VRL Logistics Limited IPO – Should you Invest?
Karnataka based VRL Logistics Limited IPO would hit the market on 15th April, 2015. VRL Logistics Ltd is in the business of providing surface logistics and parcel delivery across 28 states in India. Though profits for 2013 and 2014 are low, VRL Logistics IPO looks promising. Should you invest in VRL Logistics Limited Initial Public Offering? What are the risk factors to be considered before you invest in such VRL Logistics Ltd IPO? What are brokerage houses / IPO analysts saying about VRL Logistics IPO?
About VRL Logistics Limited
VRL Logistics Ltd (VRL) is one of the leading pan-India surface logistics and parcel delivery service provider. It owns and operates the largest fleet of commercial vehicles in the private sector in India and caters to industries like FMCG, Food, textiles, Pharma, Apparels etc. VRL provides general parcel and priority parcel delivery (less than truckload services, “LTL”), courier and full-truckload (“FTL”) services through its widespread transportation network in 28 States and four Union Territories across India. Company’s operational infrastructure for the goods transportation business as of December 31, 2014 comprised 624 branches (comprising 604 leased branches and 20 owned branches) and 346 agencies across India, and of such 624 branches, 48 (41 leased branches and seven owned branches) served as strategic transshipment hubs for operations
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Issue details of VRL Logistics Limited IPO
- IPO opens: 15-April-2015
- IPO closes: 17-April-2015
- Face Value: Rs 10 per share
- Issue price band: Rs 195-205 per share.
- Minimum Shares to apply: 65 shares and in multiples of 65 shares thereon.
- Issue size: Rs 450 Crores to 474 Crores
- Lead Managers: ICICI Securities and HDFC Securities
- Listing: BSE / NSE
- Download VRL Logistics Limited IPO Prospectus from SEBI website here
Purpose of the IPO: The funds would be used for the following purposes.
- Purchase of goods transportation Vehicles;
- Repayment/pre-payment of certain borrowings.
Company Financials
- Company generated revenue of Rs 714.61 Crores for the year ended Mar-10 and Rs 1503.77 Crores for the year ended Mar-14. It earned revenue of Rs 1279.38 Crores for 9 months ended Dec-14.
- Company posted a profit of Rs 28.75 Crores for the year ended Mar-10 and a profit of Rs 57.17 Crores for the year ended Mar-2014. Its profits are Rs 71.69 Crores for 9 months ended Dec-2014.
- Diluted EPS for FY 2014 is Rs 7.21 and last 3 years average is Rs 6.99
Why to invest VRL Logistics Limited IPO
- Good revenue growth in last 5 years. It grew at a simple average of 21% over the last 5 years.
- Consistent profits of more than 3.4%. However, for FY 2013 and FY 2014, profits are low compared to earlier years due to high fuel prices. But it could pick-up in 9 months ended Dec-2014 to 5.6%.
- Good business history.
Why not to invest in VRL Logistics Limited IPO
- There are outstanding criminal proceedings against one of Company Promoters, Dr. Vijay Sankeshwar, which, if finally determined against the Promoters and / or Company could adversely affect its business.
- Its Promoters and Directors are involved in a number of legal proceedings, including certain criminal and tax proceedings, which, if finally determined against it, Promoters, or Directors, as the case may be, could adversely affect its business, results of operations and financial condition.
- An inability to pass on any increase in operating expenses, particularly fuel costs, customers may adversely affect Company business and results of operations.
- Company's success depends on its ability to generate sufficient freight volumes and passenger occupancy to achieve acceptable profit margins or avoid losses.
- Its Inability to attract, recruit and retain a sufficient number of qualified and experienced drivers may adversely affect Company business, results of operations and financial condition.
- Its business is dependent on the road network and the ability to utilize vehicles in an uninterrupted manner. Any disruptions or delays in this regard could adversely affect us and lead to a loss of reputation and/ or profitability.
- Any interruption of operations at Hubballi facility may adversely affect Company business and results of operations.
- They are dependent on various third parties for the adequate and timely supply of equipment and maintenance of its vehicles, and any delays or increases in cost related thereto may adversely affect its business.
- Company may incur penalties or liabilities for delayed compliance with certain provisions of the Companies Act.
- Its large branch and transshipment hub network are subject to various risks relating to logistics facilities operations.
- Complete risk factors can be read from “Risk Factors” section of the IPO prospectus from page no. 16 onwards.
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Recommendation / Investment strategy
- On the diluted EPS of Rs 6.99 to Rs 7.21 (last 3 years avg and FY2014) and on the issue price of Rs 195 to Rs 205, P/E ratio would be in between 27 to 29. Its competitors P/E ratio of Gati Limited is 84.3 (High) and a Transport company India Ltd is 25.84 (Lowest). Hence the issue price is not overpriced.
- VRL Logistics Limited IPO has several positive factors. Good revenue growth, promising future outlook, reasonable issue price, consistent profits, etc., are some of the positive factors.
- IPO’s have not been performing well in recent months. Many IPO’s are trading below its issue price.
- However, I am positive about VRL Logistics IPO. While there are several risk factors indicated above, these can be kept aside considering positive factors. High risk investors who are willing to take the risk can invest in such IPO’s. One should keep in mind that shares can list below the issue price based on market sentiments.
What brokerage houses / IPO Analysts are viewing this VRL Logistics IPO (Updated on 15-Apr-2015)?
- Myinvestmentideas.com – Suresh KP on 9-Apr-2015 – One should subscribe this VRL Logistics IPO considering risk factors indicated.
- Moneycontrol.com – VS Fernando says VRL Logistis Growth prospects reasonably secured
- GEPL Capital says VRL Logistics IPO valuations look cheaper – Subscribt to this IPO
- IIFL, says Investors can subscribe to VRL Logistics IPO
- Arihanth Capital and AB Money says Subscribe to VRL Logistics IPO for short to medium term view
- Ajcon Global and KR Choksey says subscribe to this VRL Logistics Limited IPO
- Way2Wealth recommends investors to subscribe to VRL Logistics Limited Initial Public Offering
- Hem Securities says, VRL Logistics IPO is an attractive investment opportunity
Disclaimer: I am interested 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. Please consult your investment advisor before you invest in such high risk investment options.
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Suresh
VRL Logistics Limited IPO – Should you Invest
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I want to start grocery business in Mysore so plz help me how can I start & how need kiranawala help so plz suggest me
Raj, No allotment for me too on VRL. Waiting for UFO Videoz allotment. Even I am analysing on to get the allotment.
No Allotment This time….:(
Dear Mr.Suresh
I am also subscribed in this Ipo because of your are investing
Also all of your investing ipo going well so please share your holdings and intimate before sell with reason this will help people like me
Also thanks for doing nice analysis because your analysis I am investing instead of trading
Don’t invest just because I am investing. As indicated earlier, I shifted from medium risk appetite to high risk and I want to try and test various high risk investment options. Few months back I indicated that I sold all my stocks / MF’s as I purchased my dream home. Now I started investing again in MF’s. Not in stocks.
What is other difference between lower & higher price band apart from value?
Chandan, Any one can bid for higher price band in case you feel that it is worth spending that price. Similary one can bid thinking it is worth only lower price band. Based on the demand for higher or lower price band quote, stocks would be alloted to investors.
Dear suresh,
thanks for the wonderful analysis, actually I am little worried about the transport sector as its business profits rolls around oil prices,,is it good for long term or shall I keep a target of short term?
regards
k.dave
Hi Suresh, What is the strategy to make sure of an assured allotment ? Bid more lots or bid early or is there anything else. ?
Difficult. It depends on company on how they do allotment. They would consult stock exchanges on how to do allotment if oversubscription happens
Should one apply for maximum quantity of minimum for best allotment chances (in the retail category)
Hi Suresh,
Is there any discount for retail investor?
No Vikki
are you applying for this
Of course Saurabh. I have indicated in last line item of IPO analysis too
Dear Suresh,
According to your analysis, the IPO is worth investing. My doubt is whether bad market condition affects such an IPO.
Mahesh
Yes it can. I faced this last week with one of the IPO. But I retained for some more time and made good profits later.
Do you expect it will grow and give returns like Inox Wind IPO?
Kishan, I hope so, hence I am investing 🙂 Nothing in stock market world is predictable. I am ready to invest for next 2-3 years, hence I may look at listing gains and if they are not good, I would hold for 2-3 years.
Hi Suresh,
Thank you for analysis. Let me see how is my luck this time. Hope you aware that Inox Wind listed today and bagged good share value.
What is your view on Inox Wind? Can we invest in small quantity? Or shall we wait for me more days?
Thank you
Kishore
Kishore, As indicated earlier, you can hold this for 2-3 years
yes sir, very useful data given by U. thank you. i personally believe that Logistics sector has bright future ahead.
-b.k.vaghela
Hello Sureshji,
What should be the ideal bid price and bid quantity according to you?
Thankis
Vijay K
You can bid for higher price band