Analysis of Navkar Corporation IPO
Raigad based Logistic Company Navkar Corporation is going to hit capital market with IPO on 24th August to raise Rs.600 crore. The company is majorly engaged in providing services of Container Freight Station (CFS). Custom Freight Station offers wide range of services including customs clearance, handling and the temporary storage of import or export laden and empty containers. Other activity of the company includes trading of Agro Products.
About Navkar Corporation
Founded in 1983, Navkar Corporation is a CFS operator having three units – Ajivali CFS I and Ajivali CFS II at Ajivali and Somathane CFS at Somathane. All of the three CFS units are located in close proximity to the Jawaharlal Nehru Port, India’s largest container port. As of December 2014, Company’s Aggregate installed handling capacity of all three units stands at 310,000 TEUs per annum. Company also offers cargo storage facilities at CFSs and in addition, services of packing, labeling/bar-coding, palletizing, fumigation and other related activities are also provided at the warehouse which occupies an aggregate area of 500,000 sq. ft. Company also own and operate a private railway freight terminal (“PFT”) equipped with 461 trailers for the transportation of cargo between our CFSs and the JN Port by road.
Navkar Corporation IPO Details
- Issue Opens On: Monday, August 24, 2015
- Issue Closes On: Wednesday, August 26, 2015
- Issue Type: Book Building
- Issue Price Band: Rs.147 – Rs.155
- Face Value Per Share: Rs.10
- Minimum Bid Lot: 95 Equity Shares
- Minimum Order Value: Rs.13,695 to Rs.14,725
- Issue Size: Rs.600 Crores (Fresh Issue for 510 Crores + Offer for Sale of 90 Crores)
- Proposed Listing: Bombay Stock Exchange
- Lead Manager: Axis Capital, Edelweiss Financial Services and SBI Capital Markets
- Registrar: Link Intima India Pvt. Ltd.
Navkar Corporation IPO Issue Structure
- QIB: 50% of the Issue (193.55 to 204.08 Lakh Equity Shares)
- NIB: 15% of the Issue (58.06 to 61.22 Lakh Equity Shares)
- Retail Investors: 35% of the Issue (135.48 to 142.86 Lakh Equity Shares)
Objectives of Navkar Corporation IPO
The company is planning to deploy net proceeds of Fresh Issue in:
- Capacity enhancement of the Somathane CFS;
- Development of the non-notified areas of our CFSs; and
- Establishment of a logistics park at Valsad (near Vapi)
No funds from Offer for Sale will be attributed to the company as the same will be utilized towards part repayment/pre-payment of its existing shareholders.
Navkar Corporation Financial Data
- For the year ended 31st March, 2015 Company has booked net profit of Rs.73.14 crore on revenue of Rs.331 crore which translates into profit ratio of 22%.
- Profit after Tax (PAT) has increased from 17% to 22% in 3 years.
- Return on Net Worth has decreased from 22.50% in FY 12 to just 9.6% in FY 2015.
Turn On Points of Navkar Corporation IPO
- All the three CFS units of the company are located at the Ajivali and Somathane villages in Panvel, Maharashtra in close proximity to India’s Largest Container Port i.e. Jawaharlal Nehru Port.
- Huge Warehouse spread over 500,000 sq. ft. with additional services of packing, labeling/bar-coding, palletizing and fumigation.
- Well Established relationship with shipping lines and customs house agents such as United Arab Shipping Agency Company (India) Private Limited, NYK Line (India) Limited,, Hyundai Merchant Marine India Private Limited, Evergreen Shipping Agency (India) Private Limited and S. Ramdas Pragji Forwarders Private Limited.
- Dedicated infrastructure equipped with latest technologies to handle cargo and other related services.
Turn Off Points of Navkar Corporation IPO
- Company is benefitted majorly due to high traffic at JN port which if in case does not increase as projected could have an adverse effect on the business operations and financial condition.
- With effect from financial year 2015, Company has discontinued on of its segment i.e. trading of agro products which was reaping substantial portion of revenues.
- As of December 2014, Company has a substantial indebtedness of Rs.525 crore, which requires significant cash flows to service, limiting ability to operate freely.
- Various litigation involving Company, Promoters, Directors and Group Entities are outstanding, which, if determined adversely, may affect smooth running business operations.
- As of September 30, 2014, company has disclosed contingent liabilities of Rs.8.66 crore which if materialize could adversely affect company’s financial condition.
Should You Subscribe to Navkar Corporation IPO or not?
- At the asking price band of Rs.147 to Rs.155, the PE ratio, taking EPS of FY15 as base, translates into 21X at floor price and 22.15X at cap price, which seems reasonable as per the industry’s average PE of 31.19X.
- NAV of Rs.235.92 per share which is highest amongst its peer group companies, the Price to Book Value comes to 0.38 which looks highly undervalued.
- Recommendation: Navkar Corporation IPO is an attractive opportunity for retail investors for short-term as well as for long-term Gains. I am personally interested in this IPO and would be putting money at Cut-off price.