Pranik Logistics NSE SME IPO review (May apply)

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Review By Dilip Davda on October 7, 2024

•    The company is engaged in providing carrying and forwarding agent services on a Pan India basis.
•    The company posted steady growth in its top lines for the reported periods, but the sudden boost in its bottom lines from FY24 onwards raises eyebrows.
•    Based on FY25 annualized super earnings, the issue appears fully priced.  
•    It is operating in a highly competitive and fragmented segment.
•    Well-informed/cash surplus investors may park moderate funds in this fully priced issue for long term.

ABOUT COMPANY:
Pranik Logistics Ltd. (PLL) is engaged as carrying and forwarding agent providing end-to-end Logistics solutions i.e. from the point of origin to the point of consumption, in order to meet the needs of customers and corporations. It is a pan India logistics provider, acting as carrying and forwarding agent and providing integrated services including transportation, warehousing, material handling and freight forwarding to customers belonging to various industries such as Retail, Customer Durables, Telecom, Manufacturing, Pharma, etc.

Since its establishment in 2015, The company has over the period expanded the ambit of services. It offers customized services as per the requirements of customers. It has a dedicated team of employees and agents, who manage the entire supply chain effectively and efficiently. As on the date of this Red Herring Prospectus, PLL manages a fleet of commercial vehicles, comprising more than 80 vehicles that it owns, and any further requirement is managed through leasing the vehicles on trip-to-trip basis. Its fleet encompasses various types of trucks categorized by design, size, and capacity. Company's Container Trucks are utilized for parcel transportation, while Platform Trucks handle heavy-duty goods like automotive parts and machinery. 

The diversity of its transportation vehicles allows it to cater to a wide range of consignments. Further, as on the date of this Red Herring Prospectus, it operates a total of 30 warehouses, which are directly managed by the company. The technological systems that the company uses for managing the logistics operations are provided by its clients that enable it to improve service quality, consistency and increase operating efficiency. 

The company is based in Kolkata and has its wings spread across India. It has implemented Logistics & Warehousing solutions over 13 states of India in various sectors including Retail, Customer Durables, Telecom, Manufacturing, Pharma, etc. As on the date of this Red Herring Prospectus, its fleets include 86 owned vehicles (53 small vehicles, 12 LCVs, and 21 HCVs), and any further requirements are outsourced either on lease or on trip-to-trip basis. As of September 30, 2024, it had 625 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 2918400 equity shares of Rs. 10 each to mobilize Rs. 22.47 cr. (at the upper cap). The company has announced a price band of Rs. 73 - Rs. 77 per share. The issue opens for subscription on October 10, 2024, and will close on October 14, 2024. The minimum number of shares to be applied is for xxx 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, the company will utilize Rs. 0.80 cr. for investment in technology, Rs. 2.20 cr. capex on material handling equipments, Rs. 12.00 cr. for working capital, and the rest for general corporate purposes. 

The IPO is solely lead managed by Narnolia Financial Services Ltd., and Maashitla Securities Pvt. Ltd. is the registrar to the issue. Prabhat Financial Services Ltd., is the Market Maker for the company. 

Having issued/converted initial equity shares at par value, the company issued bonus shares in the ratio of 1 for 2 in May 2024. The average cost of acquisition of shares by the promoters is Rs. 6.67 per share. 

Post-IPO, company's current paid-up equity capital of Rs. 8.09 cr. will stand enhanced to Rs. 11.01 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 84.78 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total revenue/net profit of Rs. 33.61 cr. / Rs. 0.32 cr. (FY22), Rs. 60.91 cr. / Rs. 0.93 cr. (FY23), and Rs. 67.70 cr. / Rs. 4.07 cr. (FY24). For Q1 of FY25 ended on June 30, 2024, it earned a net profit of Rs. 1.09 cr. on a total revenue of Rs. 22.49 cr. Thus the company has reported steady growth in its top and bottom lines for the reported periods. However, sudden boost in its bottom lines in pre-IPO periods raises eyebrows and concern over its sustainability going forward. It is operating in a highly competitive and fragmented segment. Its employee and finance cost is on the rise. 

For the last three fiscals, the company has reported an average EPS of Rs. 4.55 and an average RoNW of 23.44%. The issue is priced at a P/BV of 4.98 based on its NAV of Rs. 15.47 as of June 30, 2024, and at a P/BV of 2.42 based on its post-IPO NAV of Rs. 31.78 per share (at the upper cap). 

If we attribute FY25 annualized super earnings on post-IPO fully diluted equity capital, then the asking price is at a P/E of 19.44, and based on FY24 earnings, the P/E stands at 20.87. The issue relatively appears fully priced.

For the reported periods, the company has posted PAT margins of 0.94% (FY22), 1.54 % (FY23), 6.08% (FY24), 4.88% (Q1-FY25), and RoCE margins of 15.40%, 23.38%, 54.14%, 11.79%, respectively for the referred periods. 

DIVIDEND POLICY:
The company has not paid any dividends for any financial year so far. It will adopt a prudent dividend policy post listing, based on its financial performance and future prospects. 

COMPARISION WITH LISTED PEERS:
As per the offer document, the company has shown S J Logistics as their listed peers. It is trading at a P/E of 37.7 (as of October 04, 2024). However, they are not truly comparable on an apple-to-apple basis. 

MERCHANT BANKER'S TRACK RECORD:
This is the 14th mandate from Narnolia Financial in the last two fiscals (including the ongoing one).  Out of the last 10 listings, 2 opened at discount, and the rest opened with a premiums ranging from 15% to 110.36% on the date of listing.

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