Snowman Logistics IPO – Crisil rates 4/5 – Should you invest?
After Wonderla IPO and after long time, there is one more non SME IPO, Snowman Logistics IPO would hit market on 26th August, 2014. Crisil rates this Snowman Logistics Limited IPO at 4/5 which indicates above average fundamentals. Revenues have been growing consistently in the last 5 years. What should be your take on this Snowman Logistics Initial Public Offering? What are the risks involved in this IPO? Should we invest in a Snowman Logistics IPO or not?
About Snowman Logistics Limited
Bengaluru based, Snowman Logistics is integrated temperature controller logistics service provider. Its business is classified into. a) Temperature controlled services and b) Ambient distribution.
Their warehousing solutions cover the complete spectrum of temperature ranges from ambient to chilled and frozen (i.e. +20ºC to -25ºC). They offer blast freezing facilities at their temperature controlled warehouses in Bengaluru, Mevalurkuppam, (near Chennai), Visakhapatnam, Serampore (near Kolkata), Taloja (near Mumbai), Ahmedabad, Palwal (near Delhi), Mubarakpur (near Chandigarh) and Surat. As of March 31, 2014, their operations comprised 23 temperature controlled warehouses across 14 locations in India including Serampore (near Kolkata), Taloja (near Mumbai), Palwal (near Delhi), Mevalurkuppam, (near Chennai) and Bengaluru capable of warehousing 58,543 pallets and 3,000 ambient pallets.
Issue details of Snowman Logistics IPO
- IPO opens: 26-August-2014
- IPO closes: 28-August-2014
- Price band: Rs 44 to Rs 47 on book building process. Means when you apply, you can quote any share price between Rs 44 and Rs 47. If it is oversubscribed by investors at highest band, investors who invested at such high band only would be alloted. For others, company would refund the money.
- Minimum Shares: 300
- Minimum investment: Rs 13,200
- No. of shares open for subscription: 4.2 Crores
- Issue size: Rs 187 Crores to Rs 197.2 Crores
- Lead Managers: HDFC Bank
- Listing: BSE and NSE
- Download Snowman Logistics IPO Prospectus from BSE website here
Purpose of the IPO: The funds would be used for the following purposes.
- Setting up a new temperature controller and ambient warehouses
- Long Term Working Capital Requirements and
- General Corporate Purposes
- Company generated revenue of Rs 36.9 Crores for the year ended Mar-10 and Rs 155.20 Crores for the year ended Mar-14.
- Company posted a profit of Rs 4.1 Crores for the year ended Mar-10 and a profit of Rs 22.4 Crores for the year ended Mar-2014.
Reasons to invest Snowman Logistics IPO
- Good revenue growth of Rs 36.9 Crores in FY 2010 to Rs 155 Crores in FY 2014. Its operating income CAGR growth of 48.5% between FY 10 Vs FY13.
- Good profit growth at CAGR of 79% between FY 10 to FY 13.
- Unique business model.
- This issue has been graded by Crisil as 4/5 which indicates above average fundamentals.
Reasons not to invest in a Snowman Logistics IPO
- Criminal proceedings pending against one of the Director and if determined against could have an adverse impact on business and financial results of the company.
- Outstanding legal proceedings involving company, promoters and group entities. Any negative outcome, can impact the company performance.
- It has negative cash flows in 5 years. This indicates that it need to borrow loans for high rate of interest and has difficulty in managing working capital requirements. This would affect the profits of the company.
Recommendation / Investment strategy:
- Its average EPS in the last 3 years ending Mar-2014 is Rs 1.70. Its EPS for year ended Mar-14 is 1.96. Considering the issue price of Rs 44 to Rs 47, the P/E Ratio based on average EPS of 3 years works out to be between 26 and 27. There is no listed in India in such similar business, hence comparison of the P/E Ratio OR the issue price is not possible.
- Snowman Logistics Limited IPO has several positive factors. Its revenues are consistently growing. Profits in the last few years has seen good improvement. The issue price only looks on higher side. Though there are a few negative factors, you can invest in this IPO and can expect a good, decent return in 1-2 years. You can subscribe at Rs 47 (higher price band) per share.
- I am sure this would be one more Wonderla Holidays IPO where investors has gained handsome returns of 150% till now.
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