AVG Logistics NSE SME IPO review (Apply)

AVG Logistics Ltd. (AVG) is an organized third-party logistics service operator offering logistics solutions to a wide range of customers. It offers Full Truck Load (FTL) and “hub-and-spoke” transportation model and warehousing services to select clients with pan-India distribution network and automated technology systems. Its customers operate in various sectors across India, including automotive and heavy engineering, telecom, food and agro, fast-moving consumer goods (“FMCG”), paint and dairy.

AVG offers customers services in three key areas (1) Transportation whereby it provides point-to-point, less than truck-load, time-definite transportation services; (2) Warehousing whereby it provides warehousing, distribution and cold-chain warehousing, and (3) Value-added Services including, temperature-controlled logistics, supply chain solutions and cargo handling services at integrated check posts. As of September 30, 2017, it has five (5) trans-shipment centres at Guwahati, Bangalore, Hyderabad, Delhi-UP border, and Kundli (Delhi-Haryana border) and forty nine (49) branches across India, covering 23 states as of September 30, 2017. It operates 264 owned containerised vehicles which are GPS-enabled vehicles, of which 85 are refrigerated (reefer) trucks. It has warehouses in Modinagar, Ghaziabad, Delhi and Panipat. AVG is in the process of setting up additional large format, multi-user warehouses in certain strategic locations and have acquired land at Agartala in Tripura and Mysore in Karnataka adding 1.08 lakhs square feet which will enable the expansion of warehousing space to 4.62 lakhs square feet by April, 2019.

To part finance setting up of warehouse facilities at Agartala, Tripura and Mysuru, working capital and general corpus needs, AVG is coming out with a maiden IPO of 3090000 equity shares of Rs. 10 each via book building route with a price band of Rs. 105 - Rs. 107 to mobilize Rs. 32.45 cr. – Rs. 33.06 cr. (based on lower and upper price bands). Issue opens for subscription on 28.03.18 and will close on 03.04.18. Minimum application is to be made for 1200 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. Issue is solely lead managed by Systematix Corporate Services Ltd. and Link Intime India Pvt. Ltd. is the registrar to the issue. Issue constitutes 30.01% of the post issue paid up capital of the company. Average cost of acquisition of shares by the promoters is Rs. 5.88, Rs. 6.05 and Rs. 6.95per share. Having raised initial equity in the price range of Rs. 20 and Rs. 50 per share from inception till May 2010, it raised further equity at par between January 2012 and March 2016. It has also issued bonus shares in the ratio of 10 for 7 in Februay 2018. Post issue, its current paid up equity capital of Rs. 7.21 cr. will stand enhanced to Rs. 10.30 cr.

On performance front, AVG has posted turnover/net profits of Rs. 130.41 cr. / Rs. 2.62 cr. (FY14), Rs. 183.32 cr. / Rs. 3.19 cr. (FY15), Rs. 192.29 cr. / Rs. 3.80 cr. (FY16) and Rs. 194.386 cr. / Rs. 4.43 cr. (FY17). For first six months of the current fiscal, it has earned net profit of Rs. 3.46 cr. on a turnover of Rs. 103.59 cr. Thus it has shown consistent growth in top and bottom lines. For last three fiscals, it has posted an average EPS of Rs. 5.99 and an average RoNW of 21.76%. Issue is priced at a P/BV of 3.01 on the basis of its NAV of Rs. 35.55 as on 30.09.17 (on ex-bonus basis). If we annualize latest earnings and attribute it on fully diluted post issue equity then asking price is at a P/E of around 16 against industry average of 45. It is considering Sicals Logi, Tiger Logi, Total Transport, VRL Logi and Snowman as its listed peers that are trading at a P/E of around 33, 19, 11, 39 and -431 respectively (as on 21.03.18 on BSE/NSE). Thus issue pricing appears reasonable.

On merchant banker’s front, this is the 3rd mandate from its stable and out of last two listings, both opened at a premium to offer price ranging between 16 to 20% on the day of listing.