Navkar Corporation IPO – Should you invest?
Mumbai based, Navkar Corporation IPO will open for subscription on 24th August, 2015. Navkar Corporation Ltd is CFS operator in India. Its revenues grown by 1.6 times in last 5 years. It earned 22% as profits for FY2014-15. What are the positive factors of Navkar Corporation IPO? What are hidden factors of Navkar Corporation Ltd IPO? Why should you invest in Navkar Corporation Limited IPO?
About Navkar Corporation Limited
Navkar Corporation Ltd is a CFS operator in India with three CFSs, Ajivali CFS I and Ajivali CFS II at Ajivali and Somathane CFS at Somathane, which are strategically located in Panvel, Maharashtra, in close proximity to the JN Port, the largest container port in India (Source: . As of May 31, 2015, its CFSs had an aggregate installed handling capacity of 310,000 TEUs per annum on the basis of its then current infrastructure and operating equipment. They have a private railway freight terminal (“PFT”) which allows them to load and unload cargo from container trains operating between Somathane CFS and the JN Port and to transport domestic cargo to and from inland destinations on the Indian rail network. As of May 31, 2015, they also own and operate 516 trailers for the transportation of cargo between its CFSs and the JN Port by road.
Issue details of Navkar Corporation IPO
- IPO opens: 24-August-2015
- IPO closes: 26-August-2015
- Face Value: Rs 10 per share
- Issue price band: Rs 147 to Rs 155 per share
- Minimum Shares: 95 shares
- Minimum amount: Rs 13,695 to Rs 14,725
- Issue size: Rs 600 Crores
- Lead Managers: Axis Capital and Edelweiss Financial Services Ltd
- Listing: BSE and NSE
- Download Navkar Corporation Limited IPO Prospectus at this link
Purpose of the IPO:
The Offer comprises a Fresh Issue by Company and an Offer for Sale by the Selling Shareholder.
1) The Offer for Sale
Company will not receive any proceeds of the Offer for Sale by the Selling Shareholder. The Selling Shareholder has undertaken pursuant to its board resolution dated March 25, 2015 that the proceeds of the Offer for Sale will be utilized towards part repayment/ pre-payment of its indebtedness.
2) The Fresh Issue
The objects of the Net Proceeds (as defined below) of the Fresh Issue are:
(a) Capacity enhancement of the Somathane CFS;
(b) Development of the non-notified areas of our CFSs; and
(c) Establishment of a logistics park at Valsad (near Vapi) (together, “Objects of the Fresh Issue”).
- Company generated revenue of Rs 207.14 Crores for the year ended Mar-11 and Rs 332.01 Crores for the year ended Mar-15.
- Company posted a Profit of Rs 33.8 Crores for the year ended Mar-11 and a Profit of Rs 74.36 Crores for the year ended Mar-2015.
- Its post bonus issue EPS for FY 2015 is Rs 6.78 and last 3 years average EPS of Rs 7.94.
Reasons to invest Navkar Corporation IPO
- Steady and consistent performance in last 5 years. It increased its revenue by 1.6 times in last 5 years.
- Good margins of 22% for FY2014-2015.
Reasons not to invest in Navkar Corporation IPO
- Revenues in FY2014-2015 has taken dip of 10% compared to previous financial year.
- Company business operations are geographically concentrated and are dependent on container traffic at the JN Port. Any decline in the container traffic handled by the JN Port or any significant social, political, economic or geological disruption in the region could have an adverse effect on its business, results of operations and financial condition.
- The lack of an efficient transportation network and reliable transportation infrastructure or inadequacies in the connectivity of its CFSs to the Indian road and rail network may have an adverse effect on its business, results of operations and financial condition.
- Any adverse development affecting the growth of trade volumes and freight rates may have an adverse effect on company business, results of operations and financial condition.
- Company can face a variety of risks in connection with its reliance on licenses and approvals from government organizations, including the inability to obtain or renew the requisite approvals, licenses, registrations or consents, the occurrence of which could adversely affect its business, results of operations and financial condition.
- Its Promoters and certain members of Promoter Group are involved in adjudication proceedings initiated by SEBI
- Company is required to comply with stringent environment regulations and any failure on its part to do so, could adversely affect company business and operations
- There is outstanding litigation involving Company, its Promoters, its Directors and its Group Entities, which, if determined adversely, may affect their business and operations and its reputation.
- Other risk factors (Internal and external) can be viewed in prospectus Page no. 14 onwards.
Recommendation / Investment strategy
- At a lower price band of 147 and FY2014-15 EPS, P/E ratio works out to be 21.68. Last 3 year EPS, P/E ratio works out to be 18.51.
- At an upper price band of 155 and FY2014-15 EPS, P/E ratio works out to be 22.86. Last 3 year EPS, P/E ratio works out to be 19.52.
- Means company is asking for an issue price between 18.5 and 22.86 P/E ratio.
- There are listed peers like Gati Ltd which has highest P/E ratio of 45.67 and All Cargo Logistics Ltd which has lowest P/E ratio of 16.61 and industry average is 28.88. This indicates that Navkar Cargo IPO upper price band of Rs 155 at P/E ratio of 22.86 is reasonably priced.
- Navkar Corporation revenues have been growing consistently, but yes at a smaller pace. It has been generative good margins of 22%+ in last 2 years. Issue price is also reasonably priced. Considering all these positive factors, investors can invest in this IPO at upper price band.
Disclaimer: I have an interest in investing in this IPO. The idea of giving positive and negative factors to investors in this article is to create awareness and education about this IPO. One should NOT constitute this as investment advice to buy or not to buy. While investing in IPO is one of the Best Investment Plans, please consult your investment advisor before you invest in such high risk investment options.
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Navkar Corporation IPO – Should you invest