Rapid Fleet NSE SME IPO review (Avoid)

•    The company is engaged in providing tailormade logistics services on B2B and B2C model.
•    While it posted inconsistency in its top lines for the reported periods, it marked jump in bottom lines from FY24 onwards.
•    Based on its super earnings from FY24 onwards, the IPO appears xxxx priced.
•    It is operating in a highly competitive and fragmented segment.
•    Small equity post-IPO indicates longer gestation period for migration to mainboard.
•    There is no harm in skipping this ”High Risk/Low Return” pricey bet.

ABOUT COMPANY:
Rapid Fleet Management Services Ltd. (RFMSL) is a Chennai based company engaged in the business of providing logistics services tailored to the diverse needs of B2B and B2C clientele. The company is engaged in road transportation. Its process begins with order booking, followed by route planning to optimize efficiency. Each shipment is carefully matched with an appropriate vehicle, factoring in cargo specifics for safe transit. Whether loading from designated stops or warehouse, its team ensures goods are secured for the journey ahead. Utilizing GPS, FAST-TAG SIM TRACKING navigation systems, the company tracks and monitors every movement, providing real-time updates. Upon arrival at the destination, its unloading procedures guarantee safe delivery.

RFMSL owns a fleet of trucks, as on date of filing of Red Herring Prospectus it owned 226 Vehicles, which is been used by the company to provide logistics services. It serves a wide array of industries, including but not limited to Tyre, Logistics, Electronics, FMCG, Renewable, Durables, FNB, Chemicals. Since inception, it has consistently been providing solutions powered by own fleet vehicles. Guided by a team of dedicated professionals with extensive expertise in logistics. Its present in-house fleet strength is about 226 vehicles which comprise of various types of cargo trucks and trailers.

It has developed own Mobile App which is being used for our entire flow of business process. To drive operational efficiency and scale the Company’s business for future growth, it has implemented Digitify, an advanced Transport Management System (TMS) that seamlessly integrates with Tally and bank payment APIs. This comprehensive system offers a unified platform to manage crucial aspects such as order matching, order management, vendor management, and vendor risk management. Digitify’s design covers the entire spectrum of transportation needs, providing robust tools for freight, fleet, accounting, and analytics management. Its flexibility and native integration empower them to maintain seamless control over their operations, ensuring the agility and transparency necessary to maintain a competitive advantage. One of the key strengths of Digitify is its ability to unify all key stakeholders – Company’s team, suppliers, truck owners, and drivers - on a single, cohesive platform. This integration allows for seamless management of freight operations, real-time monitoring of vendor performance, and data-driven insights through advanced analytics. 

At Fleet Management, it takes immense pride in diverse and contemporary fleet composition, meticulously curated to address the ever-evolving demands of transportation. Its fleet comprises a carefully selected range of vehicles, each tailored to deliver unmatched efficiency, reliability, and sustainability. This thoughtful selection ensures that it can provide optimal logistics solutions to meet the unique needs of clients. As of February 28, 2025, it had 72 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 2284800 equity shares of Rs. 10 each to mobilize Rs. 43.87 cr. at the upper cap. It has announced a price band of Rs. 183 – Rs. 192 per share. The issue opens for subscription on March 21, 2025, and will close on March 25, 2025. The minimum number of shares to be applied is for 600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 30.73% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, the company will utilize Rs. 13.00 cr. for purchase of goods carriages vehicles, Rs. 19.12 cr. for working capital, and the rest for general corporate purposes. 

The IPO is solely lead managed by Gretex Corporate Services Ltd., and Bigshare Services Pvt. Ltd., is the registrar to the issue. MLB Stock Broking Pvt. Ltd., is the Market Maker for the company. Gretex Share Broking Ltd. is the syndicate member. The IPO is underwritten to the tune of 15.02% by Gretex Corporate Services Ltd., up to 66.52% by Wealth Mine Networks Pvt. Ltd., and up to 18.46% by MLB Stock Broking Pvt. Ltd.

Having issued initial equity shares at par value, the company issued further equity shares at a fixed price of Rs. 120 per share in June 2024. It has also issued bonus shares in the ratio of 49 for 1 in April 2024. The average cost of acquisition of shares by the promoters is Rs. 0.20, and Rs, 0.49 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 5.15 cr. will stand enhanced to Rs. 7.44 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 142.75 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 114.02 cr. / Rs. 3.40 cr. (FY22), Rs. 106.03 cr. / Rs. 4.71 cr. (FY23), and Rs. 116.32 cr. / Rs. 8.07 cr. (FY24). For H1 of FY25 ended on September 30, 2024, it earned a net profit of Rs. 7.01 cr. on a total income of Rs. 87.39 cr. 

For the last three fiscals, the company has reported an average EPS of Rs. 12.35 and an average RoNW of 40.67 %. The issue is priced at a P/BV of 3.38 based on its NAV of Rs. 56.82 as of September 30, 2024, but its post-IPO NAV data is missing.

If we attribute FY25 annualized super earnings on post-IPO fully diluted equity capital, then the asking price is at a P/E of 10.18. Based on FY24 earnings, the P/E stands at 16.76. The issue relatively appears aggressively priced.

For the reported periods, the company has posted PAT margins of 2.99 % (FY22), 4.47% (FY23), 6.98%, (FY24), 8.25% (H1-FY25), and RoCE margins of 15.95%, 26.13%, 32.59%, 12.50%, for the referred periods, respectively.

DIVIDEND POLICY:
The company has not paid any dividends for the reported periods of the offer document. 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 Premier Roadlines, AVG Logistics, as their listed peers. They are trading at a P/E of 14.5, and 11.8 (as of March 18, 2025). However, they are not truly comparable on an apple-to-apple basis. 

MERCHANT BANKER’S TRACK RECORD:
This is the 25th mandate from Gretex Corporate in the last four fiscals.  From the last 10 listings so far, 2 listed at discount and the rest listed with a premium ranging from 17.36% to 187.36% on the listing date.