S J Logistics (India) coming with IPO to raise upto Rs 48.00 crore

S J Logistics (India)

• S J Logistics (India) is coming out with an initial public offering (IPO) of 38,40,000 equity shares of face value of Rs 10 each in a price band Rs 121-125 per equity share.
• The issue will open on December 12, 2023 and will close on December 14, 2023. 
• The shares will be listed on NSE Emerge platform.
• The share is priced 12.10 times of its face value on the lower side and 12.50 times on the higher side.
• Book running lead manager to the issue is Hem Securities.
• Compliance Officer for the issue is Dinky Jain.

Profile of the company

The company is engaged in the business of providing logistics and supply chain solutions to its customers. Its key services include freight forwarding, custom clearance and transportation handling services. It is a Multimodal Transport Operator registered under the Multimodal transportation of Goods Act 1993 to carry on the business of multimodal transportation. It started the business as a proprietorship concern during the year 2000 under the leadership of its Promoter Rajen Hasmukhlal Shah. Later, during the year 2003, considering the market demand and business opportunity in the logistics and freight forwarding business, its promoter incorporated and carry on the business of freight forwarding under the name and style of ‘SJ Logistics (India)’ and since then, it has grown its presence, expanded the scope of its services and increased its capabilities in the business of freight forwarding. 

It has over the years developed ourselves and increased the ambit of its services covering services which includes multimodal transportation, regulatory compliance like custom clearance and other related services. It is also engaged in handling of project cargo, which requires detailed planning and technical experience. The project handling service includes providing solutions to meet specific customer requirements for the transport of oversized, over dimension’s cargo, critical or high value cargo’s such as power generating set, excavator, transmission tower etc. from one location to another using multiple modes of transport. The transports of oversized, over dimension’s cargo, critical or high value cargo are generally handled on a turnkey contract basis.

It operates from its registered office situated at Thane and its international logistics operations are supported by a network of partners and vendors that enables it to service client requirements across India and abroad as well. It delivers international logistic services by using air, sea and surface, as modes of transportation. Its regulatory compliance services include customs clearance which is undertaken through mutual understanding with its network and connection formed over years.

Proceed is being used for:

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

Industry overview

The Indian logistics industry is growing, due to a flourishing e-commerce market and technological advancement. The logistics sector in India is predicted to account for 14.4% of the GDP. The industry has progressed from a transportation and storage-focused activity to a specialised function that now encompasses end-to-end product planning and management, value-added services for last-mile delivery, predictive planning, and analytics, among other things. One of the key drivers of this expansion is projected to be the rise of India's logistics industry, which employs 2.2 crore people and serves as the backbone for various businesses. 

The logistics sector in India was valued at $250 billion in 2021, with the market predicted to increase to an astounding $380 billion by 2025, at a healthy 10%-12% year-on-year growth rate. Moreover, the government is planning to reduce the logistics and supply chain cost in India from 13-14% to 10% of the GDP as per industry standards. The industry is crucial for the efficient movement of products and services across the nation and in the global markets. The logistics business is highly fragmented and has over 1,000 active participants, including major local players, worldwide industry leaders, the express division of the government postal service, and rising start-ups that focus on e-commerce delivery. 

In 2016, India was ranked 35th in the Logistics Performance Index (LPI), a measure through which the World Bank ranks countries based on their logistics performance. India had moved up from 54th position in 2014 to 35th in 2016, riding on massive capacity investments made since 2014, in almost all sectors of transport (by way of mega projects like DFCs/UDAN/ Bharatmala / Sagarmala etc.), major policy reforms like GST and measures in support of EODB. 

Pros and strengths

Wide range of logistics services and solutions: The Company, being a multimodal transport operator, is capable of offering a wide range of logistics services with focus on creating solutions that address the requirements of its clients. Its range of services involves ocean freight forwarding, custom clearances, transportation and other value added services, which assist its clients to improve their service levels, reduce cost and ensure better quality, scalability and visibility of their supply chain. This along with a combination of its logistics and transportation network and diversified service portfolio, has made it possible for the company to attract and retain clients across various industry segments.

Existing agency network and arrangements: It has been able to tap markets across the countries by establishing a strong relationship through its network with international companies through its subsidiaries. This network has complemented and enhances its capabilities to manage movements across geographies. It has created a strong network through its subsidiary companies and mutual cooperation or agency agreements with parties located in countries like Ecuador, Brazil, Chile, Peru, United States of America, Paraguay, Bolivia, Hongkong, China, Taiwan, Vietnam and other countries. 

Strong knowledge and expertise of promoters: Its promoters have a strong knowledge of the logistics and warehousing management business. Its Promoter, Rajen Hasmukhlal Shah, possess an experience of around 33 years in the logistics industry, which gives it an advantage of industry knowledge, maintaining good relationship with clients and suppliers and better decision making power. Under their leadership it has shaped the company and builds domain knowledge of specific logistics requirements in a variety of sectors. This domain knowledge combined with its capabilities of end-to-end logistics management enables the company to offer customised solutions in these customers’ requirements.

Risks and concerns

Dependent on third party service providers: It relies on commercial ocean freight carriers and NVOCC for the shipment of its client’s cargo from one port to another. Apart from this it is also dependent on CHA agents for custom clearance and upon various third parties for supply of assets and services, which inter-alia includes, vehicles for inland transportation of goods, containers for carrying goods, warehouses for storage etc. Its ability to service its customers depends on the availability and continuous services of such third parties for these outsourced services. Events beyond its control or that of its suppliers such as (i) equipment and vehicles shortages, particularly among contracted truckload carriers and ocean carriers; (ii) interruptions or stoppages in transportation services as a result of labor disputes and strikes; (iii) network congestion, weather related issues, ‘Acts of God’ or acts of terrorism; and (iv) increases in operating expenses for carriers, such as fuel costs, insurance premiums and licensing expenses; may affect the cost, availability or ability to provide their services.

Dependent on export of yarn and yarn commodities: Majority of its revenues is dependent on the export of yarn and yarn commodities. For the period September 30, 2023 and during the fiscal 2023, 2022 and 2021 it derived approximately 47.20%, 68.19%, 74.65% and 58.80% of its revenue from providing logistics services to the customers engaged in yarn business. In case of any slowdown in the yarn and related commodities, it may face disruption in its logistic and freight forwarding business. If there is any slowdown in the industry it may lead to reduction in orders from the customers, delay or re-schedule of the delivery commitments and delay or defaults in payments from the customers. Thus, in case there is any slowdown in the yarn and yarn commodities industry it may have an adverse effect on its business, revenue and results of operations.

Does not have Custom House Agent license: It does not have any Custom House Agent license in its name which is used for clearance of cargo at entry or departure of a conveyance or the import or export of goods at any Customs Station. It has over the years make firm arrangements with CHA agents to undertake the custom clearance services on its behalf. Thus, it don’t have Custom House agent license in its own name and have to rely on third parties for Custom House Agent Services. Any delay in the service or refusal of services by Custom House Agency may affect delivery of its goods and it may have to compensate its customers for the loss if any.

Outlook

The company is engaged in the business of providing logistics and supply chain solutions to its customers. Its key services include freight forwarding, custom clearance and transportation handling services. It operates from its registered office situated at Thane and its international logistics operations are supported by a network of partners and vendors that enables it to service client requirements across India and abroad as well. On the concern side, the company does not have any Custom House Agent license in its name which is used for clearance of cargo at entry or departure of a conveyance or the import or export of goods at any Customs Station.

The issue has been offered in a price band of Rs 121-125 per equity share. The aggregate size of the offer is Rs 46.46 crore to Rs 48.00 crore based on lower and upper price band respectively. On performance front, the total income for the financial year 2022-23 stood at Rs 135.01 crore whereas in Financial Year 2021-22 the same stood at Rs 105.31 crore representing an increase of 28.20%. The company reported Restated profit after tax for the financial year 2022-23 of Rs. 7.62 crore in comparison to Rs 1.88 crore in the financial year 2021-22. Going forward, it plans to continue to invest in enhancing its presence into different geographies and to enable it to respond quickly to its customers’ changing requirements, thereby continually improving the competitiveness of its services.