Accuracy Shipping NSE SME IPO review (May apply)

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Review By Dilip Davda on June 5, 2018

Accuracy Shipping Ltd. (ASL) is a third party logistics solutions provider. It offers customized and end-to-end logistics solutions and services including transportation and distribution, freight forwarding, clearing and forwarding service, custom house clearance, warehousing and value added services to clients. ASL is also engaged in handling of project cargo, which is a specialized activity requiring detailed planning and technical expertise. The comprehensive project handling service includes designing and execution of customized solutions tailored to meet specific customer requirements for the transport of high value specialized equipments from one location to another using multiple modes of transport. As a multimodal transport operator, company offers end-to-end freight services for export and import cargo utilizing multiple modes of transport such as sea, road, rail and air. Simply going by the name of the company, it misleads as a shipping company, a sector which is not in good shape.

ASL operates through a PAN India network consisting of a registered office at Gandhidham, 5 branch offices and over 1,300 clients as at January 31, 2018. In addition to using hired fleets, it also has a fleet of more than 150 vehicles to meet inland transportation requirements. It also has a network of various business partners providing vehicles, warehouses and other assets and services for company’s business. At present it is offering services through business partners in over more than 35 countries mainly from South Africa, Egypt, Turkey, Italy, Colombo, etc.

To part finance repayment/prepayment of certain debts, purchase of Goods Transportation Vehicles, working capital and general corpus fund needs, ASL is coming out with a maiden IPO of 4257600 equity shares (net of pre-IPO placement of 678400 shares amounting to Rs. 5.70 crore) of Rs. 10 each via book building route with a price band of Rs. 81 – Rs. 84 to mobilize Rs. 34.49 cr. to Rs. 35.76 cr. (based on lower and upper price bands). Issue opens for subscription on 11.06.18 and will close on 14.06.18. Minimum application is to be made for 1600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. Issue is solely lead managed by Pantomath Capital Advisors Pvt. Ltd. and Link Intime India Pvt. Ltd. is the registrar to the issue. Having raised initial equity at par, it raised further equity at a price of Rs. 84 per share. Issue (including pre-IPO placement) constitutes 32.80% of post issue paid up capital of the company. Average cost of acquisition of shares by the promoters is Rs. 6.41 and Rs. 10 per share. Post issue, its current paid up equity capital of Rs. 10.80 cr. (including pre-IPO placement at Rs. 84 in the month of May 2018) will stand enhanced to Rs. 15.06 cr.(Approx).

On performance front, for last four fiscals, ASL has posted turnover/net profits of Rs. 97.39 cr. / Rs. 0.62 cr. (FY14), Rs. 161.66 cr. / Rs. 0.32 cr. (FY15), Rs. 170.79 cr. / Rs. 1.07 cr. (FY16) and Rs. 201.29 cr. / Rs. 1.96 cr. (FY17). For first nine months ended on 31.12.17 of FY18 it has earned net profit of Rs. 6.82 cr. on a turnover of Rs. 266.53 cr. Thus for 9 months of FY 18 it has shown superb performance with spurt in top line and record net profits, which raises concern. For FY 15 it suffered a setback in bottom line despite improved top line. For last three fiscals it has posted an average EPS of Rs. 5.53 and an average RoNW of 16.27%. Issue is priced at a P/BV of 4 based on its NAV of Rs. 21.03 as on 31.12.17. Based on super profits of FY18 (9 months), if we annualize and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 13 plus. But whether company will be able to report such superb performance going forward is a million dollar question. As per offer documents it has shown Tiger Logistics, Allcargo Logistics, Sical Logistics and Total Transport Syst as its listed peers that are trading at a P/E of around 18, 16, 29 and 10 respectively (as on 05.06.18). They are not comparable with this company in a strict manner. As on 31.12.17 its debt-equity ratio was 2.04%.

On merchant banker’s front, this is 73rd mandate from its stable in last four fiscals. Out of last 10 listings, 1 opened at par and 9 with a premium ranging from 1.59% to 20% on the day of listing.

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