Paradeep Parivahan BSE SME IPO review (May apply)

•    The company is a 3PL logistics service provider delivering end-to-end specialized and tailor-made solutions for critical contracts that brings high margins.
•    It has implemented a new strategy of rendering services for specialized and high margin contracts with its cost management techniques. 
•    The change in its solutions has yielded desired benefits with higher margins that is reflected in its working from FY23 onwards.
•    As per historical trends, second half brings over 60% of annual revenue.
•    It is operating in a highly competitive and fragmented segment.
•    Well-informed investors may park moderate funds for long term. 

ABOUT COMPANY:
Paradeep Parivahan Ltd. (PPL) is a complete 3 PL (third-party logistics service provider), delivering end-to-end solutions in the logistics and supply chain domain involving multimodal transport operations (MTO), owning and operating container, sea and transportation, warehousing, custom clearance services and handling of project cargo.

PPL is located within Paradip Port and specializes primarily in logistics. It has established as excavators, cargo handlers, service providers, and importers and exporters of bulk cargo within ports. It boasts a significant fleet of own equipment, including Volvo V loaders introduced as early as 1989 in Paradip. At that time, the logistics sector in the city was sluggish due to limited capacity. However, by 2000, the capacity had increased tenfold. The company introduced advanced tools and mechanisms in Paradip Port to enhance productivity significantly. This enhancement in productivity directly translates into cost savings for importers and exporters, as it streamlines operations and reduces overheads through specialized equipment and expertise.

PPL sets up operations with the aim to deliver top-notch services to customers, specializing in various aspects such as cargo handling, port operations, intra-port transportation, as well as the handling and transportation of port import cargo. Additionally, it excels in in-plant shifting of bulk raw materials and hazardous cargo, railway siding operations, crusher operations, special attention cargo handling, earthwork, and more. Its operations are structured to ensure efficiency and safety while meeting the diverse needs of clients across a wide range of services.

As operations expanded, it seized opportunities such as partnering with IFFCO, a major player in the market, for heavy machinery services and raw material processing within their plant. Its vision extends beyond mere business operations; the company aspire to become a leading entity known for dedication to addressing domestic energy and industrial raw material shortages. It strives to achieve this through the application of advanced technologies and safe, profitable solutions. It is continually enhancing company's technological standards by incorporating high-end Heavy Earth Moving Equipment, ensuring it meets the needs of numerous Indian clients engaged in long-term contracts through Stevedoring and Clearing Services Arm. As of the date of filing this offer document, it had 1124 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 4578000 equity shares to mobilize Rs. 44.86 cr. at the upper cap. The company has announced a price band of Rs. 93 – Rs. 98 per share of Rs. 10 each. The issue opens for subscription on March 17, 2025, and will close on March 19, 2025. The minimum number of shares to be applied is for 1200 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 28.76% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, the company will utilize Rs. 35 cr. for working capital, and the rest for general corporate purposes. 

The IPO is solely lead managed by Share India Capital Services Pvt. Ltd., and Bigshare Services Pvt. Ltd., is the registrar to the issue. Share India group’s Share India Securities Ltd., is the Market Maker for the company. 

Having issued initial equity shares at par value, the company issued further equity shares at a fixed price of Rs. 60 per share in February 2024. It has also issued bonus shares in the ratio of 1 for 1 in October 2023. The average cost of acquisition of shares by the promoters is Rs. 5.00 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 11.34 cr. will stand enhanced to Rs. 15.92 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 156 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 188.69 cr. / Rs. 2.84 cr. (FY22), Rs. 202.81 cr. / Rs. 6.56 cr. (FY23), and Rs. 211.62 cr. / Rs. 15.02 cr. (FY24). For H1 of FY25 ended on September 30, 2024, it earned a net profit of Rs. 5.18 cr. on a total income of Rs. 137.94 cr. The quantum jump in bottom lines from of FY23 not only raises eyebrows, but concern over its sustainability going forward. 

According to the management, their experience in the segment for over two decades has been implemented in focusing margin contracts where in the company is using its own techniques and methods and this change has helped it to get the desired level of profits that it reflected in its workings from FY23 onwards. Their business has historical trends of first half generating around 40% revenues and rest in the second half with higher activities by their customers.

For the last three fiscals, the company has reported an average EPS of Rs. 18.18 and an average RoNW of 21.72%. The issue is priced at a P/BV of 1.85 based on its NAV of Rs. 52.85 as of September 30, 2024, but its IPO ad is missing post-IPO NAV data. 

If we attribute FY25 annualized earnings on post-IPO fully diluted equity capital, then the asking price is at a P/E of 15.08. Based on FY24 earnings, the P/E stands at 10.38. The issue relatively appears fully priced.

For the reported periods, the company has posted PAT margins of 1.51% (FY22), 3.23% (FY23), 7.10%, (FY24), 3.75% (H1-FY25), and RoCE margins of 10.08%, 17.82%, 26.61%, 7.89% for the referred periods, respectively. Net profit margin data differs on Page no. 93 by a friction.

DIVIDEND POLICY:
The company has not paid any dividends since incorporation. It will adopt a prudent dividend policy post listing, based on its financial performance and future prospects. 

COMPARISION WITH LISTED PEERS:
As per the offer document, the company has shown All Cargo Logi., Navkar Corp., and Container Corp., as its listed peers. They are trading at a P/E of 61.4, NA, and 29.4 (as of March 12, 2025). However, they are not truly comparable on an apple-to-apple basis. Peers compare appears to be an eyewash.

MERCHANT BANKER’S TRACK RECORD:
This is the 15th mandate from Share India Capital in the last three fiscals.  From the last 13 listings so far, 3 at par and the rest listed with a premium ranging from 5.33% to 120% on the listing date.