Ritco Logistics BSE SME IPO review (Apply)

• RLL is cost efficient logistics partner. It implies unified technology for optimum benefits.
• It plans to more than double its operational fleets by 2025.
• The issue is priced reasonably against industry average/major listed peers.
• Investment for medium to long term may be considered.

ABOUT THE COMPANY:
Ritco Logistics Ltd. (RLL) is an integrated supply chain solution company, providing land-based logistics, warehouse and other value added services in India. It offers a broad, integrated freight transpiration service under bulk load dedicated load (to and fro), full truckload, less than truckload utilizing company-owned fleets or through an independent third-party operator. It also offers warehouse and other value-added services. It follows the 3PL business model along with an optimal mix of necessary assets for its operations. This strategy has enhanced its ability to satisfy multiple supply chain needs of its customers. It also provides its fleet on rental services to small retail customers.

As on filing of RHP the company enjoys PAN-India presence with a network of 30 branches that includes 6 fleet centers and 9 warehouses. Currently, it has over 1400 fleets out of which more than 350 fleets are owned by it. On an average basis, its 70% fleets are on roads daily. It has more than two decades relations with regular customers that include corporate like Reliance Industries, Indian Oil, Haldia Petrochem, Mitsubishi, Unilever, Perfeti, Emami, ITC, JK Tyres, Ceat, MRF, Apollo Tyres etc. Thus it serves across the sectors like petrochemicals, FMCG, Consumer Durables, Tyre industries etc.
With the optimal use of unified technology and continued up gradation, it derives cost efficiency in its operations that helps it to post growing top and bottom lines. Its average Out of its own 355 fleets 325 are just less than 3 years old representing young fleets that is leading to operational efficiency. This has helped it in scaling up its revenue and earnings. Realizing benefit of speedy fleet expansion, RLL now mulls to more than double its operational fleets by 2025.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its working capital, technology up gradation, warehouse developments, fleet center up gradation and general corpus fund needs, RLL is coming out with a maiden IPO of 6600000 equity shares of Rs. 10 each via book building route. The issue comprises of fresh equity issue of 5000000 shares and an offer for sale of 1600000 shares. It has fixed a price band of Rs. 71-73 per share. RLL hopes to mobilize Rs. 46.86 cr. to Rs. 48.148 cr. (based on lower and upper price bands). Minimum application is to be made for 1600 shares and in multiples thereon, thereafter. The issue opens for subscription on 28.01.19 and will close on 30.01.19. Post allotment, shares will be listed on BSE SME. Issue is solely lead managed by Pantomath Capital Advisors Pvt. Ltd. and Link Intime India Pvt. Ltd. is the registrar to the issue. Issue constitutes 26.96% of post issue paid up equity capital of the company. It has raised entire equity at par so far and has issued bonus shares in the ratio of 8 shares for every 5 shares held in March 2018. Average cost of acquisition of shares by the promoters is Rs. 0.002 and Rs. 0.79 per share. Post issue, its current paid-up equity of Rs. 19.48 cr. will stand enhanced to Rs. 24.48 cr. Promoters will continue to hold around 73% in post issue equity.

FINANCIAL TRACK RECORD:
On the financial performance front, for the last three fiscals, RLL has posted turnover/net profits of Rs. 314.16 cr. / Rs. 1.44 cr. (FY16), Rs. 328.96 cr. / Rs. 3.82 cr. (FY17) and Rs. 343.91 cr. / Rs. 10.28 cr. (FY18). For the first six months of FY19 it has earned a net profit of Rs. 6.21 cr. on a turnover of Rs.208.60 cr. For the last three fiscals, it has posted an average EPS of Rs. 3.42 and an average RoNW of 14.81%. The issue is priced at a P/BV of 2.62 on the basis of its NAV of Rs. 27.81 as on 30.09.18. Unified Technology coupled with cashless management and online tracking and strategic alliance with fleet suppliers RLL has done suitable cost management and is a most preferred logistics partner. It has a debt-equity ratio of 2.15 as on 30.09.18. If we annualize latest earnings and attribute it on fully diluted equity post issue then asking price is at a P/E of around 14.3 against an industry average of 27. This issue is reasonably priced. Based on its capital and financial parameters, RLL is an early aspirant for migration to the main board.

COMPARE WITH LISTED PEERS:
As per offer documents, it has shown Mahindra Logistics, VRL Logistics, TCI, Gati and AVG Logistics as its listed peers that are currently trading at a P/Es of around 48, 29, 19, 31 and 10 ( as on 24.01.19 closing).

LEAD MANAGER'S TRACK RECORD:
On merchant banker's front, this is the 77th mandate from its stable. Out of last 10 listings all have opened at a premium ranging from 0.05% to 8% on the day of listing.