Timescan Logistics NSE SME IPO review (May apply)

•    TLIL is primarily engaged in the port-related logistics services segment.
•    It operates in a highly competitive and fragmented sector.
•    Sudden boost in the top and bottom lines for the pandemic period is a bit surprising. 
•    Based on financial and other parameters, the issue is fully priced. 
•    Lower equity base post IPO indicates longer gestation for migration to the mainboard.

ABOUT COMPANY:
Timescan Logistics (India) Ltd. (TLIL) started the work as a customs clearance broker and then swiftly moved across domains, geographies and industries to offer a gamut of services for the logistics industry. The company offers its customers, transport management services and also freight-related services. It provides a complete range of services like Freight Forwarding (Sea freight & Airfreight), Customs Clearance, Warehousing, Transportation, Multimodal Transportation, Project cargo, Third Party Logistics, Vessel Charter, Packaging, loading/unloading and unpacking of items to facilitate customers with end-to-end solutions and other related value-added services.

TLIL is an ISO 9001:2015 certified company for Quality Management Services for providing services namely International Freight Forwarding, Customs Broker, Third-Party Logistics (3PL), Warehousing and Transportation services. It has been registered as Custom House Broker with Custom Office - Chennai, Custom Office - Vijayawada and Custom office - Mundra under Department of Revenue, Ministry of Finance and authorised to transact business as Custom Broker all over India by the Customs Office, Chennai under Department of Revenue, Ministry of Finance.

It is also registered as a Multimodal Transport Operator under the Multimodal Transportation of Goods Act, 1993 to carry on/commence the business of Multimodal transportation under the Directorate General of Shipping, Ministry of Shipping, Government of India. It is also having approx. 16,354 Sqft warehouse taken on long term lease Under Free Trade Warehousing Zone of JMD Chennai SEZ. Currently, it has 35 employees on its payroll.

Its top 5/10 customers' / suppliers' contribution for the last three fiscals has shown declining trends of the business. It is also depending on third party contracts. This sector is highly competitive and fragmented. This is raising a concern.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its needs for working capital (Rs. 4.15 cr.) and general corporate purpose (Rs. 0.30 cr.), TLIL is coming out with a maiden IPO of 944000 equity shares of Rs. 10 each at a fixed price of Rs. 51 per share to mobilize Rs. 4.81 cr. Minimum application is to be made for 2000 shares and in multiples thereon, thereafter. The issue opens for subscription on December 31, 2021, and will close on January 04, 2022. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 27.02% of the post issue paid-up capital of the company. TLIL will be spending Rs. 0.37 cr. for this IPO process. 

The issue has been solely lead managed by Finshore Management Services Ltd. and Cameo Corporate Services Ltd. is the registrar to the issue. Nikunj Stock Brokers Ltd. is the market maker for this IPO. 

The company has issued entire equity shares at par so far and has also issued bonus shares in the ratio of 4 for 1 in April 2012, and 50 for 1 in August 2021. The average cost of acquisition of shares by the promoters is Rs. 0.03 and Rs. 0.04 per share. 

Post issue, TLIL's current paid-up equity capital of Rs. 2.55 cr. will stand enhanced to Rs. 3.49 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 17.82 cr. 

FINANCIAL PERFORMANCE: 
On the financial performance front, for the last three fiscals, TLIL has posted turnover/net profits of Rs. 63.93 cr. / Rs. 0.83 cr. (FY19), Rs. 65.10 cr. / Rs. 0.80 cr. (FY20) and Rs. 99.76 cr. / Rs. 1.25 cr. (FY21). For the first quarter of FY22 ended on June 30, 2021, it has earned a net profit of Rs. 0.41 cr. on a turnover of Rs. 27.24 cr. Growth posted for the pandemic period is a bit surprising. 

For the last three fiscals, TLIL has posted an average EPS of Rs. 4.03 and an average RoNW of 21.25%. The issue is priced at a P/BV of 2.18 based on its NAV of Rs. 23.44 as of June 30, 2021, and at a P/BV of 1.65 based on its post-IPO NAV of Rs. 30.88.

If we annualize FY22 earnings and attribute it to fully diluted post issue equity, then the asking price is at a P/E of around 10.87. 

COMPARISON WITH LISTED PEERS:
As per offer documents, TLIL has shown ABC India, Maheshwari Logi., Ritco Logi., and Frontline Corp., as its listed peers. They are currently trading at a P/E of 21.11, 12.93, 18.62 and 6.44 (as of December 29, 2021). However, they are not truly comparable on an apple-to-apple basis. 

DIVIDEND POLICY:
The company has not declared any dividend for the referred periods in the offer documents. It will adopt a prudent dividend policy post listing based on its financial performance and future prospects. 

MERCHANT BANKER'S TRACK RECORDS:
This is the 19th mandate from Finshore in the last four fiscals (including the ongoing one). Out of the last 10 listings, 2 IPOs opened at discount and the rest with premiums ranging from 1.63% to 11% on the day of listings. Thus it has an average track record.