Kaushalya Logistics
- Kaushalya Logistics is coming out with initial public offering (IPO) of 48,80,000 shares of Rs 10 each in a price band Rs 71-75 per equity share.
- The issue will open for subscription on December 29, 2023 and will close on January 3, 2024.
- The shares will be listed on NSE Emerge Platform.
- The face value of the share is Rs 10 and is priced 7.10 times of its face value on the lower side and 7.50 times on the higher side.
- Book running lead manager to the issue is Khandwala Securities.
- Compliance Officer for the issue is Prateek Sharma.
Profile of the company
Kaushalya Logistics is developed as an integrated Logistics and Clearing and Forwarding (C&F) services provider. At present, the Company operates in three major verticals, one of which vertical is providing logistic support for handling and dealing in the cement for dealers and customers of Dalmia Cement Bharat Limited. The other vertical is of retail /e-commerce business wherein it is the sellers of Electronics and White Good items such as Televisions, Refrigerator, Washing Machines etc. on a major online e-commerce platform, covering locations all across India with registration under Goods and Services Tax (GST) in 17 Locations. It has also ventured out in commercial real estate sector by owning and renting out commercial shops in Udaipur, which constitutes the third vertical of its business operations.
The company is operating as Clearing and Forwarding agents for major cement Companies like Dalmia Cement Bharat Limited. Business model includes end to end support including clearing rail rake from railways, getting material transported to warehouse, loading / unloading, dispatches to distributors, invoicing, warehouse management including upkeep of stock, handling insurance matters and depot audit, related statutory compliances etc. Practically all operations on behalf of its customers after dispatch from production facility are handled by it. This comes with huge saving of manpower resources, saving on material wastage and other operational cost to customers through its efficient working which is based on vast rich experience in the logistics and warehousing field. This helps customers in having better reach over their customers in more transparent way, gaining more market share and customer confidence. Company works on asset light model, wherein company uses warehouses owned / rented by customers only. All transport fleet is hired based on broad parameters fixed by customer.
Company got engaged with a major online e-commerce platform as sellers of white good and electronics since January 2022. In online business, company sells products purchased from the leading brands only. Online business is performed with the help of various companies associated with the major online e-commerce platform. Company has entered agreements with Authorized distributors on B2B basis and purchases the products on best pricing on bulk purchases with best of discounts based on identification through automated Intelligence support provided to it. The company has also invested into pre-rental properties. This was to encash a good opportunity with the objective to having some regular cash inflows.
Proceed is being used for:
- Repayment of unsecured loans.
- Funding of working capital requirements of the company.
- General Corporate Purposes.
Industry overview
In recent years India has experienced a boom in internet and smartphone penetration. The number of internet connections in 2021 increased significantly to 830 million, driven by the ‘Digital India’ programme. Out of the total internet connections, 55% of connections were in urban areas, of which 97% of connections were wireless. The smartphone base has also increased significantly and is expected to reach 1 billion by 2026. This has helped India’s digital sector and it is expected to reach $1 trillion by 2030. This rapid rise in internet users and smartphone penetration coupled with rising incomes has assisted the growth of India’s e-commerce sector. India’s e-commerce sector has transformed the way business is done in India and has opened various segments of commerce ranging from business-to-business (B2B), direct-to-consumer (D2C), consumer-to-consumer (C2C) and consumer-to-business (C2B). Major segments such as D2C and B2B have experienced immense growth in recent years. India’s D2C market is expected to reach $60 billion by FY27. The overall e-commerce market is also expected to reach US$ 350 billion by 2030 and will experience 21.5% growth in 2022 and reach $74.8 billion.
Meanwhile, the real estate sector is one of the most globally recognized sectors. It comprises of four sub-sectors - housing, retail, hospitality, and commercial. The growth of this sector is well complemented by the growth in the corporate environment and the demand for office space as well as urban and semi-urban accommodation. The construction industry ranks third among the 14 major sectors in terms of direct, indirect and induced effects in all sectors of the economy. By 2040, real estate market will grow to Rs 65,000 crore ($9.30 billion) from Rs 12,000 crore ($1.72 billion) in 2019. Real estate sector in India is expected to reach $1 trillion in market size by 2030, up from $200 billion in 2021 and contribute 13% to the country’s GDP by 2025. Retail, hospitality, and commercial real estate are also growing significantly, providing the much-needed infrastructure for India's growing needs.
Logistics is of critical importance for both business and the economy. A robust and efficient logistics sector of a country indicates an efficient forward and reverse of goods and services, which ultimately translates to a fast-paces growth in economy. According to a recent EY report ‘India@100: realizing the potential of a US$26t economy’, India is projected to grow to US$ 26t by FY48. India’s transportation and logistics sector can act as the backbone to support this fast-paces growth, which the country is poised to achieve in the next 25 years. India’s freight movement is heavily skewed toward road transportation, which moves 66% of cargo (in ton-km). This is followed by rail (31, shipping (3%) and air (1%). The sector continues to witness unevenness in freight transportation by mode and is working toward solving this impediment. The warehousing and logistics industry in India is a dynamic and rapidly growing sector that is expected to play an increasingly important role in the country's economy. Despite some challenges, the sector is well-positioned for long term growth and presents exciting opportunities for investors and businesses. With the government's focus on improving infrastructure and the rise of e-commerce, the sector is expected to be a key driver of economic growth in the country.
Pros and strengths
Integrated, end-to-end logistics services and solutions: The company’s integrated, end-to-end logistics services focus on creating solutions that address the requirements of its clients. The company’s range of services, transportation, warehousing, and handling of cargo. Use of integrated, end-to-end solutions logistics service provider such as it results in enhanced cost efficiencies for its clients, which encourages them to use its services. Its business development and solutions are dedicated to, and specialize in, designing customized integrated logistics solutions for its clients, which have helped improve service levels, cost, quality, scalability and visibility of its clients’ supply chain. This, along with a combination of its logistics and transportation network and diversified service portfolio, has made it possible for it to attract and retain clients across various industry segments.
Established strong network: The company has tapped markets across the country by establishing a strong and symbiotic relationship through its network with various companies through its group companies. Over the year it has established a strong relationship with cement companies and a major online e-commerce platform managed suppliers. The company is having trusted relationship with them with repeated orders and ever-expanding presence across the country.
Storage Capabilities: The company has established a well-documented process for its warehouse management system which can be used by its customers to help them store their products. The warehouse is equipped with all the necessary requirements for proper handling, safety and security of the cargo like end-to-end surveillance, material handling equipments like MHE / HPT / Forklift / Reach Trucks, trained manpower, packaging facility and Epoxy Flooring with storing high load capacity. Warehousing facility services allows the customer to keep their goods in its warehouse which can be delivered based on the requirement of the customers or for storing of the goods which are waiting for clearance or approval.
Risks and concerns
Maximum revenue dependent upon e-commerce business: The substantial portion of the company’s revenue has been dependent upon one major e-commerce platform. Out of total revenue of Rs 63,216.92 lakh of the Company in Financial Year 2023, revenue from e-commerce business was Rs 57,264.13 lakh, which is around 90.58% of its total revenue. The company is registered as a seller with this e-commerce platform and have entered into various agreements with it which authorize the Company to sell various products on the ecommerce platform and on the basis of which the platform provides certain services to the company. The nature of these services is to facilitate the sales on the platform. These Agreements are all non-exclusive but shall remain in force until terminated by the e-commerce platform after giving prior written notices varying from 30 days’ to 60 days’ period to the company. The success of its business is accordingly significantly dependent on it maintaining good relationships with the major online e-commerce platform. The loss of business through this e-commerce platform or a reduction in the amount of business it obtains from them could have an adverse effect on its business, results of operations, financial and cash flows.
Revenue from logistics business is dependent only one major customer: The substantial portion of the company’s profits has been dependent upon its major customer Dalmia Cement (Bharat) Limited. The company’s revenue for this segment has increased from Rs 3,140 lakh in Financial Year 2021 to Rs 4,953 lakh in Financial Year 2023. Approximately 60% of its total profit comes from its activity of C&F Agency for Dalmia. The company has not entered into long term agreements with its customer and the success of its business is accordingly significantly dependent on it maintaining good relationships with them. The loss of this customer or a reduction in the amount of business it obtains from them could have an adverse effect on the company’s business, results of operations, financial condition and cash flows.
Dependent on third party transportation: The company’s success depends on the smooth supply and transportation of its products from its supplier to its warehouse and from its warehouse to its customers both of which are subject to various uncertainties and risks. In addition, products may be lost or damaged in transit for various reasons including occurrence of accidents or natural disasters. There may also be delay in delivery of products which may also affect its business and its results of operation negatively. A failure to maintain a continuous supply of its products to customers in an efficient and reliable manner could have a material and adverse effect on business, financial condition and results of operations.
Outlook
Kaushalya Logistics provides clearing and forwarding services to a leading cement company in India. The company also distributes electronics and home appliances through an online e-commerce platform. In FY 2022-23, the company entered into the commercial real estate leasing business. The company offers its services in Tamil Nadu, Kerala, Karnataka, Bihar and Rajasthan and has its head office in New Delhi and a regional office in Chennai. On the concern side, substantial portion of the company’s revenue has been dependent upon e-commerce business which is through only one major e-commerce platform. The loss of its major e-commerce platform would have a material adverse effect on its business, cash flows, results of operations and financial condition. Moreover, substantial portion of its profits has been dependent upon logistics business which has only one major customer. The loss of its major customer would have a material adverse effect on its business, cash flows, results of operations and financial condition
The issue has been offered 48,80,000 equity shares of Rs 10 each in a price band of Rs 71-75 per equity share. The aggregate size of the offer is Rs 34.65 crore to Rs 36.60 crore based on lower and upper price band respectively. On performance front, total revenue has increased by Rs 56,857.49 lakh and 894.14%, from Rs 6,358.92 lakh in the fiscal year ended March 31, 2022 to Rs 63,216.41 lakh in the fiscal year ended March 31, 2023. The increase in revenue was on account of sale of electronic products on the major online e-commerce platform. Moreover, net profit has increased by 87.53% from profit of Rs 377.02 lakh in the fiscal year ended March 31, 2022 to profit of Rs 707.02 lakh in the fiscal year ended March 31, 2023.
The company has established close relationships with the existing clients like cement companies and a major online ecommerce platform. It intends to leverage this relationship to further acquire more business in warehousing and retail. The company’s strategy also includes marketing customized solutions to target customers and analyzing their business processes to propose a comprehensive solution to their warehousing, logistic and supply chain needs. As its customers continue to grow and their supply chains increase in size and complexity, the company intends to focus on expanding the range of services for which they rely on it, cater to new geographies in which they operate and expand its services into their new product lines.
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