On Monday, Mahindra Logistics allocated 57.62 lakh equity shares at Rs. 429 per equity share to 15 anchor investors aggregating to Rs. 247.2 crore. As of 3 pm on Day 2, the issue was fully subscribed, according to NSE data.
Mahindra Logistics Limited, part of Mahindra & Mahindra group, is a third party logistics services provider. Mahindra Logistics was incorporated in 2007 and is one of the largest third-party party logistics solutions providers in India. The company follows an asset light model in which most assets (vehicles and warehouses) are owned /provided by its business partners. The company operates in two business segments": Supply Chain Management (SCM) and corporate People Transport Solutions (PTS). The supply chain management segment offers customized and end-to-end logistics solutions and services including transportation and distribution, warehousing, in-factory logistics and value added services to clients.
In corporate people transport solutions segment, Mahindra Logistics provides technology enabled people transportation solutions and services across India to over 100 domestic and multinational companies operating in the IT, BPOs, KPOs, financial services, consulting and manufacturing industries.
Mahindra Logistics IPO Registrar
Link Intime India is the registrar for Mahindra Logistics IPO.
Mahindra Logistics shares allotment and listing
Finalization of allotment around November 8 and listing on stock exchanges around November 10, according to a note from Aum Capital.
Mahindra Logistics Financials
In FY17, Mahindra Logistics posted net sales of Rs 2,667 crore, growing at a CAGR of around 15 per cent from FY13, according to a note from Angel Broking. In the last few years, Mahindra Logistics has successfully diversified its business and 45 per cent of its revenues are derived by non-Mahindra clients. "The company hired global consultant McKinsey in 2015 to scale up its business, especially that of the non-Mahindra segment and results are clearly visible with the 17.5% top-line CAGR between FY2015-17," says Angel Broking in a note.
On the margins front, company saw margins improving from 2.4 per cent in FY2013 to 2.9 per cent in FY2017. Adjusted for the consultant fees paid to McKinsey, the FY2017 EBITDA o operating margins work out to be 3.6 per cent, indicating a 125 bps appreciation in the EBITDA margins since FY2013. Its adjusted PAT grew at a CAGR of 25 per cent from Rs 24 crore in FY13 to Rs 60 crore in FY17.
Mahindra Logistics IPO - What Brokerages Say
The Indian logistics industry is expected to grow and will benefit from these rising opportunities, says Aum Capital, which has a subscribe rating on the IPO. Mahindra Logistics' focus on enhancements in technology, leveraging on the changing logistics industry dynamics particularly with the implementation of GST regime and exploration in new business opportunities in new industry verticals shows bright prospects in the future, it added.
Domestic brokerage KRChoksey Research also has a subscribe rating on Mahindra Logistics IPO. " In terms of valuation, on the upper price band of Rs 429, the company has been valued at around 65 times FY17 earnings as against 71 times for Blue Dart Express, 34.2 times for Gati Ltd and 54 times for TCI Express," it says. Though valuations look expensive, Mahindra Logistics "plans to support this growth by focusing on increasing business from non-Mahindra Group clients, leveraging the changing industry with the implementation of GST regime with greater focus on warehousing, continuing focus on technology enhancements and diversifying into other industry verticals," the brokerage says.
Another domestic brokerage Angel Broking has a subscribe rating to the issue, based on its growth story, diversification strategy, strong parent repute and post GST attractiveness of the logistics sector.
India's logistics industry is estimated at Rs 6.4 lakh crore in FY2017 and it is expected to grow at a CAGR of 13 per cent to Rs 9.2 lakh crore in FY2020. The logistics industry is dominated by transportation (nearly 88 per cent share of the logistics industry), which is expected to remain high over the next 3-4 years. Large segment of the industry is fragmented, hence dominated by the unorganized players.
The GST is seen as a game changer for the logistics sector. "As the sector is largely fragmented, the share of the unorganized players is very high in this sector. Implementation
of GST will result in most business decisions being focused on supply chain efficiency and not on state-wise tax benefits. Many businesses have already started considering a complete redesign of their supply chain network. This will be a boon to the logistics sector and to the large organized players in the sector," says Angel Broking.
Risk Factors
Mahindra Logistics depends significantly on clients in the automotive industry and is highly dependent on the performance of the automotive industry. A loss of or a significant decrease in business from clients in the automotive industry could adversely affect the business and profitability, says Aum Capital.
The company depends on a limited number of clients, which exposes to a high risk of client concentration, the brokerage adds. Fluctuations in the performance of the industries in which their clients operate may result in a loss of clients, a decrease in the volume of work they undertake or the price at which they offer their services.
