Premier Roadlines coming with IPO to raise upto Rs 40 crore

Premier Roadlines

• Premier Roadlines is coming out with initial public offering (IPO) of 60,24,000 shares of Rs 10 each in a price band Rs 63-67 per equity share. 
• The issue will open for subscription on May 10, 2024 and will close on May 14, 2024.
• The shares will be listed on NSE Emerge Platform.
• The face value of the share is Rs 10 and is priced 6.30 times of its face value on the lower side and 6.70 times on the higher side.
• Book running lead manager to the issue is Hem Securities.
• Compliance Officer for the issue is Gaurav Chakarvati. 

Profile of the company

Premier Roadlines is engaged in providing logistics solutions to businesses, particularly surface transportation of goods ranging from 1 MT to 250 MT. It is goods transport agency providing general transport services, project logistics, and over dimensional/overweight cargo movements on a Pan India basis to its customers wherein it provides point to point services in which the goods are loaded from the premises of the customer and are delivered to the delivery point as specified by them. It mainly serves B2B customers under the Contract Logistics division, who have requirement to transport bulk quantities of their goods from one place to another within India and other neighboring countries like Nepal, Bhutan etc.

To provide with transportation services, it engages third party operators i.e. small fleet owners and agents who provide the company with necessary transportation facilities such as containerized trucks, Trailers, Hydraulic axles etc. Its centralized information technology network is capable of connecting its branch offices with its corporate office, which enables real time monitoring of its operations, consignment bookings and delivery status. It carries its logistics business through its widespread transportation network across India which it is operating through its Registered and Corporate Office located in Delhi, along with 28 Branch Offices located in various cities of India like Ahmedabad, Bengaluru, Chennai, Guwahati, Hyderabad, Kolkata, Mumbai, Nashik, Pune etc. Few of its esteemed customers include KEC International, ThyssenKrupp Industrial Solutions (India) Private, Tata Project, G R Infraprojects, Tata Power Solar Systems, Sterlite Power Transmission etc.

Proceed is being used for:

• Repayment and/or pre-payment, in full or part, of certain borrowings availed by the Company.
• Purchase of vehicle for commercial purpose
• Meeting working capital requirements 
• General corporate purpose 

Industry overview

India’s logistics are estimated to account for about 14.4% of GDP. More than 22 million people rely on it for their income. The Department of Commerce's logistics division for India was established on July 7, 2017 and was given the responsibility of the Integrated Development of Logistics Sector. The Special Secretary to the Government of India is at the helm of the division and has been assigned the responsibility for the development of an action plan to facilitate the overall development of the logistics sector through policy changes, procedure improvements, identification of bottlenecks and gaps, and adoption of technology. Overall, India’s logistics sector consists of 37 export promotion councils, 40 Participating Government Agencies (PGAs), 20 government agencies, 10,000 commodities and 500 certifications.

In 2019, the Indian logistics sector was valued at Rs 15.1 lakh crore. The unorganised sector amounts to 99% of the logistics sector that includes owners of less than five trucks, brokers or transport companies' affiliates, small-scale warehouse owners, customs brokers and freight forwarders, among others. The global indices reflect the progress and developments in trade-related logistics over the years. The development of the logistics sector is also reflected by the fact that India scored 90.3% in the United UNESCAP’s Global Survey on Digital and Sustainable Trade Facilitation conducted in 2021, which is an exceptional improvement from the score it secured in 2019 of 78.5%, brought about by gains in the scores of five important indicators. The score has shown a consistent improvement, with scores of 63.4% and 67.7% secured in 2015 and 2017, respectively.

The initiatives taken by the government will lead to the progress of the logistics sector. The integration in the form of a multi modal network of transport and warehousing will lead to increased efficiency in the transportation and storage of goods throughout the country. By focusing on the digital aspect, the government’s aim is to upgrade the existing system that will lead to faster, better communication with fewer errors that will benefit the sector significantly. The plan has a strong monitor system with periodic audits in order to check the implementation of policies and application of required corrective measures. With the aforementioned initiatives, India intends to raise its ranking in the Logistics Performance Index to 25 and cut bring down the logistics cost from 13% to 8% of GDP, leading to a reduction of approximately 40%, within the next five years. These goals were set by the National Logistics Policy. This would guarantee the logistics industry acts as a growth engine and a major factor in upgrading India to a $5 trillion economy.

Pros and strengths

Process and technology: In the current times, customers give preference to logistics service providers with a systematised process with no loopholes as they demand organised logistics operations. It has a dedicated customised Enterprise resource management (ERP) software which helps the company in all aspects beginning from the procurement of vehicles from the supplier, checking permits/legal documents of the vehicle and driver, to entering the order in its ERP and in the end final settlement of the account. A dedicated team examines and confirms the quality of the vehicle carrying the consignment of goods. Every detail is saved in the ERP; therefore, the information remains accurate. This provides it with real-time data for its fleet management

Diverse customer base: It serves a large and diverse mix of end market customers across several industry sectors viz. Infrastructure, Energy, Power, Oil & Gas, Engineering, Construction, Metallurgical etc. It generally does not enter into long term agreements with its customers, however, it has developed long-standing relationships with these customers some of whom, like L&T constructions, KEC international, ThyssenKrupp and many more have been its customers from past many years.

Assured quality services: The company has been accredited with ISO 9001:2015 (Quality Management System) Certification, ISO 14001:2015 (Environmental Management System) Certification and ISO 45001:2018 (Occupational Health and Safety Management System) Certification from QRO Certification. As it adheres to the quality standards required as per industry norms, it is capable of providing quality services at competitive prices to its customers resulting into repetitive work orders from them. These certificates provide assurance for its transportation services to its customers for the quality and timeliness of its services.

Risks and concerns

Delays or non-payment by clients: It is exposed to counterparty credit risk in the usual course of its business dealings with its clients or other counterparties who may delay or fail to make payments or perform their other contractual obligations. The financial condition of its clients, business partners, and other counterparties may be affected by the performance of their business which may be impacted by several factors including general economic conditions. It cannot assures of the continued viability of its counterparties or that it will accurately assess their creditworthiness. Any material non-payment or non-performance by its clients, business partners, suppliers or other counterparties could adversely affect its financial condition, results of operations and cash flows.

Dependent upon few customers: Notable portion of its revenues has been dependent upon few customers. For instance, its top ten customers for the ten months’ period ended January 31, 2024 and F.Y ending March 31, 2023, March 31, 2022 & March 31, 2021 accounted for 25.04%, 23.06 %, 33.48 % & 40.57 % of its revenue from operations for the said period. Its reliance on a selected group of customers for its business exposes us to risks, that may include, but are not limited to, reductions, delays or cancellation of orders from its customers, failure to negotiate favorable terms or the loss of these customers, all of which could affect financial position and future prospects of the Company.

Business is dependent on road network: ITS transportation business is dependent on the road network. There are various factors which affect road transport such as political unrest, bad weather conditions, natural calamities, regional disturbances, breakdown of the vehicles, fatigue or exhaustion of drivers, improper conduct of the drivers/ motormen, accidents or mishaps and third party negligence. Even though it undertake various measures to avoid or mitigate such factors to the extent possible, some of these could cause extensive damage and affect its operations and/ or condition of its fleet and thereby increase its maintenance and operational cost. Also, any such interruption or disruptions could cause delays in the delivery of its consignments to their destination and/ or also cause damage to the transported cargo. It may be held liable to pay compensation for losses incurred by its clients in this regard, and/ or losses or injuries sustained by other third parties.

Outlook

Premier Roadlines is engaged in providing logistics solutions to businesses, particularly surface transportation of goods ranging from 1 MT to 250 MT. It is goods transport agency providing general transport services, project logistics, and over dimensional/overweight cargo movements on a Pan India basis to its customers wherein it provides point to point services in which the goods are loaded from the premises of the customer and are delivered to the delivery point as specified by them. It mainly serves B2B customers under the Contract Logistics division, who have requirement to transport bulk quantities of their goods from one place to another within India and other neighboring countries like Nepal, Bhutan etc. On the concern side, the goods transportation industry in which it operates is unorganized, competitive and highly fragmented in India. It competes with a variety of local, regional, and national goods transportation service providers of varying sizes and operations.

The company is coming out with an IPO of 60,24,000 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 63-67 per equity share. The aggregate size of the offer is around Rs 37.95 crore to Rs 40.36 crore based on lower and upper price band respectively. On performance front, total income for the financial year 2022-23 stood at Rs 19,205.60 lakh whereas in Financial Year 2021-22 the same stood at Rs 13,868.81 lakh representing an increase of 38.48%. The company reported a net profit for the financial year 2022-23 increased to Rs 718.50 lakh as compared to Rs 388.60 lakh in the financial year 2021-22. Meanwhile, the Company intends to focus on adhering to the quality standards of the service as it understand that curtailing cost without compromise on quality is an important factor to be considered for operation of business. This is necessary so as to make sure that it gets repeat orders from its customers. This will also aid it in enhancing its brand value. It intends to continue to build its brand image by providing quality services to the satisfaction of its clients.