The Initial Public Offering for Future Supply Chain Solutions opens today for subscription. The promoters are aiming to raise around Rs 650 crore from the IPO whose three-day window will close on Friday. The shares are offered in the price bracket of Rs 660-664.
The total equity shares on offer are 97,84,570, out of which 78,27,656 equity shares are by Griffin Partners and 19,56,914 equity shares by the promoter, Future Enterprises. Future Supply Chains Solutions are not going to see any of the proceeds from the IPO as this is a complete offer for sale.
A day ahead of the IPO, the Future Supply Chain had already allocated 29.35 lakh equity shares to 16 anchor investors at the upper end of the price bracket effectively garnering around Rs 195 crore. The 16 anchor investors include HDFC Trustee Co., Reliance Capital Trustee Co. Ltd, L&T Mutual Fund and IDFC Mutual Fund.
The minimum bid is set for a lot of 22 equity shares and thereafter you can place your bids in multiples of 22 equity shares. The Kishore Biyani-led Future Supply Chains Solutions, the logistics arm of the Future Group claims that it is one of the largest third-party logistics solutions firms in the country. It adopts a business model which is asset light wherein it leases out assets like warehouses, transport vehicles etc that are necessary for operations.
Its three verticals are contract, express, and temperature controlled logistics, and the firm has significant presence in all three segments. It has 42 distribution centres along with 3.84 million sq ft of warehouse space. Future Supply Chain also operates two distribution centres and as much as 0.37 million sq ft of warehouse space of its customers.
Numbers from the quarter ending September 2017 showed the company’s net worth to be Rs 326 crore with an effective book value of Rs 81 per share. The compounded annual growth rate of its revenue was 17 per cent and net profit grew at 36 per cent over FY 2015-17. In the last three years, earnings before interest, tax and depreciation and amortisation (EBITDA) margin have been between 13-15 per cent. Over the last five fiscals, the firm has not declared any dividends.
The book-running lead managers to this IPO are CLSA India, Edelweiss Financial Services, Nomura Financial Advisory and Securities (India) Pvt. Ltd, IIFL Holdings Ltd, IDFC Bank Ltd, and Yes Securities (India) Ltd.
Meanwhile, brokerage firms have pointed out that though the valuations are cheaper that its major competitors, it appears to give little upside to investors.
Angel Broking said in its report, that even though the valuation was lower than the likes of Mahindra Logistics, the IPO gives little upside to investors.
“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 a report.
Similarly, Choice Brokers said in their report that the IPO is aggressively priced, there is limited room for upside and advised investors with a “subscribe with caution” rating.
Choice Broking said in its report: “The company is demanding valuation compared to its peer Mahindra Logistics, which is trading at P/E multiple of 59.4(x) and 54(x) on the basis of FY17 and FY18E (annualized) EPS), looks cheap, however its one fifth of peer business size. Thus, considering the above observations, we are of the view that at P/E(x) of 58.2, the issue is aggressively priced leaving limited room for further upside. Thus, we assign ‘Subscribe with Caution’ rating to the issue.”