Transvoy Logistics BSE SME IPO review (Avoid)

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Review By Dilip Davda on January 18, 2023

•    TLIL is in the business of providing integrated logistics solutions.
•    The sudden boost in its top line for the last 17 months raises eyebrows.
•    The financial data provided by the company appears to be window dressing.
•    The small paid-up equity capital post-IPO indicates longer gestation for migration to the mainboard. 
•    There is no harm in skipping this pricey issue. 

ABOUT COMPANY:
Transvoy Logistics India Ltd. (TLIL) is engaged in the business of integrated logistics solutions. Its key expertise includes NVOCC, Freight Forwarding, Customs Clearance, Transportation handlings locally as well as globally and Advisory on MEIS License Trading. As of the date of this Prospectus, TLIL primarily provides services to clients' countries namely India, China, the Middle East, Sri Lanka, Singapore, and Malaysia.

The core business categories of the company include Freight forwarding, customs clearance, and Allied logistics and transportation services. Its wholly owned subsidiary Aashirvad Shipping & Allied Private Limited (ASAPL) is engaged in the business of providing services of customs clearing. As of the date of filing this offer document, it has 4 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden IPO of 720000 equity shares of Rs. 10 each at a fixed price of Rs. 71 per share to mobilize Rs. 5.11 cr. The issue opens for subscription on January 20, 2023, and will close on January 24, 2023. The minimum application is to be made for 1600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 27.04% of the post-IPO paid-up capital of the company. TLIL is spending Rs. 0.73 cr. for this IPO process, and from the net issue proceeds it will utilize Rs. 2.50 cr. the purchase of containers for its subsidiary, Rs. 0.60 cr. for working capital and Rs. 1.28 cr. for general corporate purposes. 

Beeline Capital Advisors Pvt. Ltd. is the sole lead manager and Link Intime India Pvt. Ltd. is the registrar of the issue. Sunflower Broking Pvt. Ltd. is the market maker for this company. 

Having issued initial equity shares at par, the company issued further equity shares in the price range of Rs. 535 - Rs. 542 between May and June 2022. It has also issued bonus shares in the ratio of 54 for 1 in June 2022. The average cost of acquisition of shares by the promoters is Rs. 6.74, Rs. 6.78, and Rs. 7.06 per share. 

Post-IPO, TLIL's current paid-up equity capital of Rs. 1.94 cr. will stand enhanced to Rs. 2.66 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 18.91 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, TLIL has posted a turnover/net profit of Rs. 0.43 cr. / Rs. 0.01 cr. (FY20), Rs. 0.62 cr. / Rs. 0.01 cr. (FY21), and Rs. 5.03 cr. / Rs. 0.57 cr. (FY22). For the period ended till November 25, 2022, of FY23, it earned a net profit of Rs. 0.36 cr. on a turnover of Rs. 10.83 cr. Thus sudden boost in its top and bottom lines for the last 17 months period raises eyebrows. 

For the last three fiscals, TLIL has posted an average EPS of Rs. 5.27 and an average RoNW of 449.12% (based on pre-rights/bonus equity basis). The issue is priced at a P/BV of 6.98 based on its NAV of Rs. 10.17 as of May 31, 2022, and at a P/BV of 2.68 based on its post-IPO NAV of Rs. 26.51. Off late we are witnessing such data on the basis of the last concluded fiscal closure equity capital data, which is misleading. 

If we annualize FY23 earnings and attribute it to the post-IPO fully diluted equity capital, then the asking price is at a P/E of 34.63. Thus the issue appears aggressively priced. 

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

COMPARISON WITH LISTED PEERS:
As per the offer document, TLIL has shown Timescan Logi., ABC India, Maheshwari Logi., Ritco Logi., and Frontline Corp. as their listed peers. They are currently trading at a P/E of 16.65, 14.58, 14.99, 15.88, and 5.76 (as of January 18, 2023). However, they are not truly comparable on an apple-to-apple basis. 

MERCHANT BANKER'S TRACK RECORD:
This is the 8th mandate from Beeline Capital in the current fiscal. Out of the last 6 listings, 1 opened at par and the rest with premiums ranging from 3.96% to 63.64% on the day of listing.

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