is Rs 6.58 basic and diluted. So on basic the PE would be around 65. Now Allcargo Logistics has a EPS of Rs 4.24 in FY 2016-17 and is trading at Rs 168. That’s a PE of 40. VRL Logistics has a EPS of Rs 7.72 and is trading at Rs 351. That’s a PE of 45. With this the issue seems to be overvalued. Then again its brand name Mahindra. Little premium over other brands can be considered.

Therefore I would say you can avoid it for now. Can pick it up later on from market depending on its performance.

Thanks for joining us friends.

Keep learning!!!! Enjoy investing!!!!

-          RicherInvestor




-Written by Roger Vins (CA, MCom)



Disclosures:

The author or any person at RicherInvestor doesn't have any financial interest in the Company.

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