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Destiny Logistics NSE SME IPO review (Avoid)

Review By Dilip Davda on Sep 28, 2021

•    DLIL is in land-based transportation logistics services.
•    It depends on third-party service providers.
•    Sudden boost in the top and bottom lines for pre-IPO year FY21 raises eyebrows.
•    The issue is aggressively priced compared to its financial parameters.

ABOUT COMPANY:
Destiny Logistics & Infra Ltd. (DLIL) is in the business of Logistics involving land-based transportation. The vehicles are mostly procured from third-party service providers. The Company acts as an aggregator for providing Logistics services which mainly includes transportation and other allied services to facilitate the client like providing Loading, unloading, packing and unpacking of items. Its services are mainly in the domestic market, more specifically in the state of West Bengal. This asset-light business model allows for the scalability of services as well as the flexibility to develop and offer customized logistic solutions across diverse sectors. It provides end-to-end safe mobility and delivery of items. At present, it has 8 permanent employees (including the management team) and 75 casual labours. 

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its needs for working capital (Rs. 4.40 cr.) and general corporate purpose (Rs. 0.60 cr.), DLIL is coming out with a maiden IPO of 2694000 equity shares of Rs. 10 each at a fixed price of Rs. 20 per share to mobilize Rs. 5.39 cr. The issue opens for subscription on September 30, 2021, and will close on October 05, 2021. A minimum application of to be made for 6000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 35.01% of the post issue paid-up capital of the company. DLIL will spend around Rs. 0.39 cr. for this IPO process.  

The issue is solely lead managed by Finshore Management Services Ltd. and Cameo Corporate Services Ltd. is the registrar to the issue. Nikunj Stock Brokers Ltd. will be the market maker for this issue.

After issuing initial equity at par, the company raised/swapped further equity at Rs. 20 per share in August 2021. The average cost of acquisition of shares by the promoters is Rs. 18.19 and Rs. 19.29 per share. 

Post issue DLIL's current paid-up equity capital of Rs. 5.00 cr. will stand enhanced to Rs. 7.69 cr. Based on the IPO price, the company is looking for a market cap of Rs. 15.39 cr. 

FINANCIAL PERFORMANCE: 
On the financial performance front, for the last three fiscals, DLIL has posted a total revenue/net profit of Rs. 6.73 cr. / Rs. 0.05 cr. (FAY19), Rs. 6.75 cr. / Rs. 0.05 cr. (FY20) and Rs. 10.06 cr. / Rs. 0.30 cr. (FY21). A sudden boost in activities and profits in the pre-IPO year with the pandemic in place raises eyebrows. 

For the last three fiscals, DLIL has reported an average EPS of Rs. 3.53 and an average RoNW of 18.80 %. The issue is priced at a P/BV of 1 based on its NAV of Rs. 20.03 as of March 31, 2021, and at a P/BV of 1 based on its post-issue NAV of Rs. 20.00. 

If we attribute FY21 earnings on fully diluted post issue equity capital, then the asking price is at a P/E of around 51.28, making it an aggressively priced issue.  

COMPARISON WITH LISTED PEERS:
As per offer documents, the DLIL has no listed peers to compare with. 

DIVIDEND POLICY:
The company has not declared any dividend for the period covered in the restatement of accounts as per the offer documents. It will follow a prudent dividend policy post listing based on its financial performance and future prospects. 

MERCHANT BANKER'S TRACK RECORD:
This is the 18th mandate from Finshore Management in the last five fiscals (including the ongoing one). Out of the last 10 listings, 2 opened at discount, 1 at par and the rest with premium ranging from 1.63% to 20% on the day of listings.


Conclusion / Investment Strategy

Though the company is doing asset-light business, it is in a highly competitive and fragmented business. Financial data is not matching the aggressive asking price. Even with the higher earnings of FY21, issue pricing is at a high P/E. There is no harm in giving this issue a MISS.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Sep 28, 2021

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 before making any actual investment decisions, based on information published here. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the past, SME IPOs drew the attention of investors across the board. However, as SME issues have entry barriers and continued low preference from the broking community, any reader taking decisions based on any information published here does so entirely at own risk. The above information is based on information available as on date coupled with market perceptions. The Author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda

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

Destiny Logistics & Infra IPO FAQs

  1. 1. Why Destiny Logistics & Infra IPO?

    The initial public offer (IPO) of Destiny Logistics & Infra Limited offers an early investment opportunity in Destiny Logistics & Infra Limited. A stock market investor can buy Destiny Logistics & Infra IPO shares by applying in IPO before Destiny Logistics & Infra Limited shares get listed at the stock exchanges. An investor could invest in Destiny Logistics & Infra IPO for short term listing gain or a long term.

  2. 2. How is Destiny Logistics & Infra IPO?

    Read the Destiny Logistics & Infra IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Destiny Logistics & Infra IPO what should investors do?

    Destiny Logistics & Infra IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Destiny Logistics & Infra IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.

  4. 4. Is Destiny Logistics & Infra IPO good?

    Our recommendation for Destiny Logistics & Infra IPO is to avoid.

  5. 5. Is Destiny Logistics & Infra IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the Destiny Logistics & Infra IPO.

  6. 6. When will Destiny Logistics & Infra IPO allotment status?

    The Destiny Logistics & Infra IPO allotment status will be available on or around Oct 8, 2021. The allotted shares will be credited in demat account by Oct 12, 2021. Visit Destiny Logistics & Infra IPO allotment status to check.

  7. 7. When will Destiny Logistics & Infra IPO list?

    The Destiny Logistics & Infra IPO will list on Wednesday, October 13, 2021, at NSE SME.

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