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 invest: Even 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.