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Mahindra Logistics IPO Review – Details,Opening Date, Issue Price, Allotment Status, Listing

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Mahindra Logistics is one of India largest 3PL solutions providers in the Indian logistics industry.  Mahindra’s  logistics arm that provides warehousing, distribution and transportation solutions.

Issue Details of Mahindra Logistics IPO:   

  • IPO Open:  31st Oct – 2nd Nov 2017
  • Issue Price band: Rs 425 – 429
  • Issue Size:  Rs 830 crore
  • Market lot:   34 shares
  • Minimum Investment:  14586 (Rs 429 per share)
  • Max Investment for Retail Investor – 442 shares
  • Book Running Lead Managers:   Axis Capital
  • Registrar: Link Intime
  • Listing: BSE/NSE
  • Download – Mahindra Logistics IPO Red Herring Prospectus

Mahindra Logistics IPO Grey market Premium :

  • 22.10.2017 GMP Rs 135 – Rs 145 per equity share
  • 26.10.2017 GMP Rs 80 – Rs 90 per equity share

IPO Issue Allocation:

  • Qualified institutional buyers (QIBs) – 50% of the offer.
  • Non-institutional bidders –  15% of the offer.
  • Retail individual bidders  – 35% of the offer.

Background:

Mahindra Logistics is one of India’s largest 3PL solutions providers in the Indian logistics industry. Their competitive advantage is their asset-light business model pursuant to which assets necessary for their operations such as vehicles and warehouses are owned or provided by a large network of business partners. The company operates in two distinct business segments, supply chain management (SCM) and corporate people transport solutions (PTS).

  • SCM business: they offer customized and end-to-end logistics solutions and services including transportation and distribution, warehousing, in-factory logistics and value added services to our clients. They operate their SCM business through a pan-India network comprising 24 city offices and over 350 client and operating locations as at May 31, 2017. They have a large network of over 1,000 business partners providing us vehicles, warehouses and the other assets and services for SCM business. Key clients for SCM business include Volkswagen India, Vodafone India, Thermax, JSW Steel, Ashok Leyland, Siemens, Bosch, BMW India, 3M India, and Mercedes-Benz India.
  • PTS business: The company provide technology-enabled people transportation solutions and services across India to over 100 domestic and multinational companies operating in the IT, ITeS, business process outsourcing, financial services, consulting and manufacturing industries. It provide services through a fleet of vehicles provided by a large network of over 500 business partners. As at May 31, 2017, we operated our PTS business in 12 cities and over 120 client operating locations across India.
  • SCM and PTS businesses contributed 88.94% and 11.06%, respectively
  • About 54% of the company’s revenue came from Mahindra Group clients.

Top Shareholdings:

The list of the top shareholders of the company and the number of equity shares held by them is as below:

  • Mahindra & Mahindra Limited: 73.19%
  • Normandy: 22.3%

The IPO will see parent Mahindra Group, Normandy Holdings, and private equity firm Kedaara Capital together offloading up to 19.33 million shares, or a 27% stake, 

Objective of the issue:  The objects of the Offer are to achieve the benefits of listing the Equity Shares on the Stock Exchanges and for the Offer for Sale. The Company will not receive any proceeds from the Offer and all the proceeds will be received by the Selling Shareholders, in proportion to the Equity Shares offered by the respective Selling Shareholders as part of the Offer.

Anchor Investors:  One day before the issue.

Financials:

Revenue (in crores) Growth PAT PAT Growth Profit Margin %
2017 2676 28% 46 27% 1.7%
2016 2077 7% 36 -6% 1.7%
2015 1939 38.5 2%
2014 1757 36.6
2013 1535 24.4

The company has long term liabilities of rs 20 crores i.e. the company does not have huge debt. 

EPS for the last 3 years is 6.70 (2017), 5.37 (2016) and 6.6 (2015).  Its weighted average EPS is 6.24

At the issue price of Rs 429, the PE ratio of 64  seems too high.

Valuation as compared to its peers: The company has no comparable listed peers. However, please see details of similar companies:

Similar Companies CMP Market Cap PE Ratio
Navkar Corp 193 2757 32.88
Aegis Logistics 234 7817 65
AllCargo 168 4127 17.61
VRL Logistics 352 3210 41.3
TCI 280 2143
Arshiya 84 1322
Sical Logistics 217 1209 26.7
TCI Express 560 2144 48.7

Brokerage Recommendations: 

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Should you investEven though the company has reputed Mahindra brand, the valuation seems quite high.  The company has very low profit margin (approx 2%) and the askign price is at PE ratio of 64 time, that is too high.

I will personally avoid this IPO primarily because of high valuation.

If you have any queries related to this article or any other personal finance query ( Investment, Taxation etc), please comment below

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The author is a Chartered Accountant and loves to write about Personal Finance, Wealth Management, Taxation etc. Disclaimer - The articles on this website is for informational and knowledge purposes and should not be treated as financial advice, Please consult your financial advisor before taking any investment decision.

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