Rapid Multimodal BSE SME IPO review (May apply)

•    The company is engaged in providing one-stop logistics solutions for B2B segment.
•    It posted inconsistency in its top and bottom lines for the reported periods. 
•    Based on FY24 earnings, the issue appears fully priced. 
•    Well-informed/cash surplus investors may park moderate funds for medium term.

PREFACE:
Though this company announced IPO opening on August 20, 2024, and its final Prospectus had a filing date of August 14, 2024, the document was not available on public domain till the morning of August 21, 2024, while the issue is opening on August 22, 2024. Its high time that the regulators do act in the matter to ensure that the documents are filed well in time for access to the investors at large to study the offer document. 

ABOUT COMPANY:
Rapid Multimodal Logistics Ltd. (RMLL) is engaged in the business of providing one-stop logistical solution to clients. The company majorly cater to the B2B segment of the industry. It provides an end-to-end logistics solution to manufacturers/traders to transport raw materials or finished goods. The company is involved in the management and coordination of the movement of raw materials or finished goods throughout the supply chain, from the point of origin to the destination. 

It provides single as well as multimodal transportation services which involves the coordinated use of multiple modes of transportation (such as road, rail, sea) within a single, integrated supply chain to optimize efficiency and meet the unique requirements of shipments. Right from shipment planning, Route Optimization, Carrier Selection, Documentation, Containerization, Tracking and to Communication and Coordination, Last-Mile Delivery, Performance Evaluation.

RMLL encompasses a diverse range of industries, including but not limited to Glass, Plywood, Paper, Edible oil, Gypsum boards, Iron & Steel, Scraps, Tiles, Sanitary, Liquor industry. Its commitment to excellence is exemplified in ability to tailor its logistics and supply chain solutions to meet the unique demands of each industry it serves. The company understands the intricacies and specific requirements of these varied sectors, allowing it to provide customized and efficient services that contribute to the seamless functioning of clients' operations. This broad industry coverage underscores RMLL's adaptability and commitment to being a comprehensive and reliable partner, capable of navigating the distinctive challenges presented by diverse business landscapes. 

The company is in collaboration with one of the leading players in Logistics Industry. It has a tie up agreement with them on yearly renewal of contract of railway shipments for its clients. For Railway and Coastal transport orders, it deals with their authorized designated person. As of the date of filing this offer document, it had 17 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden IPO of 1011200 equity shares of Rs. 10 each at a fixed price of Rs. 84 per share to mobilize Rs. 8.49 cr. The issue opens for subscription on August 22, 2024, and will close on August 27, 2024. The minimum application to be made is for 1600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 26.53% of the post-IPO paid-up capital of the company. The company is spending Rs. 1.24 cr. for this IPO process, and from the net proceeds, it will utilize Rs. 5.50 cr. for working capital, and Rs. 1.75 cr. for general corporate purposes. 

The issue is solely lead managed by Gretex Corporate Services Ltd., and Bigshare Services Pvt. Ltd. is the registrar to the issue. Gretex Group's Gretex Share Broking Ltd. is the market maker for the company. The issue is underwritten to the tune of 50% by Gretex Corporate and balance 50% by Gretex Share Broking.

The company issued entire initial equity shares at par value, and has also issued bonus shares in the ratio of 55 for 1 in January 2024. The average cost of acquisition of shares by the promoters is Rs. 0.13, Rs. 0.18, Rs. 0.66, and Rs. 10.38 per share. 

Post-IPO, company's current paid-up equity capital of Rs. 2.80 cr. will stand enhanced to Rs. 3.81 cr. Based on the upper IPO price band, the company is looking for a market cap of Rs. 32.01 cr.  Small paid-up equity capital post-IPO indicates longer gestation for migration to mainboard. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 47.74 cr. / Rs. 0.95 cr. (FY22), Rs. 72.96 cr. / Rs. 2.01 cr. (FY23), Rs. 71.84 cr. / Rs. 1.79 cr. (FY24). The company has posted inconsistency in its top and bottom lines for the reported periods. In fact on a static top line for the last two fiscals, it posted declining margins.

For the last three fiscals, it has reported an average EPS of Rs. 6.16, and an average RoNW of 57.12%. The issue is priced at a P/BV of 4.99 based on its NAV of Rs. 16.84 as of March 31, 2024, and at a P/BV of 1.36 based on its post-IPO NAV of Rs. 61.66 per share. 

If we attribute FY24 earnings to its post-IPO fully diluted paid-up capital, then the asking price is at a P/E of 17.87. Thus the issue appears fully priced. 

For the reported periods, the company has posted PAT margins of 2.00% (FY22), 2.76% (FY23), 2.50% (FY24), and RoCE margins of 83.06%, 69.55%, 48.98% respectively for the referred periods. 

DIVIDEND POLICY:
The company has not declared 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. 

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown as of August 21, 2024). However, they are not comparable on an apple-to-apple basis.

MERCHANT BANKER'S TRACK RECORD:
This is the 22nd mandate from Gretex Corporate in the last three fiscals (including the ongoing one), out of the last 10 listings, 1 opened at discount and the rest listed with premiums ranging from 5.83% to 187.36% on the date of listing.