Raigad-based logistics company Navkar Corporation (NCL), which provides container freight station services and trading activities, is coming out with an initial public offering (IPO) of 3.87-4.08 crore equity shares with a face value of Rs 10 each. Sharekhan, a brokerage firm is positive on the public issue of Navkar Corporation.

Post-issue, the shareholding of the promoters in the company will fall to 71.7-72.9 per cent from the current holding of 100 per cent. The issue is priced at Rs 147-155 per share and the company intends to raise Rs 600 crore.

The company plans to use the net proceeds for capacity enhancement of the Somatane container freight station (CFS; Rs 114.5 crore), development of the non-notified areas of its CFSs (Rs 54.3 crore) and for the establishment of a logistics park at Valsad (Rs 314.6 crore).

The issue will open for subscription on August 24 and is scheduled to be closed on August 26, 2015. Axis Capital, Edelweiss Financial Services, SBI Capital Markets are the lead managers to the issue.

Below are the two reasons why Sharekhan is bullish on the Navkar Corporation public offer.

1) NCL at the upper price band is likely to trade at P/E and EV/EBITDA of 30.2 and 22.3 respectively its 2014-15 earnings. As compared with the large players like Container Corporation of India and Gateway Distriparks, the valuation multiples seem higher although Sharekhan believes the company’s expansion plans which are likely to be materialised in the next financial year will significantly increase its capacity and lead to higher earnings.

2) Further, the logistics sector has been in the limelight on account of proposed dedicated freight corridors, Goods and Services Tax (GST) policy and huge investments in the sector.

Consequently, considering the company’s line of business and growth strategy we have a positive view on the company.