BracePort Logi NSE SME IPO review (Apply)

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Review By Dilip Davda on August 14, 2024

•    The company is primarily an ocean cargo logistics service provider.
•    It also provides value added services like Air Freight, Warehousing facilities, special cargo services etc. 
•    The company posted higher top and bottom lines for FY23 following specialized contracts with higher margins fulfillment.
•    Based on FY24 earnings, the issue appears reasonably priced.
•    Investors may park funds for medium to long term. 

ABOUT COMPANY:
Brace Port Logistics Ltd. (BPLL) is a service-based logistics company primarily engaged in the business of providing Ocean cargo logistics services to clients operating in the various sectors of the economy. It also provides various value-added services like Air Freight, Warehousing facilities, special cargo services such as handling cargo in foreign country and delivery the same in other foreign country and custom clearance services. 

The company along with its group companies and holding company have an extensive network across the globe. It provides services at a worldwide level where it caters for clients across the globe and even provide cross-border shipment facilities as well. Its team comprises of trained and experienced professionals and has had the rich industry expertise of its promoters for more than two decades. 

Its holding company is leading player in air cargo industry in India. BPLL aims is to provide highly optimized and customized supply chain solutions to customers with unified technology systems. It has a strong Pan-India and global network to meet the needs of customers across a wide range of industries including medical supplies and pharma, sports goods, perishables, electronics, consumer durables and automotive etc. Its experienced team can handle all logistics movements using advanced systems and processes to overcome any challenges. The company is flexible in its approach to managing the supply chains effectively, along with the identification of the best routes to move shipments and at best pricing options. It provides services across the globe. As of July 18, 2024, it had 25 employees on its payroll. 

According to the management, perhaps it is the only company that is providing Ro-Ro deals for moving products from one port of origin to other port of destination and has gained ground with more such repeat orders. To site an example, the company moved Ford Motor's automotive products from China to Thailand and has provided vessels to move such cargo from one destination to other destination. The company started its operations in 2021, and in just four years' time, it gained ground and emerged as the niche and most preferred player in logistics services. 

The company posted higher top and bottom lines for FY23 following some special contracts executed by it that were with higher margins. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 3051200 equity shares of Rs. 10 each to mobilize Rs. 24.41 cr. at the upper cap. It has announced a price band of Rs. 76 - Rs. 80 per share. The issue opens for subscription on August 19, 2024, and will close on August 21, 2024. The minimum application to be made is for 1600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 27.00% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, it will utilize Rs. 16.10 cr. for working capital, and the rest for general corporate purposes. 

The issue is solely lead managed by Holani Consultants Pvt. Ltd., and Link Intime India Pvt. Ltd. is the registrar to the issue. Holani Consultants Pvt. Ltd. is also the market maker for the company. 

The company has issued entire initial equity shares at par value. It has also issued bonus shares in the ratio of 10 for 1 in September 2023. The average cost of acquisition of shares by the promoters is Rs. 0.91, and Rs. 13.73 per share. 

Post-IPO, company's current paid-up equity capital of Rs. 8.25 cr. will stand enhanced to Rs. 11.30 cr. Based on the upper IPO price band, the company is looking for a market cap of Rs. 90.41 cr.  

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 54.20 cr. / Rs. 3.22 cr. (FY22), Rs. 70.94 cr. / Rs. 6.18 cr. (FY23), Rs. 55.25 cr. / Rs. 4.89 cr. (FY24). 

For the last three fiscals, it has reported an average EPS of Rs. 6.11, and an average RoNW of 53.75%. The issue is priced at a P/BV of 4.79 based on its NAV of Rs. 16.69 as of March 31, 2024, and at a P/BV of 2.37 based on its post-IPO NAV of Rs. 33.79 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 18.48, and based on FY23 earnings, the P/E stands at 14.63. Thus the issue appears reasonably priced. 

For the reported periods, the company has posted PAT margins of 5.95% (FY22), 8.77% (FY23), 8.89% (FY24), and RoCE margins of 103.15%, 89.16%, 47.05% respectively for the referred periods. 

DIVIDEND POLICY:
The company has paid a dividend of 200% for FY23 and 12.5% for FY24. It has already adopted a dividend policy in September 2023, based on its financial performance and future prospects.  

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Tiger Logistics, and AVG Logistics as their listed peers. They are trading at a P/E of 28.9 and 30.2 (as of August 14, 2024). However, they are not comparable on an apple-to-apple basis.

MERCHANT BANKER'S TRACK RECORD:
This is the 11th mandate from Holani Consultants in the last four fiscals (including the ongoing one), out of the last 10 listings, 1 opened at discount and the rest listed with premiums ranging from 4.94% to 266.20% on the date of listing. 

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