Ashapura Logi NSE SME IPO review (Apply)

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Review By Dilip Davda on July 26, 2024

•    ALL is an integrated logistics company in India providing all related services.
•    Though it posted degrowth in top lines, bottom lines improved for the reported periods.
•    It has created a niche place in the segment with many blue-chip clients.
•    Based on FY24 earnings, the issue appears reasonably priced.
•    Investors may park funds for the medium to long term.

ABOUT COMPANY:
Ashapura Logistics Ltd. (ALL) an integrated logistics company in India, primarily operating in (i) Cargo handling and freight forwarding segment; (ii) Transportation (including project logistics and third-party logistics ("3PL")); (iii) Warehousing and Distribution and (iv) other services (including coastal movement). It has Pan-India operations through network of 9 (Nine) branch offices as of the Date of Red Herring Prospectus.

With over 20 (Twenty) years of operational experience since inception, the company provides differentiated logistics solutions with: (a) Pan-India presence, (b) integrated service offerings, (c) focus on improving service through technology, and (d) large network of vehicle fleet. It relies on an 'asset-based' business model wherein the assets necessary for quality services to customers, such as commercial vehicles, containers and warehouses, are either owned or provided by a network of its business partners on lease basis. Accordingly, it has maintained owned fleet of vehicle along with network of business partners from whom it hires the required vehicles on need basis. Further, its material subsidiary i.e., Jai Ambe Transmovers Private Limited is also engaged in the business of transportation services, having large fleet of owned commercial vehicles. 

As on March 31, 2024, it has maintained owned fleet of 250 of commercial trucks (Comprising 181 trucks of its material subsidiary i.e., Jai Ambe and 69 trucks owned by the company). Access to such large vehicle network enables it to scale business as the demand increases and also cater to large business opportunities. Further, the company also owns 60 containers of 40 TEUs providing edge in its cargo handling business. Its warehouse distribution network comprises of 7 (Seven) warehouses across India situated at prompt locations such as Gujarat, Maharashtra, Karnataka and Tamilnadu.

Additionally, its technology-enabled 'asset-based' business model facilitates the flexibility to develop and offer customized logistics solutions to a diverse set of customers and industries. The company actively promotes a 'technology first' culture with a view to scale the business efficiently and enhance the customer experience. It has developed software (IMPEX) for ease of operations, which trace and track entire operations of cargo handling and transportation segment. 

Further, the company is in the process of development of another software, dedicated to transportation segment. Its primary technological capabilities encompass demand generation, track and trace, fleet operations, pricing control, and vendor ecosystem enablement. As of the date of Red Herring Prospectus, the issuer company have 3 (Three) Subsidiary namely 1) Jai Ambe Transmovers Private Limited, 2) Ashapura Warehousing Private Limited and 3) Amanzi International Private Limited. While Jai Ambe Transmovers Private Limited is engaged only in business of transportation, Ashapura Warehousing Private Limited is primarily engaged in the business of warehouse and distribution and Amanzi International Private Limited is currently engaged in the logistics solutions business. 

The company is certified with ISO 9001:2015 for providing custom clearance and consultation, freight forwarding, supply chain management, warehousing and distribution, surface transportation, cargo handling and 3PL services. Further, it is also accredited various Certificate of Excellence from Container Corporation of India (CONCOR) for its CHA services in various segments including Import, Export and Air cargo services of demonstrating it is an organization which delivers quality products and services to its end users, having direct relationship with reputation, customer satisfaction and long-term success. Its customer list includes Auto mobile, West Paper, Textile and Steel industry. Some of its marquee customers includes like Ford India Private Limited, Piramal Glass Private Limited, TT Steel Services Private Limited and JK Paper Limited. As of June 30, 2024, it had 219 employees on its payroll. The company also engages contract labourers as and when required.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 3657000 equity shares of Rs. 10 each to mobilize Rs. 52.66 cr. at the upper cap. It has announced a price band of Rs. 136 - Rs. 144 per share. The issue opens for subscription on July 30, 2024, and will close on August 01, 2024. The minimum application to be made is for 1000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.98% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, it will utilize Rs. 6.00 cr. for working capital, Rs. 15.02 cr. for purchase of vehicles and equipment, Rs. 16.40 cr. for construction of warehouse at Mundra, and the rest for general corporate purposes. 

The issue is solely lead managed by Beeline Capital Advisors Pvt. Ltd., and KFin Technologies Ltd. is the registrar to the issue. Beeline Group's Spread X Securities Pvt. Ltd. is the market maker for the company. 

Having issued initial equity shares at par value, the company issued further equity shares at a price of Rs. 151 in March 2024.The company also issued bonus shares in the ratio of 3 for 1 in March 2010, and 25 for 1 in February 2024. The average cost of acquisition of shares by the promoters is Rs. 0.10 per share. 

Post-IPO, company's current paid-up equity capital of Rs. 9.90 cr. will stand enhanced to Rs. 13.56 cr. Based on the upper IPO price band, the company is looking for a market cap of Rs. 195.21 cr.  

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a consolidated basis) posted a total income/net profit of Rs. 227.14 cr. / Rs. 7.88 cr. (FY22), Rs. 222.60 cr. / Rs. 9.47 cr. (FY23), Rs. 199.35 cr. / Rs. 12.35 cr. (FY24). 

For the last three fiscals, it has reported an average EPS of Rs. 10.31, and an average RoNW of 19.40%. The issue is priced at a P/BV of 2.18 based on its NAV of Rs. 65.99 as of March 31, 2024, and at a P/BV of 1.66 based on its post-IPO NAV of Rs. 87.03 per share (at the upper cap). 

If we attribute FY24 earnings to its post-IPO fully diluted paid-up capital, then the asking price is at a P/E of 15.81, and based on FY23 earnings, P/E stands at 20.60. 

For the reported periods, the company has posted PAT margins of 3.44% (FY22), 4.26% (FY23), 6.21% (FY24), and RoCE margins of 18.49%, 18.68%, 20.69% respectively for the referred periods. 

DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown S J Logistics as their listed peer. It is trading at a P/E of 33.9 (as of July 26, 2024). However, they are not comparable on an apple-to-apple basis.

MERCHANT BANKER'S TRACK RECORD:
This is the 45th mandate from Beeline Capital in the last three fiscals (including the ongoing one), out of the last 10 listings, all listed with premiums ranging from 7.14% to 386.67% on the date of listing.

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