VRL Logistics Ltd (VLL) is coming out with an initial public offering (IPO) of 2.28-2.31 crore equity shares of face value of Rs10 each. Post-issue, the shareholding of the promoters in the company will fall to 69.3-69.6% from the current holding of 77.2%.
The issue is priced at Rs195-205 per share and the company intends to raise Rs451-468 crore which comprises a fresh issue of Rs117 crore and an offer for sale from New Silk Route and the promoters aggregating Rs334-351 crore. The company plans to use the net proceeds (Rs117 crore) to purchase goods transportation vehicles (Rs67 crore) and repay debt (Rs28 crore).
At the upper price band of Rs205, the company is priced at an enterprise value/earnings before interest, tax, depreciation and amortisation of 10.7x FY2014 earnings and at a price/earnings multiple of 37.1x FY2014 earnings (19.6x FY2015 annualised earnings).
The issue is priced at Rs195-205 per share and the company intends to raise Rs451-468 crore which comprises a fresh issue of Rs117 crore and an offer for sale from New Silk Route and the promoters aggregating Rs334-351 crore. The company plans to use the net proceeds (Rs117 crore) to purchase goods transportation vehicles (Rs67 crore) and repay debt (Rs28 crore).
At the upper price band of Rs205, the company is priced at an enterprise value/earnings before interest, tax, depreciation and amortisation of 10.7x FY2014 earnings and at a price/earnings multiple of 37.1x FY2014 earnings (19.6x FY2015 annualised earnings).
Considering company’s strong track record, good promoter pedigree, focus on operational efficiencies on increasing size and improving macro environment for road-freight transport, the growth prospects look promising and leave scope for an upside.
IPO details
Issue opens: April 15, 2015
Issue closes: April 17, 2015
Issue size: Rs451-468 crore
Offer size: 2.28-2.31 crore shares
Face value: Rs10
Issue to public: 2.28-2.31 crore shares
QIB portion: 50% of issue
Non-institution portion: 15% of issue
Retail portion: 35% of issue
Price band: Rs195-205 per share
Positives
VLL has almost four decades of experience in providing surface logistics and parcel delivery services. The company owns and operates one of the largest fleets of 3,546 commercial vehicles catering to 28 states and four union territories across India.
The company’s servicing and maintenance operations are undertaken at its workshop in Hubballi, Karnataka with several dedicated satellite workshops in strategic locations across India. VLL’s in-house technologies can be gauged from the fact that it has developed software applications to track service and space replacements and installed an enterprise resource planning system to monitor
consignments on a real-time basis.
VLL has been able to increase its revenue and net profit at a compounded annual growth rate (CAGR) of 20.44% and 18.75% respectively over the period FY2010-14. The company’s return ratios are healthy with return on equity (RoE) of 18.65% and return on capital employed (RoCE) of12.4% for FY2014.
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| CMD Mr. Vijay Sankeshwar |
The management team is led by the chairman and managing director, Mr Sankeshwar, who has about four decades of experience in the industry. The industry experience of the senior management has enabled the company to develop a large network of offices, branches and transshipment hubs, and strong relationships with drivers, thereby helping it develop a brand name.
Risks
Fuel costs, toll charges and rent represent the most significant operating costs and an increase in such costs or the company’s inability to pass on a cost increase to its customers can adversely affect its operations.
Events like political unrest, bad weather conditions, regional disturbances, calamities etc can affect the company’s financials as was witnessed in FY2014 on account of political unrest in Andhra Pradesh.
The company operates in an unorganised and highly competitive industry which can pressurise the revenue and operating profit margin, and may result in a loss of market share.
Disclaimer
This document is for information and illustrative purposes only and does not purport to show actual results. It is not, and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.
