GB Logistics BSE SME IPO review (May apply)

•    The company is engaged in providing logistics services and trading in agri commodities.
•    Sudden boost in its bottom lines from FY24 onwards raise eyebrows and concern over its sustainability.
•    It is operating in a highly competitive and fragmented segments.
•    Based on its recent financial performance, the issue appears fully priced. 
•    Well-informed investors may park moderate funds for medium term.

ABOUT COMPANY:
GB Logistics Commerce Ltd. (GLCL) operates across two main business verticals: logistics and trading of agricultural commodities. The company provides full truckload freight services for large and medium-sized enterprises, utilizing both proprietary and third-party transportation services to manage logistics. Their offerings include regular full-truckload transportation, special handling, godowns-to-godowns transportation, delivery above ground floor, and handling out-of-delivery area shipments. With a fleet comprising light, heavy, closed body, and trailer trucks, GB Logistics ensures extensive domestic coverage and timely delivery. In addition to logistics services, GB Logistics engages in trading agricultural commodities, capitalizing on opportunities that arise incidentally to their logistics activities. This diversification enhances their revenue streams and supports their role in both the agricultural and logistics sectors. 

The company’s strategy includes market expansion, operational efficiency, technological integration, and specialized handling services, positioning them as a comprehensive logistics partner. By focusing on customer requirements and leveraging their expertise in remote and challenging deliveries, GB Logistics maintains its operations in the logistics landscape. The Company currently operates across two broad business verticals: ● Logistics ● Trading of Agricultural Commodities. 

GLCL specializes in full truckload freight services for large and medium-sized enterprises. Utilizing both proprietary and third-party transportation services, the company efficiently conducts logistics operations. GB Logistics Commerce Limited positions itself as a partner for businesses across sectors, providing comprehensive cargo movement solutions. Additionally, the company has a wholly owned subsidiary, GB Hospitality (India) Private Limited, engaged in a similar line of business.

The company engages in logistics operations with a strategic proximity to agriculture commodities. In instances where trading opportunities arise incidentally to logistics activities, it capitalizes on them to generate additional revenue and profit. This approach allows the company to diversify revenue streams and contribute meaningfully to the agricultural and logistics sectors. Trading in agricultural commodities is not the main line of business of the Company. As of the date of this offer document, the company had 39 employees on its payroll. The company currently owns 4 trucks and will add another 4 trucks to push its logistics business, which is a high margin segment for them.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden book building route IPO of 2457600 equity shares to mobilize Rs. 25.07 cr. (at the upper cap). The company has announced the price band of Rs. 95 – Rs. 102 per share of Rs. 10 each. The issue opens for subscription on January 24, 2025, and will close on January 28, 2025. The minimum application to be made is for 1200 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 29.99% of the post-IPO paid up equity capital of the company. From the net proceeds of the fresh equity issue, it will utilize Rs. 5.00 cr. for repayment/prepayment of certain borrowings, Rs. 9.38 cr. for working capital, Rs. 3.80 cr. for purchase of truck chassis and truck bodies, and the rest for general corporate purposes. 

The issue is solely lead managed by SKI Capital Services Ltd., and Maashitla Securities Pvt. Ltd. Is the registrar to the issue, SVCM Securities Pvt. Ltd. is the market maker for the company. 

After issuing initial equity shares at par value, the company issued further equity shares in the price range of Rs. 95.00 – Rs. 1820.00 between October 2023, and December 2023, and has also issued bonus shares in the ration of 209 for 1 in December 2023. The average cost of acquisition of shares by the promoters is Rs. 4.49 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 5.74 cr. will stand enhanced to Rs. 8.19 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 83.58 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 17.32 cr. / Rs. 0.96 cr. (FY22), Rs. 40.45 cr. / Rs. 0.77 cr. (FY23), and Rs. 64.46 cr. / Rs. 3.60 cr. (FY24). For H1 of FY25 ended on September 30, 2024, it earned a net profit of Rs. 1.71 cr. on a total income of Rs. 26.22 cr. 

On a consolidated basis, the company reported a total income of Rs. 115.63 cr. /net profit of Rs. 4.86 cr. (FY24), and for H1 of FY25 ended on September 30, 2024, it earned a net profit of Rs. 2.53 cr. on a total income of Rs. 50.85 cr. 

For the last three fiscals, the company has posted an average EPS of 4.96 and an average RoNW of 43.39%. The issue is priced at a P/BV of 2.85 based on its NAV of Rs. 35.82 as of September 30, 2024, and at a P/BV of 1.83 based on its posts-IPO NAV of Rs. 55.67 per share (at the upper cap). 

If we attribute FY25 annualized super earnings to its post-IPO fully diluted paid-up capital, then the asking price is at a P/E of 16.53. Based on FY24 earnings, the issue is at a P/E of 17.20. The issue relatively appears fully priced based on its recent financial performance. Super earnings in pre-IPO period raise eyebrows. 

For the reported periods, the company has posted PAT margins of 5.57% (FY22), 1.91% (FY23), 4.21% (FY24), 4.97% (H1-FY25), and RoCE margins of 43.41%, 11.44%, 14.51%, 6.22%, respectively for the referred periods.

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

COMPARISION WITH LISTED PEERS:
As per the offer document, the company has shown VRL Logi., Ritco Logi., Orissa Bengal, as their listed peer. They are trading at a P/E of 48.2, 17.0, and 32.1 (as of January 21, 2025). However, they are not truly comparable on an apple-to-apple basis.  

MERCHANT BANKER’S TRACK RECORD:
This is the 4th mandate from SKI Capital in the ongoing fiscal. Out of the last 3 listings, all listed with premiums ranging from 28% to 90% on the date of listings.