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Mahindra Logistics IPO review (Apply)

Review By Dilip Davda on October 24, 2017

Mahindra Logistics Ltd. (MLL) - a Mahindra group company is one of India’s largest 3PL solutions providers in the Indian logistics industry which was estimated at Rs. 6.40 trillion in fiscal 2017 according to CRISIL report. MLL’s competitive advantage is its “asset-light” business model pursuant to which assets necessary for operations such as vehicles and warehouses are owned or provided by a large network of business partners. Technology enabled, “asset-light” business model allows for scalability of services as well as the flexibility to develop and offer customized logistics solutions across a diverse set of industries. Company operates in two distinct business segments, supply chain management (“SCM”) and corporate people transport solutions (“PTS”).

Under SCM business it offers customized and end-to-end logistics solutions and services including transportation and distribution, warehousing, in-factory logistics and value added services to clients through a pan-India network comprising 24 city offices and over 350 client and operating locations as at August 31, 2017. It has a large network of over 1,000 business partners providing vehicles, warehouses and other assets and services for SCM business. As at August 31, 2017, MLL managed over 10.0 million square feet of warehousing space spread across pan-India network of multi-user warehouses, built-to-suit warehouses, stockyards, network hubs and cross-docks. As at August 31, 2017, it operated in-factory stores and line-feed at over 35 manufacturing locations. Such model of its operations enables company to serve over 200 domestic and multinational companies operating in several industry verticals in India, including automotive, engineering, consumer goods, pharmaceuticals, e-commerce and bulk. Its client list includes Volkswagen India Private Limited, Vodafone India Limited, Thermax Limited, JSW Steel Limited, Ashok Leyland Limited, Siemens Limited, Bosch Limited, BMW IndiaPrivate Limited, 3M India Limited, and Mercedes-Benz India Private Limited.

MLL provides technology-enabled people transportation solutions and services across India to over 100 domestic and multinational companies operating in the IT, ITeS, business process outsourcing, financial services, consulting and manufacturing industries. As at August 31, 2017, it operated PTS business in 12 cities and over 120 client and operating locations across India. Certain key clients in India for PTS business include Tech Mahindra Limited, AXISCADES Engineering Technologies Limited and ANZ Support Services India Private Limited. Company’s subsidiary, 2X2 Logistics, provides logistics and transportation services to OEMs to carry finished automobiles from the manufacturing locations to stockyards or directly to the distributors through specially designed vehicles. MLL’s other subsidiary, Lords, provides international freight forwarding services for exports and imports, customs brokerage operations, project cargo services and charters.

An “asset-light” business model helps MLL to reduce capital expenditure requirements, mitigate the effects of operational risks relating to direct fuel costs, maintenance costs and depreciation in addition to reducing the effect of any risks emanating from changes in laws and regulations. This also enables it to deploy and utilize capital more efficiently, as reflected in company’s adjusted ROE (excluding Surplus Funds) which was 29.26%, 33.77%, 39.95% and 89.55% in the three month period ended June 30, 2017 and in Fiscals 2017, 2016 and 2015, respectively.

For providing exit route to P/Es and listing gains, MLL is coming out with a maiden IPO of 19332346 equity shares of Rs. 10 each via book building route with a price band of Rs. 425 - Rs. 429 to mobilize Rs. 821.62 to Rs. 829.36 core (based on lower and upper price bands. This being secondary offers (i.e. Offer for Sale), no money is coming to company and post issue paid up equity capital remains same at Rs. 71.14 crore. Issue opens for subscription on 31.10.17 and will close on 02.11.17. Minimum application is to be made for 34 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. MLL has reserved 125000 equity shares for eligible employees and is offering a discount of Rs. 42 per share to them. BRLMs to this offer are Kotak Mahindra Capital Co. Ltd., Axis Capital Ltd. and registrar to the issue is Link Intime India Pvt. Ltd. Having issued initial equity at par between Sept. 2007 and March 2011, it raised further equity in the price range of Rs. 13.90 to Rs. 122.29 per share from February 2014 to August 2017. The average cost of acquisition of Equity Shares by Promoter is Rs. 10 per equity share and by Investor Selling Shareholders is Rs. 122.29 per equity share. Issue constitutes 27.17% of post issue paid up equity capital of the company. Mahindra & Mahindra Group Company Mahindra Logistics Ltd.’s IPO will be the first public offering from the USD 19 bn Group after a decade.

On performance front, MLL has (on a consolidated basis) reported revenue/net profits of Rs. 1939.56 cr. / Rs. 38.52 cr. (FY15), Rs. 2077.13 cr. / Rs. 35.97 cr. (FY16), Rs. 2676.25 cr. / Rs. 46.07 cr. (FY17). For Q1 of current fiscal it has posted net profit of Rs. 15.13 crore on total revenue of Rs. 854.46 crore. Thus it has shown constant surge in top and bottom lines. It has reported average EPS of Rs. 6.18 and average RoNW of 13.07% for last three fiscals on an equity base of Rs. 68 crore. It has no listed peers to compare with. It we annualize latest earnings and attribute on fully diluted post issue equity then asking price is at a P/E of around 29.6 and at P/BV of 4.8 plus. However since this company is having an asset light model of operation and has provided onetime expenses for multi years, on restated basis its net profit has been at Rs. 40.17 cr., Rs. 39.93 cr. and Rs. 60.04 cr. for FY 15, FY16 and FY17. For first quarter of current fiscal too its net profit stands at Rs. 17.63 crore. Restated profits results in restated adjusted RoE as shown in 4th Para last two lines here above. If we annualize these and attribute to post issue equity, then asking price is at a P/E of 25.4 plus. From fiscal 15 to fiscal 17 its non-Mahindra group clients grew at a CAGR of 64.45% and adjusted PAT grew at a CAGR of 22.26%.

On BRLM’s front, the two merchant bankers associated with the offer have handled 42 public issues in the past three financial years out of which 11 issues closed below the issue price on listing date.

Conclusion: An investment opportunity in MLL from Mahindra group after a decade with asset light business model may be considered for medium to long term. (Subscribe).

Conclusion / Investment Strategy

An investment opportunity in MLL from Mahindra group after a decade with asset light business model may be considered for medium to long term. (Subscribe).

Reviewer recommends Subscribing to the issue.

Review By Dilip Davda on October 24, 2017

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 the information published here. My reviews do not cover GMP market and operators game plans. Any reader taking decisions based on any information published here does so entirely at their own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

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.

(Dilip Davda -SEBI registered Research Analyst-Mumbai,

Registration no. INH000003127 (Perpetual)

Email id: ).

Mahindra Logistics IPO FAQs

  1. 1. Why Mahindra Logistics IPO?

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

  2. 2. How is Mahindra Logistics IPO?

    Read the Mahindra Logistics IPO recommendations by the leading analyst and leading stock brokers.

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  3. 3. Mahindra Logistics IPO what should investors do?

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

  4. 4. Is Mahindra Logistics IPO good?

    Our recommendation for Mahindra Logistics IPO is to subscribe.

  5. 5. Is Mahindra Logistics IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe to the Mahindra Logistics IPO.

  6. 6. When will Mahindra Logistics IPO allotment status?

    The Mahindra Logistics IPO allotment status will be available on or around November 8, 2017. The allotted shares will be credited in demat account by November 9, 2017. Visit Mahindra Logistics IPO allotment status to check.

  7. 7. When will Mahindra Logistics IPO list?

    The Mahindra Logistics IPO will list on Friday, November 10, 2017, at BSE, NSE.


2. Dr.Sanjeev Parikh     Link|October 31, 2017 3:29:32 PM
Extremely costly issue.Mahindra wants to exploit his name as a good promoter house.After 3 months, this stock will be available at discount.
1. Ghatol     Link|October 25, 2017 9:31:32 AM
Please review the P/E Ratio Calculations. The Figures provided by you do not match.

The Asking Market Cap is @ 3052 Cr. Latest Net Profit is @ 46 Crores. OFS size is @27.17 of the Post issue Equity. That brings the PE ratio @66.

AS per The EPS figure provided by you also the PE comes to @69.

Please check