Navkar Corp IPO Review (Apply)

Navkar Corp Ltd (NCL) is a CFS (Container Freight Stations) operator in India with three CFSs, Ajivali CFS I and Ajivali CFS II at Ajivali and Somathane CFS at Somathane, which are strategically located in Panvel, Maharashtra, in close proximity to the JN Port, the largest container port in India. As of May 31, 2015, its CFSs had an aggregate installed handling capacity of 310,000 TEUs per annum on the basis of current infrastructure and operating equipment. The company also has a private railway freight terminal ('PFT') which allows it to load and unload cargo from container trains operating between Somathane CFS and the JN Port and to transport domestic cargo to and from inland destinations on the Indian rail network. As of May 31, 2015, it also owns and operates 516 trailers for the transportation of cargo between CFSs and the JN Port by road.

NCL can handle cargo at controlled temperatures at its temperature controlled chamber and through our 92 Reefer plug points at our CFSs. NCL is also certified to handle hazardous cargo at its Ajivali CFS II and Somathane CFS. It provides cargo storage facilities at CFSs which include a buffer yard and warehouses for the storage of cargo and also offers services such as packing, labeling/bar-coding, palletizing, fumigation and other related activities at its warehouses and customize offerings for its customers. NCL’s warehouses are spread over an aggregate area of 500,000 sq. ft., which includes a bonded warehouse of 60,782 sq. ft. and an area of 118,000 sq. ft. designated for the consolidation of less than container load ('LCL') containers. Its CFSs also have a customs facility for the examination and clearing of cargo and Somathane CFS has a unit for the inspection and approval of agricultural cargo set up by the plant and quarantine authorities of the Ministry of Agriculture, Government of India. The company also provides services for the repair and maintenance of containers and the storage of empty containers at CFSs.

NCL works with shipping lines, logistical service providers and customs house agents, importers and exporters. The leading shipping lines and customs house agents that the company works with include, United Arab Shipping Agency Company (India) Private Limited, NYK Line (India) Limited, Hyundai Merchant Marine India Private Limited, Evergreen Shipping Agency (India) Private Limited and S. Ramdas Pragji Forwarders Private Limited.

CFSs and ICDs are set up for the purposes of in-transit container handling, stuffing, de-stuffing, including temporary storage and the examination and assessment of export and import ('EXIM') cargo and are an integral part of the logistics chain in relation to the transportation of containerized cargo. A CFS is an off-dock facility located near gateway ports which helps in decongesting the port by shifting cargo and customs related activities outside port areas, while an ICD is located in the hinterland away from gateway ports acting as a hub for container cargo from different ports and used for the same functional purposes as a CFS.

To meet expenses for its Somathane CFS capacity enhancement plans, development of the non-notified area’s near its CFSs and establishment of Logistics Park at Valsad, the company is coming out with maiden IPO of approx 3.87 crore equity shares of Rs. 10 each via book building route in the price band of Rs. 147-155 to mobilize Rs. 600 crore (that includes offer for sale worth Rs. 90 crore and fresh equity issue worth Rs. 510 crore).  Issue opens for subscription on 24.08.15 and will close on 26.08.15. Minimum application is to be made for 95 shares and in multiples thereon, thereafter.

After issuing equity at par during MoA and then in the price range of Rs. 100 to Rs. 150 between 2009 to 2014 and then issued bonus shares in the ratio of 5 shares for every 1 share held in March 2015, its equity capital is at Rs. 109.71 crore that will stay enhanced to Rs. 142.60 post IPO. BRLM to this IPO are Axis Capital Ltd, Edelweiss Financial Services Ltd and SBI Capital Markets Ltd and registrar to the issue is Link Intime India Pvt Ltd. Post allotment, shares will be listed on BSE/NSE.

On performance front, on a consolidated basis the company has posted turnover and net profit of Rs. 338 cr. /Rs. 56.71 cr. (FY13), Rs. 370.18 cr. /Rs. 90.00 cr. (FY14) and Rs. 330.91 cr. /Rs. 73.13 cr. (FY15). Thus for the last fiscal, it has suffered a setback. For last three fiscals its consolidated average EPS is Rs. 7.88 on post bonus basis. Based on its FY15 earnings, asking price is at a P/E of around 23 on pre-IPO equity. On fully diluted equity on post issue basis, asking price is at a P/E of 30 against Industry’s composite P/E of around 29.

BRLMs have mixed trends for their past mandates.