Premier Roadlines NSE SME IPO review (May apply)

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Review By Dilip Davda on May 7, 2024

•    The company provides transport logistics solutions to its customers with Pan India presence.
•    It does not own any vehicles, but operates on third party contracts.
•    It posted steady growth in its top and bottom lines for the reported periods. 
•    Based on FY24 annualized super earnings, the issue appears fully priced. 
•    Well-informed investors may park moderate funds for the medium term rewards.

ABOUT COMPANY:
Premier Roadlines Ltd. (PRL) is engaged in providing logistics solutions to businesses, particularly surface transportation of goods ranging from 1 MT to 250 MT. It is a goods transport agency providing general transport services, project logistics, and over dimensional/overweight cargo movements on a Pan India basis to customers wherein the company provides point to point services in which the goods are loaded from the premises of the customer and are delivered to the delivery point as specified by them. PRL mainly serves B2B customers under the Contract Logistics division, who have requirement to transport bulk quantities of their goods from one place to another within India and other neighboring countries like Nepal, Bhutan etc. In F.Y. 2022-23, it has delivered over 26,000 orders across India.

Currently, it is engaged in providing transportation of goods in containerized trucks to various industrial sectors such as Infrastructure, Energy, Power, Oil & Gas, Engineering, Construction, Metallurgical, Renewable energy etc.

To provide with transportation services, it engages third party operators i.e. small fleet owners and agents who provide with necessary transportation facilities such as containerized trucks, Trailers, Hydraulic axles etc. PRL's centralized information technology network is capable of connecting its branch offices with corporate office, which enables real time monitoring of its operations, consignment bookings and delivery status. It carries logistics business through widespread transportation network across India which it is operating through Registered and Corporate Office located in Delhi, along with 28 Branch Offices located in various cities of India like Ahmedabad, Bengaluru, Chennai, Guwahati, Hyderabad, Kolkata, Mumbai, Nashik, Pune etc. 

Few of its esteemed customers includes KEC International Limited, ThyssenKrupp Industrial Solutions (India) Private Limited, Tata Project Limited, G R Infraprojects Ltd, Tata Power Solar Systems Limited, Sterlite Power Transmission Limited etc. Company does not own any fleet. It hires from small fleet owners and agents and fulfill the demands of the customer. Thus it operates on asset light model. As of January 31, 2024, it had 214 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 6024000 equity shares of Rs. 10 each to mobilize Rs. 40.36 cr. at the upper cap. It has announced a price band of Rs. 63 - Rs. 67 per share. The issue opens for subscription on May 10, 2024, and will close on May 14, 2024. The minimum application to be made is for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.35% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, it will utilize Rs. 15.00 cr. for repayment/prepayment of certain borrowings, Rs. 2.76 cr. for purchase of commercial vehicles, Rs. 14.00 cr. for working capital, and the rest for general corporate purposes. 

The issue is solely lead managed by Hem Securities Ltd., and Maashitla Securities Pvt. Ltd. is the registrar of the issue. HEM Group's Hem Finlease Pvt. Ltd. is the market maker for the company. 

Having issued initial equity shares at par value, the company issued further equity shares in the price range of Rs. 45 - Rs. 200 per share between December 2008 and April 2018. It has also issued bonus shares in the ratio of 10 for 1 in December 2023. The average cost of acquisition of shares by the promoters is Rs. 1.30, Rs. 1.60, and Rs. 7.07 per share. 

Post-IPO, company's current paid-up equity capital of Rs. 16.84 cr. will stand enhanced to Rs. 22.86 cr. Based on the upper IPO price band, the company is looking for a market cap of Rs. 153.18 cr.  

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 94.16 cr. / Rs. 1.55 cr. (FY21), Rs. 138.69 cr. / Rs. 3.89 cr. (FY22), and Rs. 192.06 cr. / Rs. 7.19 cr. (FY23).  For 10M - FY24 ended on January 31, 2024, it earned a net profit of Rs. 8.75 cr. on a total income of Rs. 174.21 cr. Thus it posted steady growth in its top and bottom lines for the reported periods. 

For the last three fiscals, it has reported an average EPS of Rs. 3.06, and an average RoNW of 21.44%. The issue is priced at a P/BV of 3.15 based on its NAV of Rs. 21.25 as of January 31, 2024, and at a P/BV of 2.27 based on its post-IPO NAV of Rs. 29.48 per share (at the upper cap).

If we attribute annualized FY24 super earnings to its post-IPO fully diluted paid-up capital, then the asking price is at a P/E of 14.60. Thus the issue appears fully priced. 

For the reported periods, the company has posted PAT margins of 1.66% (FY21), 2.80% (FY22), 3.74% (FY23), 5.02% (10M-FY24), and RoCE margins of 10.43%, 16.73%, 19.37%, 20.05% 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 VRL Logi., AVG Logi., and Ritco Logi., as their listed peers. They are trading at a P/E of 37.8, 19.4 and 19.8 (as of May 07, 2024). However, they are not comparable on an apple-to-apple basis.

MERCHANT BANKER'S TRACK RECORD:
This is the 43rd mandate from Hem Securities in the last three fiscals (including the ongoing one), out of the last 10 listings, 1 opened at discount and the rest with premiums ranging from 4.63% to 90% on the date of listing.

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