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Snowman Logistics Ltd IPO Review by ARM Research (Apply)

Review By ARM Research Pvt. Ltd. on August 26, 2014

Issue opens for subscription on 26.08.14 and will close on 28.08.14. Bids can be made for minimum 300 equity shares and in multiples of 300 shares thereafter.

Accordingly, the retail investors can apply for maximum 4200-4500 equity shares (at given price band).


Utilization of Funds

To part finance its expansion of capacities, meeting corporate funding, the company is coming out with a maiden IPO of 42000000 equity share of Rs. 10 each via a book building process and has fixed price band of Rs. 44-47 per share. Thus the company intends to raise between Rs. 184.8 to Rs. 197.4 Cr on the basis of

lower and upper price bands.


Lead Manger & IPO Grading

Issue is lead managed by HDFC Bank Ltd and Link Intime (India) Pvt Ltd is the registrar to the issue. This issue is grades as IPO 4/5 by CRISIL. Post issue equity will be Rs. 166.44 crore. Shares will be listed on BSE and NSE post allotments.

Public portion is of 10%, HNI 15% and rest for QIBs including Anchor Investors.

  • Snowman Logistics subsidiary of Gateway Distriparks Ltd is now getting listed as the separate company. It is the most preferred integrated temperature controlled warehouse and transport logistics company in the organized sector enjoying lion market share.
  • The company has been also providing additional services like repacking of products for direct marketing in retail market to the manufacturers, exporters etc and adding value addition of services to its clients that include Hindustan Unilever, Cadbury, Baskin Robbins etc and has PAN India presence at 14 locations with 23 warehouses and fleet of 370. Approx 62K pallets are in operations as of 2013-14 fiscal end. According to management, it will continue its aggressive plans of strategic investments and although it expects competitions to emerge going forward, it will focus on maintaining the lead in the segment.
  • Its warehousing solutions cover the complete spectrum of temperature ranges from ambient to chilled and frozen (i.e. +25ºC to -20ºC). It offers blast freezing facilities at its temperature controlled warehouses in Bengaluru, Mevalurkuppam (near Chennai), Visakhapatnam, Serampore (near Kolkata), Taloja (near Mumbai), Ahmedabad,
  • Palwal (near Delhi), and Mubarakpur (near Chandigarh). Its integrated 'Source to Stores' operations comprise warehousing, primary distribution and secondary distribution and value-added services including kitting, labeling, sorting and bulk breaking.
  • It caters to industries like - Dairy products including butter and cheese; Icecream; Poultry and meat; Sea food; Ready-to-eat / ready-to-cook food products; Confectioneries including chocolate and baked products; Fruits and vegetables; Healthcare and pharmaceutical products; and Industrial products such as x-ray, and photo-imaging, films.
  • Gateway Distriparks owns 54.1% stake in the company, International Finance Corporation and Japan-based Mitsubishi Corporation hold 12.4% and 12.6% stake, respectively, in Snowman Logistics.

On performance front, the company posted an average EPS of Rs. 1.70 for three fiscals ended 31.3.14. For fiscal 2013-14 it posted net profit of Rs. 22.48 Cr on a turnover of Rs. 155.23 Cr is at a P/E of 32-35 on lower and upper price bands which makes it a pricey bet but considering its earnings and future plans, it is worth considering for medium to long term as the company has lion share in the segment of temperature controlled warehouse and logistics.


For last five fiscals it has outperformed on Y-o-Y basis with a CAGR of 35% in


Revenues and PAT of 72%. Its pallets installation too has marked CAGR of 53% and the management is confident of maintaining the same for coming years with aggressive plans that has many firsts to its credits in this segment.



Some Risks factors are failure to retain one of the large clients, delay in setting up of new warehouses and heavily dependent on third party services providers.


Strong Anchor Investor Interest

Anchor investors subscribed to 9.45 million shares at Rs.47 each which is the upper end of the price band.These anchor investors include Faering Capital India Evolving Fund which subscribed to 3,492,000 shares, ICICI Prudential Growth Fund Series 2 which opted for 2,127,900 shares, ICICI Prudential Value Fund Series 4 which subscribed for 851,100 shares, IDFC Sterling Equity Fund which subscribed for 2,659,800 shares and IDFC infrastructure Fund which opted for 319,200 shares.

Conclusion / Investment Strategy

Snowman's pan-India presence with warehousing capacity of 58,543 pallets and 3,000 ambient pallets, which is expected to increase to 85,000 pellets in current

financial year (FY15) and further to 1 lakh pellets by FY16. We believe its big expansion plan (of raising capacity to 1 lakh pallets by next financial year) is

expected to boost the operating performance of the company over the next two years.


SLL, being the largest cold chain solutions provider, has huge potential for growth in the organized services sector. "India's temperature-controlled logistics

industry is estimated at Rs 12,000-15,000 Cr and is expected to grow at 15-20 percent year-on-year for the next three to five years. The current market share of the organized players in the industry is estimated at 6-7 percent in the temperature-controlled warehousing segment and at 15-20 percent in the temperature controlled transportation segment. Hence, the potential for growth in the organized services is immense.


Although this IPO looks pricey, considering the performance parameters and this being the first IPO from new specialized segment; it is set to reward

investors in medium to long term. It is said to be another Just Dial / Wonderla in the offing.


Grey Market Commanding Premium ~ Rs 25/- per share & expected retail oversubscription 20x"


We advise "Subscribing" the issue at current issue price level, citing strong domestic as well as foreign investors' support, robust revenue growth in last four years, strong operational income, balance sheet and client base, and tax benefits.

Reviewer recommends Subscribing to the issue.

Review By ARM Research Pvt. Ltd. on August 26, 2014

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