Mahindra Logistics IPO Details and Review

October 28, 2017

  1. About Mahindra Logistics Limited
  2. Business Operations of Mahindra Logistics Limited
  3. Key Strengths of Mahindra Logistics Limited
  4. Promoters of Mahindra Logistics Limited
  5. Financial Highlights or Financial Performance of Mahindra Logistics
  6. Mahindra Logistics Limited IPO Details
  7. Objective of IPO
  8. Risks for investors in Mahindra Logistics Limited

About Mahindra Logistics Limited

Mahindra Logistics was incorporated in August, 2007 under the promoter Mahindra and Mahindra Limited. Mahindra logistics is a leading supply chain and people transport solution provider in several industries segment. Since September 2008, complete logistics business was transferred to Mahindra logistics under business transfer agreement signed between Maiandra Logistics and its promoter.

Mahindra Logistics has subsidiaries are namely 2×2 Logistics Private Limited and Lords Freight (India) Private Limited. These subsidiaries provide transportation and freight forwarding solution to different industry segments.

Business Operations of Mahindra Logistics Limited

Mahindra Logistics has key segments of business in providing Logistics solutions,warehousing,freight forwarding,transport solutions,in-factory logistics; value added service and services related to supply chain management. The company specializes in providing customized and integrated third party supply chain and people transport solutions. The company also serves multiple industries with adoption of right form of technology. The major technologies adopted by Mahindra Logistics are Warehouse Management System, Transport Management System and Control Tower.

The business verticals served by Mahindra Logistics are Auto & Engineering, eCommerce, consumer & pharma, transport solutions, bulk, auto bound etc.

Key Strengths of Mahindra Logistics Limited

• Mahindra Logistics caters multiple industry segments with their customized and technology integrated logistics solution.
• Mahindra Logistics has a huge support for its brand by Mahindra Group.
• Mahindra Logistics has “asset-light” business model that offers a greater flexibility and higher scalability in business operations ultimately maximizing the capital efficiency.
• Mahindra logistics has widened business relationships with non-Mahindra Group clients globally.
• Mahindra Logistics has greater focus towards enhancement in technology.
• The Company has strong, experienced and domain experts leadership team for better management of the business operations.

Promoters of Mahindra Logistics Limited

The Promoters of Mahindra Logistics is Mahindra and Mahindra Limited.

Financial Performance of Mahindra Logistics

The following table gives a summary of key financial highlights over the period of 2015 – 2017.

The above table illustrates a rapid increase in Total Asset over the period 2015 to 2017 where the Total Revenue and Profit after tax also significantly increase over the same period of years.

In financial year 2016–2017, the revenue reported by Mahindra Logistics is 28% up from the previous financial years along with 28% increase in net profit compared to previous financial year.

Mahindra Logistics Limited IPO Details

Objective of IPO –Mahindra Logistics shall not get any proceeds from the offer as company shall get all the proceeds by selling shareholders .The objective of Mahindra Logistics Limited are following –
1. To drive the advantages of listing the Equity Shares on the Stock Exchanges and
2. For the Offer for Sale.

Issue Open Dates31th October, 2017 (Tuesday) – 2nd November, 2017 (Thursday)
Face ValueRs 10 per Equity Share
Issue PriceRs 425 – Rs 429 per Equity share
Market Lot Size34 Shares
1 Lot Investment RangeRs. 14,450 – Rs. 14,586
Listing atBSE and NSE
Type of the IssueBook Built Issue IPO
Size of Issue19,332,346 Equity Shares of Rs 10 aggregating up to Rs 829.36 Cr
• Offer for Sale of 19,332,346 Equity Shares of Rs 10
Key Business Segments for RevenueSupply Chain Management (SCM) & People Transport Solutions (PTS) business accounts for 88.94% and 11.06% respectively.
Promoter of Mahindra LogisticsMahindra & Mahindra Limited
Finalization of Basis of Allotment (Tentative)08th November, 2017
Initiation of Refunds (Tentative)09th November, 2017
Credit of Shares to DEMAT Account (Tentative)09th November, 2017
Commencement of Trading (Tentative)10th November, 2017

Kotak Mahindra Capital Co. Ltd and Axis Capital have been appointed to manage the sale of shares.

Risks for investors in Mahindra Logistics Limited

Following are some the risks stated by the brokerage houses –
• Mahindra Logistics has generated low margin of 1.7% to 2.1% in the last 3 years.
• Mahindra Logistics has limited number of clients, therefore has a high risk due to dependency on client concentration.
• The business operations of Mahindra Logistics are highly depended on the performance of business under parent company Mahindra Group.
• The operations of Mahindra Logistics are also dependent on technology application. Any disruption in technology support may severely hamper the operations of Mahindra Logistics.

Is it Worth to invest in Mahindra Logistics IPO

On upper price band of Rs.429, with EPS of Rs. 6.7 in FY17, company’s price earnings works out to 64x. We see that this P/E ratio is very high.

Company’s Return on Net Worth was 15.19% in FY15 which decreased to 12.84% in FY17. As there are no listed peers for the company, the issue price cannot be compared to ascertain the value.

This company revenue grew at 17% CAGR in the last 3 years. But the profit margin are only thin of 1.7% to 2.1% only. The asking price of Rs.429 is 64 times of the earn per share. So we consider this valuation is higher side.

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