PDP Shipping BSE SME IPO review (Avoid)

•    The company is engaged in the business of providing end-to-end logistic and transport services as an MTO.
•    It posted declining trends for its top lines, but inconsistent and erratic bottom line raises eyebrows and concern over its sustainability.
•    The company is operating in a highly competitive and fragmented segment.
•    Tiny paid-up equity capital post-IPO indicates longer gestation period for migration to mainboard.
•    Based on its recent financial data, the issue appears aggressively priced. 
•    There is no harm in skipping this pricey bet that can be termed as “High Risk/Low Return” offer.

ABOUT COMPANY:
PDP Shipping & Projects Ltd. (PSPL) is into business segment of providing services of logistic and transport. The company is providing services of international freight forwarding, air freight, sea freight [including documentation, customs clearance, packaging, warehousing, and distribution, pre-carriage, onwards carriage, cargo tracking, port or Container Freight Station (CFS) operations & ocean freight services], custom broker, project cargo, sea towage, breakbulk, heavy lifts including RoRo loadouts, spreading weight techniques, making suitable temporary jetties & RoRo ramps, route survey & reinforcements of transit roads - bridges-vessels, structural calculations - stowage – sea fastening designing, multi modal transportation. Our core speciality is handling pre-defined project transports dynamics, heavy lifts, over dimensional cargo, offshore cargo & heavy engineering transportations, integrated logistics solutions, time-bound shipments, temperature-critical cargo, exhibition cargo, door-to-door services etc. Its primary business is providing services of logistic and transport.

It is providing end-to-end solutions in the logistics & transport industry as a Multi Modal Transport Operator (MTO), sea and air freight transportation, custom clearance services and value-added services in Logistics industry. PSPL is an accredited Authorized Economic Operator (AEO) providing end to end logistics services and licensed by the Directorate General of Shipping, Government of India to work as a MTO and a Customs Broker, Licensed by Mumbai Customs, Department of Revenue of Government of India. 

The company operates on an asset light business model whereby its cargo operations are supported by a network of third-party transport operators and logistics infrastructure service providers and global agency networks. As an end-to-end logistic services provider, it offers customers a single-window solution thereby negating the need to approach multiple service providers at different levels in the chain of logistics services. As of January 27, 2025, it had 18 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden IPO of 937000 equity shares of Rs. 10 each at a fixed price of Rs. 135 per share to mobilize Rs. 12.65 cr. The issue opens for subscription on March 10, 2025, and will close on March 12, 2025. The minimum number of shares to be applied is for 1000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 31.50% of the post-IPO paid-up capital of the company. The company is spending Rs. 1.85 cr. for this IPO process, and from the net proceeds of the IPO, the company will utilize Rs. 10.00 cr. for working capital, and Rs. 0.80 cr. for general corporate purposes. 

The IPO is solely lead managed by Sun Capital Advisory Services Pvt. Ltd., and KFin Technologies Ltd., is the registrar to the issue. Rikhav Securities Ltd., is the Market Maker for the company. 

The company has issued entire equity shares at par value, the company has also issued bonus shares in the ratio of 5 for 1 in May 2015, and 28 for 1 in March 2024. The average cost of acquisition of shares by the promoters is Rs. 0.11 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 2.04 cr. will stand enhanced to Rs. 2.97 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 40.15 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 28.73 cr. / Rs. 1.91 cr. (FY22), Rs. 22.61 cr. / Rs. 1.68 cr. (FY23), and Rs. 20.58 cr. / Rs. 2.31 cr. (FY24). For 8M of FY25 ended on November 30, 2024, it earned a net profit of Rs. 1.57 cr. on a total income of Rs. 13.78 cr. While it posted degrowth in its top lines for the reported periods, higher profits and inconsistency really surprises and raises concern over its sustainability.

For the last three fiscals, the company has reported an average EPS of Rs. 9.99 and an average RoNW of 53.00%. The issue is priced at a P/BV of 3.71 based on its NAV of Rs. 36.39 as of November 30, 2024, and at a P/BV of 2.00 based on its post-IPO NAV of Rs. 67.46 per share.

If we attribute FY25 annualized earnings on post-IPO fully diluted equity capital, then the asking price is at a P/E of 17.05. Based on FY24 earnings, the P/E stands at 17.35. The issue relatively appears aggressively priced.

For the reported periods, the company has posted PAT margins of 6.65% (FY22), 7.48% (FY23), 11.28%, (FY24), 11.42% (8M-FY25), and RoCE margins of 103.69%, 47.73%, 39.62%, 21.18%, respectively for the referred periods. 

DIVIDEND POLICY:
The company paid a dividend of 345% for FY22.  It has adopted a dividend policy in May 2024, based on its financial performance and future prospects. 

COMPARISION WITH LISTED PEERS:
As per the offer document, the company has shown Marinetrans India, S J Logistics, and Cargosol Logistic, as its listed peers. They are trading at a P/E of 151, 17.8, and NA (as of March 07, 2025). However, they are not truly comparable on an apple-to-apple basis. Listed peer compare appears to be an eyewash.

MERCHANT BANKER’S TRACK RECORD:
This is the 3rd mandate from Sun Capital in the last three fiscals.  From the last 2 listings so far, all listed with a premium ranging from 5% to 12.18% on the listing date.