Deccan Transcon NSE SME IPO review (May apply)

• IPO Details
• Stock Price
• Docs
  • RHP
  • DRHP
  • Anchor Investor Link
• Reviews
• Subscription
• Calculator
• News
• GMP
• Allotment
• BoA
• Messages

Review By Dilip Davda on September 12, 2024

•    The company is engaged in providing end-to-end solutions for tank containers logistics.
•    It is providing logistics solutions to variety of clients across the globe.
•    It marked inconsistency in its top lines for the reported periods.
•    Boosted earnings for FY24 raise eyebrows and concern over its sustainability.
•    The company is operating in highly competitive and fragmented segment.
•    Based on FY24 earnings, the issue relatively appears fully priced.  Well-informed investors may park funds for medium term.

ABOUT COMPANY:
Deccan Transcon Leasing Ltd. (DTLL) is providing end-to-end solutions for freight & shipping services which include domestic logistic of tank containers, Tank fleet management solution, custom clearance and transportation, Non-Vessel Operating Common Carriers ("NVOCC") services. It is primarily engaged in providing tank containers on lease and logistic & supply chain solutions to clients in various sectors. 

The company specializes in the transportation of bulk liquids and hazardous chemicals, primarily utilizing tank containers as a mode of transport. One of its key strengths lies in extensive agency network, built over years of experience in the industry. This network provides it with access to shippers worldwide, enabling the company to cater to the logistics needs of clients across the globe. Additionally, it has established a strong network of partners with global coverage, apart from its own Subsidiary and Associate company, allowing it to provide complete, end-to-end logistics solutions. 

Having all tank container services under one roof enables it to offer services tailored to meet specific customer needs. As of July 31, 2024, more than 100 customers have been associated with it for longer than 3 years. It has served more than 884 customers in the last one year. As of July 31, 2024, lit had 84 employees on its payroll and additional 6 casual labourers.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden combo book-building route IPO of 6024000 equity shares of Rs. 10 each to mobilize Rs. 65.06 cr. at the upper cap. The company is issuing 5524000 fresh equity shares worth Rs. 59.66 cr. (at the upper cap), and an Offer for Sale (OFS) of 500000 shares worth Rs. 5.40 cr. (at the upper cap). The company has announced a price band of Rs. 102 - Rs. 108 per share. The issue opens for subscription on September 13, 2024, and will close on September 18, 2024. The minimum application to be made is for 1200 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.51% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, it will utilize Rs. 27.75 cr. for capex on procurement of tank containers, Rs. 11.50 cr. for working capital, and the rest for general corporate purposes. 

The issue is solely lead managed by Unistone Capital Services Pvt. Ltd., and Link Intime India Pvt. Ltd. Is the registrar to the issue. Giriraj Stock Broking Pvt. Ltd. is the market maker for the company. 

Having issued initial equity shares at par, the company issued further equity shares at a fixed price of Rs. 77 per share in February 2024. It has also issued bonus shares in the ratio of 1 for 1 in January 2021, and 20 for 3 in January 2024. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. NIL, Rs. 0.68, Rs. 0.70, Rs. 0.73, Rs. 1.89, and Rs. 2.71 per share. 

Post-IPO, company's current paid-up equity capital of Rs. 17.20 cr. will stand enhanced to Rs. 22.72 cr. Based on the upper cap of the IPO price, the company is looking for a market cap of Rs. 245.41 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a consolidated basis) posted a total revenue/net profit of Rs. 153.19 cr. / Rs. 5.19 cr. (FY22), Rs. 180.62 cr. / Rs. 8.56 cr. (FY23), and Rs. 153.64 cr. / Rs. 11.82 cr. (FY24).  Thus while it posted inconsistency in its top line, it marked growth in bottom lines with a big jump for FY24, that surprises all.  

For the last three fiscals, it has reported an average EPS of Rs. 5.64 and an average RoNW of 39.57%. The issue is priced at a P/BV of 5.77 based on its NAV of Rs. 18.73 as of March 31, 2024, and at a P/BV of 2.67 based on its post-IPO NAV of Rs. 40.43 per share (at the upper cap).

If we attribute FY24 super earnings to its post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 20.77. Based on FY23 earnings, the P/E stands at 28.65. Thus the issue is relatively fully priced discounting all near term positives.

The company reported PAT margins of 3.39% (FY22), 4.76% (FY23), 7.75% (FY24), and RoCE margins of 40.26%, 43.22%, 41.43% for the referred periods, respectively.

DIVIDEND POLICY:
The company has not declared any dividends since incorporation. It will adopt a prudent dividend policy based on its financial performance and future prospects. 

COMPARISION WITH LISTED PEERS:
As per the offer document, the company has shown Lancer Container, and S J Logistics as their listed peers. They are trading at a P/E of 19.2, and 42.0 (as of September 12, 2024). However, they are not truly comparable on an apple-to-apple basis.

MERCHANT BANKER'S TRACK RECORD:
This is the 22nd mandate from Unistone Capital in the last four fiscals (including the ongoing one). Out of the last 10 listings, all opened at a premiums ranging from 2.27% to 125.93% on the date of listing.

Deccan Transcon Leasing IPO FAQs