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DRS Dilip Roadlines NSE SME IPO review (Others)

Review By Dilip Davda on Nov 19, 2018

•    Company is engaged in logistics services including transportation, packing and moving, warehousing.
•    Brand "Agarwal Packers and Movers" is not owned by the company. It is also used by family/groups as well.
•    Major portion of issue fund going for repayment of loans from promoters.
•    Based on financial data, issue appears fully priced.

ABOUT COMPANY:
DRS Dilip Roadlines Ltd. (DRS) is engaged in the business of providing high quality logistics services including transportation, packing & moving and renting of warehouses.DRS is surface transporters and provide only goods transportation services. It provides Full truck loaded ‘FTL’ services to all customers for transporting goods. As on July 15, 2018 DRS operates and owns a fleet of 327 trucks in the name of Company and have capacity to hire 649 vehicles. It operates through different types of closed container trucks on the basis of size and capacities.

The variety of goods transportation vehicles in its fleet enables it to serve a diverse mix of consignments. DRS’s packing and moving business is carried under brand name of ‘Agarwal Packers and Movers’ which has become renowned name in household relocation across the country. Further, the brand ‘Agarwal Packers and Movers’ is not owned by Company and is used by families / groups as well.

For packing and moving services Company owns composite container vehicle specially designed to suit the household shifting called ‘CHAPP VAN’ (Car, Households, Artifacts, Plants and Pets). This new-concept composite container vehicle supports transport of Car, Household, Artifacts, Plants and Pets all in one i.e. there is space demarcated for each and every item and ensures better safety and ease of handling varied items. There is also provision for one person to travel with the vehicle, in case the customer so desires. Company also owns warehouses in South India. It has currently rented warehouses to some of the major Corporates.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its plans for repayment of unsecured loans (from promoters – Rs. 17.50 cr.), setting up of additional warehouse in Telangana, acquiring additional branches for business expansion, part pre-payment of cash credit facility, part repayment of term loan and general corpus fund needs, DRS is coming out with a maiden IPO of 4200000 equity shares of Rs. 10 each at a fixed price of Rs. 75 per share to mobilize Rs. 31.50 cr.  Issue opens for subscription on 27.11.18 and will close on 30.11.18. 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 Aryaman Financial Services Ltd. while Bigshare Services Pvt. Ltd. is the registrar to the issue. Issue constitutes 27.88% of the post issue paid up capital of the company. Having issued initial equity at par, it converted further equity at a price of Rs. 20 per share in December 2016 and has issued bonus shares in the ratio of 11 for 20 in July 2018. Average cost of acquisition of shares by the promoters is Rs. 6.82, Rs. 6.83 and Rs. 13.26 per share. Post issue, DRS’s current paid up equity capital of Rs. 10.86 cr. will stand enhanced to Rs. 15.06 cr.

FINANCIAL PERFORMANCE:
On financial performance front, for last four fiscals, DRS has posted total turnover/net profits of Rs. 146.34 cr. / Rs. 0.44 cr. (FY15), Rs. 153.08 cr. / Rs. 0.50 cr. (FY16), Rs. 141.91 cr. / Rs. 1.08 cr. (FY17) and Rs. 142.62 cr. / Rs. 3.45 cr. (FY18). While top line remained almost static, it has shown higher bottom lines for last two fiscals that are bit surprising. For first three months of FY19 it has earned net profit of Rs. 1.39 cr. on a turnover of Rs. 42.14 cr. For last three fiscals, DRS has posted an average EPS of Rs. 2.31 and an average RoNW of 23.87%.

Issue is priced at a P/BV of 8 on the basis of its NAV of Rs. 9.38 as on 30.06.18 and at a P/BV of 2.48 on the basis of post issue NAV of Rs. 30.23. If we annualize latest earnings and attribute it on fully diluted equity post issue then asking price is at a P/E of around 20 making it fully priced offer. As on 30.06.18, DRS has debt equity ratio of 4.89 which is pretty high.

COMPARISION WITH LISTED PEERS:
As per offer documents, it has no listed peers to compare with.

MERCHANT BANKER’S TRACK RECORDS:
On merchant banker’s front, this is 42nd mandate from its stable in last four fiscals. Out of last 10 listings, one opened at par and the rest with a premium ranging from 0.25% to 6% on the day of listing. Thus it has an average track record.


Conclusion / Investment Strategy

Company is collecting fancy premium for repayment of loans from promoters. Based on its financial data, issue is fully priced. Brand name used by the company is used by entire family and family groups; any dispute going forward in this regard is a major concern. Considering all these aspects, risk savvy cash surplus investors may consider investment at their own risks.

Review By Dilip Davda on Nov 19, 2018

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. With entry barriers, SEBI wants only well informed investors to participate is such offers. With crazy recent listings, SME IPOs have started drawing attention of investors across the board. However, as SME issues have entry barriers and continued low preference from broking community, any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on information available as on date coupled with market perceptions. Author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

Email: dilip_davda@rediffmail.com

The Agarwal Packers and Movers IPO Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered IPO Analysts tells you if Agarwal Packers and Movers IPO worth investing. The Agarwal Packers and Movers IPO Note sets the IPO expectations in systematic way which tells you if Agarwal Packers and Movers IPO good to buy (good or bad / yes or no). The IPO Forecast tells you weather to invest in Agarwal Packers and Movers IPO by providing IPO recommendations i.e. subscribe, avoid and neutral.


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