Evaluating Western Carriers (India) Ltd IPO opportunity; Should you invest?

Evaluating Western Carriers (India) Ltd IPO opportunity; Should you invest?

Mandar Wagh
/ Categories: Trending, IPO, IPO Analysis

Between FY22 and FY24, the company achieved a CAGR of 15 per cent in net profit. The impressive growth has been supported by a strong client base, including prominent names such as Tata Steel, Hindalco Industries, Vedanta, Hindustan Unilever, and Cipla.

About the Issue  

Western Carriers (India) Ltd is preparing to launch its Initial Public Offering (IPO) for equity shares. Below are the issue details.

IPO Details
IPO Opening Date  September 13, 2024
IPO Closing Date  September 18, 2024
Issue Type  Book Built Issue IPO
Face Value Rs 5 per equity share
IPO Price  Rs 163 to Rs 172 per equity share
Min Order Quantity  87 shares
Listing At  BSE, NSE
Total Issue 28,655,813 shares of FV Rs 5*
(Aggregating up to Rs 492.88 Cr)*
Fresh Issue 23,255,813 shares of FV Rs 5*
(Aggregating up to Rs 400.00 Cr)*
Offer for Sale 5,400,000 shares of FV Rs 5*
(Aggregating up to Rs 92.88 Cr)*
QIB Shares Offered  50% of the Offer
Retail Shares Offered  35% of the Offer
NII (HNI) Shares Offered 15% of the Offer
*At Upper Price Band  

Objects of the Issue  

The offer encompasses both the fresh issue and the offer for sale. It's important to note that the company will not accrue any proceeds from the offer for sale. The company plans to allocate the net proceeds raised from the fresh issue for the following purposes:

1. Prepayment or scheduled repayment of a portion of certain outstanding borrowings availed by the company.

2. Funding of capital expenditure requirements of the company towards the purchase of commercial vehicles, 40-foot specialised containers, 20-foot normal shipping containers and reach stackers.

3. General corporate purposes.

Promoter holding  

Rajendra Sethia and Kanishka Sethia are the promoters of the company. The promoters and promoter group currently hold a pre-issue shareholding stake of 99.99 per cent in the company.

Company profile  

Western Carriers (India) Ltd is India's largest private, multi-modal, rail-focused 4PL asset-light logistics company, based on container volumes handled by private players in FY23.

With extensive expertise in road, rail, and sea/river multi-modal transportation for both domestic and EXIM cargo, the company offers value-added services like inventory and warehouse planning, cargo handling, packaging, customs clearance, pre-shipment inspection, and containerization.

In FY23, Western Carriers held a 6 per cent share in the domestic market and a 2 per cent share in the EXIM market by container volumes handled.

The company has built long-standing relationships with clients across sectors such as metals, FMCG, pharmaceuticals, chemicals, engineering, oil & gas, and retail, with prominent names like Tata Steel, Hindalco Industries, Vedanta, Hindustan Unilever, and Cipla among its clientele.

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Financials  

Rs (in crore) FY22  FY23  FY24 
Revenue 1,475.79 1,637.84 1,691.41
Profit before tax 83.37 96.07 108.41
Net Profit 61.13 71.57 80.35

The company has shown consistent growth in both revenue and net profit over recent years. Between FY22 and FY24, the company recorded a Compound Annual Growth Rate (CAGR) of 7 per cent in revenue and 15 per cent in net profit. In FY24, the company reported an impressive Return on Equity (RoE) of 22 per cent and a Return on Capital Employed (RoCE) of 29 per cent.

Valuation and outlook  

Company Name P/E P/B RoE (%)
Western Carriers (India) Ltd 17 2.2 22
Listed Peers
Container Corporation Of India Ltd 46 4.84 11
Mahindra Logistics Ltd - 7.16 -
TCI Express Ltd 35 5.89 20

The issue is priced with a P/BV ratio of 3.40 times, calculated using its Net Asset Value (NAV) of Rs 50.62 as of March 31, 2024. At the upper price cap, it is priced at a P/BV ratio of 2.20 times, considering its post-IPO NAV.

When we calculate the PE ratio for the company by considering the FY24 earnings relative to the fully diluted paid-up equity capital, the resulting PE ratio stands at 17. Considering both valuation and returns, the company has significantly outperformed its listed peers.

A limited number of key customers accounts for a significant portion of the company's revenues, which creates a risk of customer concentration. Additionally, long payment cycles are a major risk factor for the company.

The logistics industry is experiencing a highly optimistic environment, fuelled by government initiatives like the National Logistics Policy and Gati Shakti, aimed at enhancing infrastructure and streamlining operations. With a growing focus on multimodal transportation, improved supply chains, and rising demand from sectors like e-commerce, manufacturing, and exports, the company is well-positioned to capitalise on these emerging opportunities.

Therefore, we recommend investors consider subscribing to the issue with a long-term investment perspective.

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