The IPO of Kishore Biyani-led Future Group’s logistics arm– Future Supply Chain Solutions saw muted demand on the first day and got subscribed by 32%, backed mainly by demand from institutions. The issue registered demand to the tune of 21,66,494 as against 68,49,200 shares on offer. Notably, the QIB portion registered the highest demand as institutions bid for 9,86,568 shares as against 19,56,914 shares reserved for them, implying subscription of 51%. Notably, the retail investor portion clocked the second highest demand investors bidding for 9,10,624 shares as against 34,24,600 shares reserved for them, implying demand to the tune of 27%. The Non-institutional portion registered the least demand with just 18% of the total shares bid for on first day. The issue will remain open till December 8.
Future Supply Chain Solutions looks to raise up to Rs 650 crore from the issue. There are a total of 97,84,570 equity shares on offer, with an offer for sale of up to 78,27,656 equity shares by Griffin Partners and up to 19,56,914 shares by the promoter, Future Enterprises. Since, it’s a complete offer for sale, Future Supply Chain Solutions will not receive any proceeds from the issue.
The company has set a price band of Rs 660-664 per share. Bids can be made for a minimum lot of 22 equity shares and in multiples of 22 equity shares thereafter. Many brokerages have in fact pointed out that the valuation is not cheap, and there’s limited upside to the issue.
“In terms of valuations, the pre-issue P/E works out to 39.9x its 1HFY2018 annualized earnings (at the upper end of the issue price band), which is lower compared to its peers like Mahindra Logistics. However, Mahindra Logistics has lower promoter group business (internal business), which is ~54% v/s. ~70% of FSCSL. Further, Mahindra Logistics had reported non-promoter revenue CAGR of ~46% v/s. de-growth of FSCSL over FY15-17. Despite the above favorable factors and lower valuations compared to Mahindra Logistics, we however, believe that all the positives are fully factored in the company’s current valuations, which does not provide any further upside for investors. Hence, we recommend Neutral rating on the issue,” Angel Broking said in its report.