VRL Logistics Limited (VRL) is tapping the capital markets with its fresh issue and offer for sale which had opened on Wednesday and closes today Friday the 17th April. The issue would raise between Rs 450 and Rs 477 crs in a price band of Rs 195-205. The Anchor book was oversubscribed and were allotted 68.47 lac shares at the top end of the band at Rs 205. The issue with today being the last day is oversubscribed 1.94 times with QIB 1.27, HNI 1.82 and Retail 2.38 times.
| Total issue size in shares | 2,31,16,000 Equity Shares at the lower end of the band to 2,28,23,317 at the upper band |
| QIB’s | 1,15,58,000 Equity Shares at lower to 1,14,11,659 Equity Shares at upper band |
| Non Institutional Investors | 34,67,400 Equity Shares at lower to 34,23,498 Equity Shares at upper band |
| Retail Investors | 80,90,600 Equity Shares at lower to 79,88,161 Equity Shares at upper band |
| Book Running Lead Managers | ICICI Securities Limited |
| HSBC Securities & Capital Markets (Jndia) Private Limited | |
| Isssue Opening Date | Wednesday 15th April |
| Isssue closing date | Friday 17th April |
| Anchor Investors | Alloted 68,46,994 equity Shares at Rs 205 |
| Paid -up Capital Pre IPO | 8,55,36,162 Equity Shares |
| Paid -up Capital Post IPO | 9,15,36,162 Equity Shares at lower band to 9,12,43,479 at higher band |
| Market Cap pre listing | Rs 1,667.96 crs at the lower end and Rs 1,753.49 crs at the upper end |
| Market Cap post listing | Rs 1,784.96 crs at the lower end and Rs 1,870.49 crs at the upper end |
| Bid Lot | 65 Equity Shares |
| Bidding Amount for Retail | 975 Equity shares at Rs 205 or Rs 199,875 per application |
| ONE LOT APPLICATION | The issue will be subscribed on lot basis hence apply 65 shares paying Rs 13,325 |
| Application srequired for retail | You need 1,22,894 application of 65 shares each to subscribe retail portion once |
Business
VRL is a pan-India transport company providing parcel delivery service across the country. The company provides full truck load, less than truck load services across 28 states and 4 union territories. VRL also operates luxury bus services across 8 states which include Karnataka, Andhra Pradesh, Telengana, Maharashtra, Goa, Tamil Nadu, Gujarat and Rajasthan. The company focuses on heavy density urban cities like Mumbai, Bengaluru, Hyderabad, Pune and Panjim and owns currently 455 buses of which 53 are staff buses.
In the transport section the company has 3,546 vehicles as of 31st
December and it featured in the Limca book of records for the largest fleet of owned trucks 2013 as of May 2013. Incidentally the very same Limca book for the year 2015 states the largest fleet owner as SVLL (Siddhi Vinayak Logistics Limited, a company based out of Navi Mumbai having over 6,737 trucks as of 16th April 2014.
Its immaterial who owns the record but owning and managing over 3,500 trucks and that too profitably is a mammoth job by itself. The word ‘logistics’ in the stock market denotes end to end solution and rising up the value chain. VRL is a vanilla transporter in that sense of the word and this is further borne out of the fact that less than 1% of its turnover comes from a single client. It is a true transport company which would have millions of customers using the services for transporting goods from one corner of the country to the whole country and vice versa.
Financials
The revenue of VRL on a consolidated basis has grown from Rs 1,135 crs in year ended March 2012 to Rs 1,355 in March13, to Rs 1,503 crs in March 14 and Rs 1,279 crs in the nine month period ended December 2014. The net profit for the same period was Rs 76.7 crs, which fell to Rs 45.7 crs, rose to Rs 57.1 crs and was Rs 71.7 crs for the nine month period ended December at Rs 71.7 crs. If one were to annualise the same expected net profit for the year ended March 2015 would be Rs 95.6 crs.
| Revenue from Operations | ||||
| Revenue from Operations | 12738.07 | 14937.84 | 13254.97 | 11303.83 |
| Other income | 55.73 | 99.93 | 98.27 | 48.95 |
| Total Revenue | 12793.80 | 15037.77 | 13353.24 | 11352.78 |
| Expenses | ||||
| Operating Expenses | 8990.74 | 10911.73 | 9626.49 | 7911.18 |
| Employee Benefits expense | 1456.79 | 1744.59 | 1482.55 | 1289.19 |
| Finance Costs | 449.89 | 599.13 | 591.23 | 651.42 |
| Depriciation and Amortisation Expenses | 691.75 | 866.16 | 823.37 | 695.98 |
| Other expenses | 151.36 | 215.76 | 193.71 | 184.37 |
| Total Expenses | 11740.53 | 14337.37 | 12717.35 | 10732.14 |
| Profit before Exceptional item and Tax | 1053.27 | 700.40 | 635.89 | 620.64 |
| Add Exceptional Item | 0.00 | 66.37 | 0.00 | 0.00 |
| Profit Before Tax | 1053.27 | 766.77 | 635.89 | 620.64 |
| Current Tax net of MAT credit | 332.26 | 137.37 | 95.34 | 83.95 |
| Deferred tax | 4.11 | 57.64 | 83.52 | -230.53 |
| Profit for the period/year | 716.90 | 571.76 | 457.03 | 767.22 |
The EPS for the year ended March 2014 was Rs 6.68 and for the nine months ended December 2014 was Rs8.38. On the annualised basis and fully diluted equity post the IPO the same would be Rs10.42 at the lower band and Rs10.45 at the upper band. This would translate into a P.E. of 18.66 and 19.68
Risks/Concerns
The average age of the fleet owned by VRL is just under nine years. The fleet needs to be replaced and increased in size as well. To this extent they need to add a larger number of vehicles than what they have been doing so far. The capex on vehicle addition would thus stand increased. Secondly the company being a vanilla transport company lacks pricing power and has therefore to content with rising costs on a regular basis. While they have managed to combat this by in house development on so many fronts like systems, technology, direct purchase of vehicles and tyres from manufacturers and so on, margins would always remain under pressure.
The issue is priced a little aggressively and there would be some scope for appreciation based on the addition in fleet that the company has planned in the coming years. The issue is already subscribed and allotment in the retail category would be on the basis of lottery.
SEBI Disclaimer: – I intend to apply for one lot for retail investors.
