Zeal Global Services coming with an IPO to raise upto Rs 36.46 crore

Zeal Global Services

• Zeal Global Services is coming out with an initial public offering (IPO) of 35,40,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 103 per equity share.
• The issue will open for subscription on July 28, 2023 and will close on August 1, 2023.
• The shares will be listed on NSE Emerge.
• The share is priced 10.30 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Expert Global Consultant.
• Compliance Officer for the issue is Monal Gupta. 

Profile of the company

The company is headquartered in Delhi and has presence in major locations such as Delhi and Mumbai. Its international logistics operations are supported by a network of service partners and vendors with whom it enters into agreements that enables it to service client requirements across India and abroad. The company is engaged in the business of providing logistics solutions in the Air Cargo Industry. It has been operating as General Sales and Service Agent (GSSA) and sales partner for airline in the region. The company realizes that clients have specific requirements with regards to their shipments. It therefore spend considerable time with clients individually to understand their specific requirements. Its approach is to bring economical solutions to its client's freighting needs through - excessive aircraft, load and destination compatibility analysis to suit ever changing needs of various industries such as fashion, pharmaceuticals, automotive and industrials.

Its promoters has experience of many years in the air cargo industry. Driven by the passion and commitment to a new way of thinking about GSSA expertise through its ‘Augmented GSSA’ strategy, taking into account its 4 pillars: Commercial, Abilities, Technology and Sustainability for growth and strong value system for the company. With their experience and progressive thinking, it aims to grow in Air Cargo space. Its commitment towards work has helped it attain immense confidence and trust of its clients. It provides services to its clients across countries namely India, China, Middle East, Sri Lanka, Singapore and Malaysia.

Proceed is being used for: 

• Working capital requirement
• Investments in subsidiaries for business expansion
• Part repayment of debt
• General corporate purposes
• Meeting issue expenses

Industry overview

India is world's fifth largest economy by nominal GDP and is one of the fastest-growing economies globally. Efficient logistics is the bed rock for a growing economy like India. The reduction in logistics cost could be a key enabler in enhancing the competitiveness of all sectors of the economy. Improving supply chain efficiencies and reducing logistics costs are fundamental to India capitalizing on this strategic shift and meeting the well-defined aspiration to become a $5 trillion economy.

India's Air Freight Market is estimated to be $13.08 billion in 2023 and is expected to reach $17.22 billion by 2028, growing at a CAGR of 5.65%. According to the Trade and Transport Group's recently published report 'India Air Cargo Outlook 2023,' India generated 2.2 million tonnes of traffic in 2018, with a projected increase to 2.5 million tonnes in 2023. In terms of relative size, its air cargo traffic was one fifth the size of China's and one-tenth the size of the US air cargo market, with roughly 30% of traffic generated domestically and the remainder internationally.

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.

Pros and strengths

Scalable Business Model: Its business model is customer centric. It has attracted various airlines in India, such as Copa Airlines, Bringer Air cargo, Miat Mongolian Airlines, and Air Europa. Its locational advantage of being situated in Delhi, development of new markets both domestically and internationally. The company can also replicate the business model in other countries and expand geographically and across the world (like India) such as Middle East, Hong Kong, and Latin America. It has developed a Plug and Play business model on one side Airlines for Passenger and Cargo and on other side the Shipper / IATA Agents.

Long standing Customer Relationships: Currently there are 300 IATA agents in India, out of which total 250 IATA agents are currently on board with the company. Further, of the IATA agents on boarded with it, around 50% of customers are repeat customers over the years. Company approaches the registered agents on IATA portal, through available resources. These are the particular services which are available with the company and it can be provided at the best rate to those IATA’s agents and the IATA’s agents can sell it further to their customers. In the FY 22-23, it has provided its services to around 200 IATA agents. As of now, there is no long-term contract or agreement entered between it and such IATA’s agents in written. 

Handling of specialised cargo: The company provides specialized cargo service for unusual sizes and temperature-controlled cargo service for goods such as perishable goods, pharmaceutical drugs etc. It has handled unusual sizes of cargo as high as 29 tonnes.

Risks and concerns

Limited number of airlines: There are a very few airlines from which it has entered agreements for its cargo logistic and they may allocate their resources to service other clients ahead of it. While it could find additional airlines, any failure of it’s agreed airlines to provide services result, it may lose customers which could have a material adverse effect on its business, financial condition and results of operations.

Face competition: The market in which the company is doing business is highly competitive on account of both the organized and unorganized players. Players in this industry generally compete with each other on key attributes. Some of its competitors may have longer industry experience and greater financial, technical and other resources, which may enable them to react faster in changing market scenario and remain competitive. Moreover, the unorganized sector offers their services at highly competitive prices which may not be matched by it and consequently affect its volume of revenue and growth prospects. Growing competition may result in a decline in its market share and may affect its margins which may adversely affect its business operations and its financial condition.

Dependent on few numbers of customers and airlines: Its top 10 customers contribute to 41.59% of its revenue from operations for the period ended January 31, 2023 and its top 10 airlines contribute to 91.10% of its purchases for the period ended January 31, 2023. The loss of a significant client or airlines would have a material adverse effect on its financial results. It cannot assures that it can maintains the historical levels of business from these clients or that it will be able to replace these clients in case it losses any of them. Furthermore, major events affecting its clients, such as bankruptcy, change of management, mergers and acquisitions could adversely impact its business. If any of its major clients becomes bankrupt or insolvent, it may lose some or all of its business from that client and its receivable from that client would increase and may have to be written off, adversely impacting its income and financial condition.

Outlook

Incorporated in 2014, Zeal Global Services is engaged in the business of providing logistics solutions in the Air Cargo Industry. It has been operating as General Sales and Service Agent (GSSA) and sales partner for airline in the region. On the concern side, the market in which the company is doing business is highly competitive on account of both the organized and unorganized players. Players in this industry generally compete with each other on key attributes, beside the market in which the company is doing business is highly competitive on account of both the organized and unorganized players. Players in this industry generally compete with each other on key attributes.

The company is coming out with an IPO of 35, 40,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 103 per equity share to mobilize Rs 36.46 crore. On performance front, the company’s revenue from operations increased from Rs 6058.87 lakh in year ended March 31, 2021 to Rs 12,109.40 lakh in year ended March 31, 2022. An increase of 99.86% in Total Revenue because the market was on recovery mode from the covid pandemic effect, due to that demand was also increased for cargo sector and price was also hiked. Net Profit after tax increased from Rs 169.61 lakh in year ended March 31, 2021 to Rs 524.30 lakh in year ended March 31, 2022 with a resultant increase of 209.12% in year ended March 31, 2022. Going forward, it strives to focus on reducing the costs without losing on quality of service. Measuring and evaluating costs at each stage and mapping it with scientific standards is its core strategy to control costs. It does business with customers at centre of its approach and always strives to maintain healthy relationship. Leveraging its knowledge and relationships with stakeholders to cross sell and upsell its services.