Published on 9/12/2017 10:17:49 AM | Source: Religare Securities Ltd
IPO Update Future Supply Chain Solutions Ltd - Religare Sec
About the Company
Promoted by Kishore Biyani led Future Enterprises Ltd, Future Supply Chain Solutions Ltd (FSC) is one of India’s largest organised third-party logistics service operators. It offers automated and IT-enabled warehousing, distribution and other logistics solutions to a wide range of customers. Its service offerings, warehousing infrastructure, pan-India distribution network, “hub-and-spoke” transportation model and automated technology systems support its competitive market position. Its customers operate in various sectors across India, including retail, fashion and apparel, automotive and engineering, food and beverage, FMCG, e-commerce, healthcare, electronics and technology, home and furniture and ATMs. The company provides solutions that enable its customers to leverage its distribution network and which optimises efficiency of their supply chains. It offers customer services in three key areas, i) Contract Logistics, ii) Express Logistics and iii) Temperature Controlled Logistics. While Contract Logitics contributed 70.7% to the total revenue (operated through 42 distribution centres covering ~3.84mn sq. ft. of warehouse space), Express Logistics and Temperature Controlled Logistics accounted for 19.8% & 4% respectively.
Objects of the Issue
* Achieve the benefit of listing the equity shares on stock exchanges.
* Offer for sale.
* Enhance brand image & provide liquidity to existing shareholders.
FSC is one of India’s largest organised third-party logistics operators. The Indian third-party logistics market has grown at a CAGR of ~12% over FY12-17. With increasing urbanization, rising consumerism due to higher per capita income, favourable regulatory changes, incentives from the government for infrastructure investment and higher levels of outsourcing of logistics activities, the industry growth (especially the organized sector) would continue to remain robust. Further, implementation of GST could create multiple opportunities for organized logistics service providers on account of supply chain optimization initiatives by companies in key user industries.
FSC’s financial performance has been encouraging over the last two to three years. Its net revenue increased by 17.3%, while PAT growth was 36.3% over FY15-17. In H1FY18, the company reported net revenue of Rs 357cr and PAT of Rs 33.3cr. The company has low D/E of 0.2x and its return ratios have improved at steady pace over FY15-17. With experienced management team, wide distribution reach, diversified customer base and vast experience in adopting the technology and automation, FSC seems comfortably placed to capitalize on the available opportunities. At the upper price band of Rs. 664, the stock is priced at 40x FY18E annualized earnings compared to 53x P/E of its listed peer Mahindra Logistics.
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