The IPO (initial public offering) of Mahindra Logistics is all set to open today for bidding. Mahindra Logistics is a third-party logistics service provider and is aiming to raise around Rs 829.35 crore at the upper end of the price band. The company has set a price band of Rs 425-429 per share for its IPO. The IPO will remain open for three days for subscription starting 31 October to 2 November. Mahindra Logistics is the seventh Mahindra Group brand to enter the stock market. Mahindra Group has six more companies that are listed on Indian stock exchanges namely, Mahindra and Mahindra, Tech Mahindra, Mahindra and Mahindra Financial Services, Mahindra Holidays & Resorts India, Mahindra CIE Automotive and EPC Industries. We take a look at seven key things about Rs 829 crore public offer of seventh Mahindra Group brand.
The IPO of Mahindra Logistics doesn’t contain fresh issue of equity shares. The public offer will be based on 100% share sale through the OFS (offer for sale) route from its existing shareholders totalling 1.93 crore equity shares of face value of Rs 10 each. Three promoters are selling a sizeable portion of their shareholding through OFS route. The OFS include 96.66 lakh shares by Mahindra and Mahindra, 92.71 lakh shares by Normandy Holdings and up to 3.95 lakh equity shares by Kedaara Capital Alternative Investment Fund (AIF). Also, the offer includes a reservation of up to 1.25 lakh equity shares for subscription by eligible employees with a discount of Rs 42 per share.
The floor price is set at 42.5 times and the cap price is set at 42.9 times the face value. The minimum bid lot for the offer is fixed at 34 equity shares and in multiples of 34 shares thereafter. Kotak Mahindra Capital Company Limited and Axis Capital Limited are the book running lead managers while Link Intime India Private Limited is the registrar to the issue. Based on basic EPS for the year ended 31 March 2017 on a standalone basis the shares of Mahindra Logistics have a P/E ratio of 65.2. Out of total size of 1.93 crore shares, 38.41 lakh shares are allocated for QIB (qualified institutional) category; 57.62 lakh shares are reserved for anchor investors; 28.81 lakh shares are blocked for NII (non-institutional investors) while 67.22 lakh shares are there for retail investors.
Mahindra Logistics raised a little over Rs 247 crore from anchor investors, ahead of its initial public offering tomorrow.
The company’s IPO committee has finalised allocation of 57,62,203 equity shares to 15 anchor investors at Rs 429 apiece, also the upper price band for the offer, Mahindra Logistics informed to the stock exchanges.
All the IPO proceeds will go to the promoters and none to the company. “As the offer is an offer for sale and our company will not receive any proceeds from the offer, our company is not required to appoint a monitoring agency for the offer,” according to DRHP.
Mahindra Logistics is one of India’s largest third-party logistics solutions providers in the Indian logistics industry. The company said it has an “asset-light” business model pursuant to which assets necessary for its operations such as vehicles and warehouses are owned or provided by a large network of business partners. The company offers customized and end-to-end logistics solutions and services including transportation and distribution, warehousing, in-factory logistics and value-added services through its SCM (supply chain management) business. Whereas, the company provides technology-enabled people transportation solutions and services across India to IT, ITeS, business process outsourcing, financial services, consulting and manufacturing industries through its PTS (people transport solutions) business.
Mahindra & Mahindra is the promoter of the company. As on the date of filing of DRHP, M&M held 51,478,330 equity shares which represent 73.19% of the subscribed and paid-up equity share capital of the company. M&M is engaged in the automotive, tractor and farm mechanisation sectors. The automotive portfolio includes two-wheelers, passenger vehicles, light and heavy commercial vehicles and electric vehicles. M&M is listed on BSE and NSE.
Mahindra Logistics reported a rise of 28.08% in the consolidated net profit to Rs 46.06 crore for the financial year ended 31 March 2017. The company has posted a net profit of Rs 35.96 crore in the FY 2015. The total income of the company grew by 28.84% to Rs 2,676.25 crore.
Pirojshaw Sarkari, chief executive officer, Mahindra Logistics said, “Supply chain management (SCM) and corporate people transport solutions (PTS) business contributed 89.89 % and 10.11%, respectively, to the total revenue from operations in the three-month period ended June 2017.” Pirojshaw Sarkari said that one of the enablers for logistics is the introduction goods and service tax (GST). “The logistics spend in India is 13% of the GDP. Third-party logistics is only 5% of the entire logistics size and that translates into Rs 300 billion and is stated to grow to Rs 500 billion with a CAGR of 20% by 2020,” Pirojshaw added.