Snowman Logistics Limited (Snowman) is tapping the capital markets with its IPO for 4.2 cr shares in a price band of Rs 44-47. The issue would raise between Rs 184.8 and Rs 197.4 crs. The company has completed earlier its anchor allocation to 5 entities comprising of three investor groups. The issue closes today and is already subscribed 2.84 times overall. The bucket wise subscription so far is 1.49 times QIB, 0.82 times HNI and retail 12.94 times making a total of 2.84 times.
The company Snowman is in the business of integrated temperature controlled logistics service provider with an ability to service customers on a pan-India basis. The company provides temperature controlled warehouses with a temperature range of plus 20 degrees centigrade to minus 25 degrees centigrade. The company also provides ambient temperature storage. The company has 23 temperature controlled warehouses in 14 locations spread across the country which offer a total storage space of 61,543 pallets. The capacity would be increased to 85,000 pallets by the end of March 2015 and further increased to 1,00,000 pallets by year ended March 2016.
The business of Snowman consists of two broad parts with storage being one part and currently accounting for 50% of the business and 40% EBITDA margins while transportation accounts for the other 50% of the business and 12% EBITDA margins. The company received on an average Rs 1,670 per pallet last year and taking a capacity utilisation of 80% and the increased capacity of 80,000 pallets which ae already in place with a 10% escalation in realisation, one can safely assume that the company would do a business of around Rs 260 crs in the year ended March 2015.
The company is promoted by Gateway Distriparks Limited and has many marquee investors in its ranks. There is an entry barrier in this business simply because you need to have a pan-India presence to cater to national players and offer an end to end solution. A classic example would be say an ice-cream manufacturer who would like his goods to be stored under frozen condition and e delivered to the ice cream shop when required.
The company achieves its distribution through 370 reefer vehicles which comprise of 307 leased and 63 owned vehicles.
The company reported revenues of RsRs 64.20 crs in the year ended March 2012, rose to Rs 114.10 crs in March 13 and further to Rs 155.22 crs in March 2013. The net profit for the same period was Rs 4.92 crs rising to Rs 19.87 crs and further to Rs 13.22 crs. The company enjoys a tax deduction of 150% on its investment in the year of making the investment in the business and hence the difference between EBITDA and PAT is substantial.
The issue is managed by HDFC who does not have a very impressive track record as merchant banker. They have handled just two issues so far which include Infratel the tower company from Bharti Airtel and the issue from Muthoot. In both these issues the merchant baker was one of many and did not have any significant role to play.

As far as this issue is concerned there are two glaring mistakes in the share application form. The first is there is no issue opening date or closing date published on the form. Secondly the form has highlighted a box which reads “Snowman Logistics Limited Public Issue –R” and gives an impression that the cheque for the issue has to be in this name. In reality this is incorrect and the cheque is to be prepared/issued in another name. This speaks volumes about the efficiency of the merchant banker who is handling his first issue independently. One hopes that the company, Stock Exchanges, registrar to the issue and SEBI consider applications with the wrong name favourably and not just reject applications.