Western Carriers IPO review (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 the largest logistics related service provider in India.
•    It marked growth in its top and bottom lines for the reported periods. 
•    Based on FY24 earnings, the issue appears reasonably priced. 
•    Considering ongoing infra/business expansion drives, the company is poised for bright prospects ahead.
•    Investors may park funds for medium to long term. 

ABOUT COMPANY:
Western Carriers (India) Ltd. (WCIL) is the largest private, multi-modal, rail focused, 4PL asset-light logistics company in India in terms of container volumes handled/operated by private players in Fiscal 2023. Its domestic and EXIM market share, based upon container volumes handled, was 6% and 2%, respectively, in Fiscal 2023 (Source: 1Lattice Report). It has several years of experience in road, rail and sea / river multi-modal movement for domestic as well as EXIM cargo in and out of India.

WCIL operates on a scalable, asset-light business model which enables it to provide differentiated 3PL and 4PL solutions. It endeavours to address complexities (in terms of scale of operations and logistics requirements) by creating customised, one-stop/single-window, end-to-end and integrated logistics solutions for customers, which involve a variety of value-added services across the supply chain. The company engineers its suite of logistics solutions to create customised supply-chains, optimised to achieve customer-specific targets.

It has long-standing relationships with customers across varied sectors such as metals, fast moving consumer goods ("FMCG"), pharmaceuticals, chemicals, engineering, oil and gas and retail. Some of them are Tata Steel, Hindalco, Vedanta, Cipla, Haldia, GHCL, BCPL, Sheela Foam, etc. These long-standing relationships has also contributed to the growth of WCIL's revenues from existing customers and the expansion of customer base. In Fiscal 2024, 80% of its revenues originated from customers who had been transacting with it for over three years and customer retention rate for top 10 customers was 100%. It continues to evolve business with progressing needs of customers, some of whom are industry leaders in their respective sectors. 

For almost all of its customers, the company provides customised 'one-stop/single-window, end-to-end' 3PL and 4PL logistics solutions meeting their unique requirements, which lets them choose from WCIL's suite of customised value-added solutions such as inventory planning, warehouse planning and management, cargo and material handling and packaging, customs house clearance, pre-shipment inspection and containerization. Its long-standing relationships with third-party service providers who provide it with some of the assets necessary for operations, i.e., vehicles, warehouses, railway flat, rakes and wagons, give it control over capacity and fleet, and the scheduling, routing, storing, and delivery of goods managed by the company. It is one of the largest platinum and the largest associate partner of an Indian rail container logistics provider.

Over the next few years, it intends to enhance scope of engagement with existing customers by strengthening existing service offerings, adding new offerings, servicing newer geographies, providing additional value-added services and offering time and cost saving solutions to them. In addition to its owned fleet of over 400 vehicles, the company enters into spot arrangements with local third-party market players for hiring of vehicles as required. On most major routes, it has dedicated brokers who supply vehicles to WCIL on priority. This enables smooth supply from a verified and dependable source. While it has contractual arrangements with a third party for booking rakes, it books rakes depending upon the needs and requirements. 

The company has employed a team of professionals to assist with sales and marketing functions. As of March 31, 2024, it had 116 sales personnel engaged in marketing and other commercial activities across India, including a dedicated business development and marketing teams at each zonal office for frontend discussions with customers for transportation of their containers. As of March 31, 2024, it had 1,427 permanent employees.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden combo IPO of fresh equity shares issue worth Rs. 400.00 cr. (approx. 23255814 shares at the upper cap), and an offer for sale (OFS) of 5400000 shares (worth Rs. 92.88 cr., at the upper cap). Thus the overall size of the IPO is 28655814 shares worth Rs. 492.88 cr. The company has announced a price band of Rs. 163 - Rs. 172 per share of Rs. 5 each. The issue opens for subscription on September 13, 2024, and will close on September18, 2024. The minimum application to be made is for 87 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. The IPO constitutes 28.11% of the post-IPO paid-up equity capital of the company. From the net proceeds of the fresh equity issue, the company will utilize Rs. 163.50 cr. for repayment/prepayment of certain borrowings, Rs. 151.71 cr. for capex on purchase of commercial vehicles of special dimension for special purposes, and the rest for general corporate purposes.

The joint Book Running Lead Managers (BRLMs) to this issue are JM Financial Ltd., and Kotak Mahindra Capital Co. Ltd., while Link Intime India Pvt. Ltd. Is the registrar to the issue. 

Having issued initial equity shares at par, the company converted further equity shares at a pre-considered price in March 2014. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. 5.00 per share. 

Post IPO, company's current paid-up equity capital of Rs. 39.35 cr. will stand enhanced to Rs. 50.98 cr. Based on the upper cap of IPO pricing, the company is looking for a market cap of Rs. 1753.63 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a consolidated basis) posted a total income/met profit of Rs. 1475.79 cr. / Rs. 61.13 cr. (FY22), Rs. 1637.84 cr. / Rs. 71.57 cr. (FY23), and Rs. 1691.41 cr. / Rs. 80.35 cr. (FY24). 

For the last three fiscals, the company has reported an average EPS of Rs. 9.43, and an average RoNW of 21.53%. The issue is priced at a P/BV of 3.40 based on its NAV of Rs. 50.62 as of March 31, 2024, and at a P/BV of 2.20 based on its post-IPO NAV of Rs. 78.31 per share (at the upper cap). 

If we attribute FY24 annualized earnings to its post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 21.83. The issue relatively appears reasonably priced.

The company reported PAT margins of 4.16% (FY22), 4.38% (FY23), 4.77% (FY24), and RoCE margins of 33.40%, 29.71%, 29.23% for the referred periods, respectively.

DIVIDEND POLICY:
The company has paid a dividend of 25% for FY23 so far. It has already adopted a dividend policy in March 2023, based on its financial performance and future prospects.

COMPARISION WITH LISTED PEERS:
As per offer document, the company has shown Container Corp., Mahindra Logistics, and TCI Express as their listed peers. They are trading at a P/E of 45.8, 68.57, and 35.6 (as of September 12, 2024). However, they are not truly comparable on an apple-to-apple basis. 

MERCHANT BANKER'S TRACK RECORD:
The two BRLMs associated with this offer have handled 59 public offers in the past three fiscals, out of which 13 offers have closed below the offer price on the listing date.

Western Carriers (India) IPO FAQs