VRL Logistics IPO Review
To fulfill the objective of increasing the fleet of commercial vehicles, the South-Indian based parcel delivery company VRL Logistics Limited is planning to hit the market with Initial Public Offer (IPO) on 15th April, 2015 which will remain open till 17th April, 2015.
About VRL Logistics Limited
VRL Logistics Limited is a Karnataka based private company, majorly engaged in providing surface logistics and parcel delivery services across 28 states and 4 union territories through 624 branches and 346 agencies to the industries such as FMCG (fast moving consumer goods), food, textiles, pharmaceutical, apparel and furniture among others. VRL Logistics also operates a luxury bus services across western and southern states besides car carrier vehicles and vehicles for liquid transportation.
Together with the PAN-India, company has a fleet of 3,456 commercial vehicles which makes it one of the largest private sector company engaged in the field of logistics.
VRL Logistics IPO Details
- IPO Opening Date: 15th April, 2015
- IPO Closing Date: 17th April, 2015
- Face Value Per Share: Rs.10
- Issue Price Band: Rs.195 to Rs.205
- Minimum Subscription/Investment: 65 shares and in multiples of 65 shares thereafter
- Issue Size: Rs.450 crore to Rs.474 crore
- Lead Manager: ICICI Securities and HSBC Securities and Capital Markets (India)
- Proposed Listing Platform: BSE and NSE
- Prospectus: Download VRL Logistics IPO Prospectus for HERE
VRL Logistics IPO Objectives
VRL Logistics is looking for expansion and will deploy the sale proceeds of Rs.67.5 crores in acquiring 248 new goods and transportation vehicles. Apart from the expansion the company will also reduce the debt burden by Rs.28 crores. The remaining sale proceeds will be used in general corporate purposes which includes marketing, brand-building etc.
VRL Logistics Financial Data
1. Company recorded revenue of Rs.1274 crores for the 9 months ended December 31, 2014. The sales figures of past 5 years have shown consistent increment with an average of 20%.
2. Company has posted a profit (PAT) of Rs.79 crores for the 9 months ended December 31, 2014. The profit margins of the company for the past five years are inconsistent with a zigzag trend but the profit for the current year is showing a steep rise which is good.
3. The Basic and Diluted EPS for FY 2014 is Rs.7.21 per share. The last 3 years average EPS reported at Rs.6.99 per share.
Why to Invest in VRL Logistics IPO?
1. The major competitive strengths of VRL Logistics comprise largest fleet of transportation vehicles, in-house vehicle body design facility and software technology capabilities.
2. VRL Logistics has a good track record and shown a consistent YoY growth rate with an average of 20%.
3. Profit margin for the current year has shown a sharp U-turn after reported low profits for the past 2 years.
4. VRL Logistics reported EPS for the year ended March 31, 2014 of Rs.7.21 per share while the Peer Company Gati has reported EPS of Rs.4.27 per share.
Why not to Invest VRL Logistics IPO?
1. Some of the managerial personnel are facing criminal proceedings which if found guilty, could adversely affect the business operations.
2. Fuel prices play a major role in the logistics business which is currently trading at the lowest, correction in the prices of the fuel may results in dip in the profit margins.
Should Retail Investors Subscribe to VRL Logistics IPO?
1. Company recorded earnings of Rs.71.69 crore on a turnover of Rs.1,280 crore for the 9 months ended December 31, 2014. If we annualize the earnings then EPS comes around Rs.11.17 and at an issue price of Rs.195-Rs.200 the PE ratio works out to be 18.
2. Peer Companies Gati has the highest PE ratio of 84.5 and Transport Company India Limited has the lowest PE of 25.84, thus the asking price of Rs.195 to Rs.200 looks rational.
3. Further, with NAV of Rs.35.84 per share, the Price to Book Value translates to 5.50+ which looks aggressive.
4. The suggestion for retail investors would be to Subscribe to VRL Logistics IPO. Although investors may not see a material short-term gain or listing gains but for the long-term period, the share price of VRL Logistics Limited may prove healthy.