Ashapura Logistics coming with IPO to raise Rs 52.66 crore

Ashapura Logistics 

• Ashapura Logistics is coming out with initial public offering (IPO) of 36,57,000 shares in a price band Rs 136-144 per equity share. 
• The issue will open on July 30, 2024 and will close on August 1, 2024.
• The shares will be listed on NSE Emerge Platform.
• The face value of the share is Rs 10 and is priced 13.60 times of its face value on the lower side and 14.40 times on the higher side.
• Book running lead manager to the issue is Beeline Capital Advisors.
• Compliance Officer for the issue is Priyanka Gyanchand Jain.

Profile of the company

The company is an integrated logistics company in India, primarily operating in (i) Cargo handling and freight forwarding segment; (ii) Transportation (including project logistics and third-party logistics (3PL)); (iii) Warehousing and Distribution and (iv) other services (including coastal movement). It has pan-India operations through its network of 9 branch offices. With over 20 years of its operational experience since inception, it provides differentiated logistics solutions with its: (a) pan-India presence, (b) integrated service offerings, (c) focus on improving service through technology, and (d) large network of vehicle fleet. Its management has focused on providing quality services to its customers over decades of operations and thereby building credibility with its customer base, including its longstanding customers. Its company is benefited from the extensive experience of its promoter Mr. Sujith Chandrasekhar Kurup, who is associated with its company since its incorporation and having experience of more than 25 years in the Logistic Industry. Its Board of Directors, Key Managerial Personnel and Senior Management Personnel has also provided significant contribution in the growth of the company.

The company relies on an ‘asset-based’ business model wherein the assets necessary for quality services to its customers, such as commercial vehicles, containers and warehouses, are either owned or provided by a network of its business partners on lease basis. Accordingly, it has maintained its owned fleet of vehicle along with network of business partners from whom it hires the required vehicles on need basis. Further, its material subsidiary i.e., Jai Ambe Transmovers is also engaged in the business of transportation services, having large fleet of owned commercial vehicles. As on March 31, 2024, it has maintained owned fleet of 250 of commercial trucks (Comprising 181 trucks of its material subsidiary i.e., Jai Ambe and 69 trucks owned by the company). Access to such large vehicle network enables it to scale its business as the demand increases and also cater to large business opportunities. Further, it also owns 60 containers of 40 TEUs providing edge in its cargo handling business. Its warehouse distribution network comprises of 7 warehouses across India situated at prompt locations such as Gujarat, Maharashtra, Karnataka and Tamilnadu. 

Additionally, the company’s technology-enabled ‘asset-based’ business model facilitates the flexibility to develop and offer customized logistics solutions to a diverse set of customers and industries. It actively promotes a ‘technology first’ culture with a view to scale the business efficiently and enhance the customer experience. It has developed software (IMPEX) for ease of its operations, which trace and track entire operations of its cargo handling and transportation segment. Further, it is in process of development of another software, dedicated to its transportation segment. Its primary technological capabilities encompass demand generation, track and trace, fleet operations, pricing control, and vendor ecosystem enablement.

Proceed is being used for:

• Funding capital expenditure requirement of the company towards purchase of trucks (Vehicles) and ancillary equipment (Equipment).
• Construction of warehouses at its facilities located at Mundra, Gujarat.
• Funding the incremental working capital requirement of the company.
• General Corporate Purposes.

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 22 million 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 ecommerce delivery. The industry includes transportation, warehousing, and value-added services like packaging, labelling, and inventory management. With the advent of technology-driven solutions such as transportation management systems (TMS) and warehouse management systems, India's logistics industry has witnessed tremendous development in recent years (WMS). These solutions have assisted logistics firms in increasing operational efficiency, lowering costs, and improving customer service.

Foreign corporations are actively investing in India's logistics infrastructure to capitalize on the country's strategic location, trained labour, and improved business environment. The development of industrial and logistics parks, as well as data centres, is a new bright spot on the Indian real estate heatmap. In 2022, these two segments received $ 1.8 billion in Private Equity (PE)/ Venture Capitalist (VC) investments, representing a 29% increase year on year. The industry garnered investments worth $ 1 billion (Rs 8,257 crore) at the beginning of 2022. The logistics and industrial industries' quarterly average investment was around 1.3 times more in 2021 than it was in 2021 when it was $ 335.69 million (Rs 2,755) crore. Over the last four years (2019-2022), the warehouse and logistics sector has received a total institutional investment of $ 5.4 billion, with 2022 accounting for a major 35% portion. Warehouse investment accounted for the second greatest percentage of institutional real estate investment in both 2021 and 2022, accounting for 27% and 31%, respectively, outperforming other asset classes such as residential and retail. During the four-year period 2019-2022, the western area of the country - led by Mumbai, Pune, and Becharji, (a tiny town in Gujarat) - witnessed the second-greatest institutional investment in warehousing, accounting for 35% of total investment in the industry, demonstrating the increased confidence that investors have in the nation's Tier II cities.

Pros and strengths

Scaled and integrated logistics operations: The company is an integrated logistics company in India, primarily operating in (i) Cargo handling and freight forwarding segment; (ii) Transportation (including project logistics, third party logistics (3PL) and freight forwarding); (iii) Warehousing and Distribution and (iv) other services (including coastal movement). It has pan-India operations through its network of 9 branch offices. With over 20 years of its operational experience since inception, it provides tailored solutions to meet the unique requirements of customers across different industries (including Auto mobile, West Paper, Textile and Steel industry) and geographies (such as Gujarat, Maharashtra, Karnataka and Tamilnadu). Through its integrated operations, it can leverage synergies across different segments of cargo handling, transportation and warehousing facilities.

Asset-based business model resulting into higher efficiencies: The company relies on an ‘asset-based’ business model wherein the assets necessary for quality services to its customers, such as commercial vehicles and containers, are either owned or provided by a network of its business partners on lease basis. Accordingly, it has maintained a limited base of owned fleet along with network of business partners from whom it hires the required vehicles. Further, its material subsidiary i.e., Jai Ambe Transmovers Private Limited is also engaged in the business of transportation services, having large fleet of owned commercial vehicles. As on March 31, 2024, it has maintained owned fleet of 250 of commercial trucks (Comprising 181 trucks of its material subsidiary i.e., Jai Ambe and 69 trucks owned by the company). Access to such large vehicle network enables it to scale its business as the demand increases and also cater to large business opportunities. Further, it also owns 60 containers of 40 TEUs providing edge in its cargo handling business. Its warehouse distribution network comprises of 07 warehouses across India situated at prompt locations on lease basis.

Optimal Utilization of Resources: The company constantly endeavours to improve its execution process, capabilities, skill up gradation of employees, modernization of plant and machineries to optimize the utilization of resources. It regularly analyses its material procurement policy and project execution process to de?bottle neck the grey areas and take corrective measures for smooth and efficient working thereby putting resources to optimal use.

Risks and concerns

Dependent on container traffic at various port: The company currently has locational presence at more than 5 Ports India such as Mundra Port, Hazira Port and JN Port. For the year ending March 31, 2024, it derived 41.30% of its revenue from handling operations from these facilities. In the event container traffic does not grow as anticipated or declines, the volume of cargo handled by it may be adversely affected. Further, with the development of new ports along the west coast of India, capacity additions in the existing ports and adverse developments in relation to the transportation infrastructure, some of the cargo traffic may get diverted to other ports, in which the company may expand in order to facilitate its existing and new customers. Also, any significant social, political, economic or geological disruption in these regions, or changes in the state or local governments, or the Government of India, or any change in the EXIM policies or the policies of these ports, could require it to incur significant capital expenditure, change its business structure or strategy, which could have an adverse effect on its business, results of operations and financial condition.

Dependent on few suppliers: The company’s top ten suppliers contribute 25.65%, 39.14%, and 35.04% of its total purchase for the financial year ended on March 31, 2024, 2023 and 2022, respectively based on restated consolidated financial statement. It cannot assure that it will be able to get the same quantum and quality of supplies, or any supplies at all, and the loss of supplies from one or more of them may adversely affect its purchases of stock and ultimately its revenue and results of operations. However, the composition and amount of purchase from these suppliers might change as it continues seeking new suppliers for its product for better quality and price in the normal course of business. Though it not faces substantial challenges in maintaining its business relationship with them or finding new suppliers, there can be no assurance that it will be able to maintain long term relationships with such suppliers or find new suppliers in time.

Majority of revenues generated from state of Gujarat: The company derives majority of its revenue from State of Gujarat. Such geographical concentration of its business in this region heightens its exposure to adverse developments related to competition, as well as economic and demographic changes in this region which may adversely affect its business prospects, financial conditions and results of operations. It may not be able to leverage its experience in these regions to expand its operations in other parts of India. The concentration of the company’s business in Gujarat subjects it to various risks, including but not limited to: Regional slowdown in construction activities in Gujarat; vulnerability to change of policies, laws and regulations or the political and economic environment of Gujarat; constraint on ability to diversify across states; and perception by its potential clients that it is a regional construction company, which may hamper it from competing for large and complex work orders at the national level. 

Outlook

Ashapura Logistics deals international & multi-national Export & Import. Its professionals are capable of handling sea freight forwarding services in most efficient and prompt manner. Also, it takes care any type of over dimensional cargo by sea. It offers logistics services round the clock and it available even for transporting delicate goods. It is equipped with fleet of well-maintained vehicles & carriers. Its customized Air Freight services enable the customers to co-ordinate the cargo more flexibly and efficiently. The company offers its customers comprehensive warehousing and storage facilities. Through its own space as well as leased, it can provide virtually any form of storage required by the customers. Being an authorized CHA, it handles documentation, custom brokerage & inland clearance. Its service includes receiving goods, custom documentation and examination of shipments & handling all kinds of customs clearances paper work of its clients. On the concern side, the company passes various cost incurred from third-part service providers to its customers. It typically incorporates charges from its third-party service providers into the pricing of its services offered to customers. However, it may not be able to immediately pass on any short-term increases in these charges to its customers until its contracts are reviewed with its customers, or until it negotiates the renewal terms of its customer contracts.  

The company is coming out with a maiden IPO of 36,57,000 equity shares of Rs 10 each. The issue has been offered in a price band of Rs 136-144 per equity share. The aggregate size of the offer is around Rs 49.74 crore to Rs 52.66 crore based on lower and upper price band respectively. On performance front, the Total Revenue from operations for the FY 2024 was Rs 19,900.91 lakh as compared to Rs 22,181.65 lakh during the FY 2023. Revenue from operations was decreased by 10.28% in FY 2024. The company recorded an increase in its profit for the period from Rs 944.49 lakh in the year ended on March 31, 2023 to Rs 1,235.71 lakh in the year ended on March 31, 2024. Meanwhile, under cargo handling segment, the company intends to increase the number of cargo handled by the company on year to year basis, in order expand its reach. It has cleared 1,35,100, 1,39,394 and 1,41,354 containers for the year ended March 31, 2024, 2023 and 2022, respectively. It intends to maintain and further grow in such segment by increasing the cargo handled by the company on year-to-year basis. The company also intends to scale its Warehousing and Distribution (W&D) solutions by catering multiple customers at a single warehouse. It intends to achieve this by implementing and offering enhanced automation and technology-based solutions for increased productivity and optimized cost.