Should you subscribe to the IPO of India’s largest digital platform for truck operators?
In this analysis, we take a closer look at Zinka Logistics Solutions Ltd and present you with the exclusive IPO details.
About the issue
Zinka Logistics Solutions Ltd is preparing to launch its Initial Public Offering (IPO) for equity shares. Below are the issue details.
| IPO Details |
| IPO Opening Date |
November 13, 2024 |
| IPO Closing Date |
November 18, 2024 |
| Issue Type |
Book Built Issue IPO |
| Face Value |
Re 1 per equity share |
| IPO Price |
Rs 259 to Rs 273 per equity share |
| Min Order Quantity |
54 shares |
| Listing At |
BSE, NSE |
| Total Issue |
40,832,320 shares of FV Re 1* |
| (Aggregating up to Rs 1,114.72 Cr)* |
| Fresh Issue |
20,146,520 shares of FV Re 1* |
| (Aggregating up to Rs 550 Cr)* |
| Offer for Sale |
20,685,800 shares of FV Re 1* |
| (Aggregating up to Rs 564.72 Cr)* |
| QIB Shares Offered |
75% of the Offer |
| Retail Shares Offered |
10% 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. Funding towards sales and marketing costs
2. Investment in Blackbuck Finserve Pvt Ltd, its NBFC subsidiary, for financing the augmentation of its capital base to meet its future capital requirements
3. Funding of expenditure in relation to product development
4. General corporate purposes.
Promoter holding
Rajesh Kumar Naidu Yabaji, Chanakya Hridaya and Ramasubramanian Balasubramaniam are the promoters of the company. The promoters and promoter group currently hold a pre-issue shareholding stake of 32.91 per cent in the company.
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Company profile
According to a Redseer report, Zinka Logistics Solutions Ltd is India’s largest digital platform for truck operators, based on the number of users. In Fiscal 2024, 963,345 truck operators transacted on the company’s platform, representing around 28 per cent of India’s total truck operators.
Among new-age digital platforms in the trucking sector, Zinka boasts the largest physical network in terms of the number of touchpoints across India. As of June 30, 2024, its services span 628 districts, including all major transportation hubs and 76 per cent of India’s toll plaza network.
The company’s platform offers truck operators the ability to digitally manage tolling and fuelling payments, monitor drivers and fleets using telematics, find loads on its marketplace. Additionally, truck operators can avail themselves of used commercial vehicle financing through the company’s platform. As of June 30, 2024, the company has facilitated 5,109 loans totalling Rs 253 crore.
Financials
| Rs (in crore) |
FY22 |
FY23 |
FY24 |
Q1FY25 |
| Revenue |
156 |
195 |
317 |
98 |
| Net Profit |
-230 |
-237 |
-167 |
32 |
The company has consistently delivered strong growth in revenue over the past few years. Between FY22 and FY24, the company recorded a Compound Annual Growth Rate (CAGR) of 43 per cent in revenue. When annualized, the figures from the June quarter show notable topline growth of around 24 per cent compared to FY24.
The company reported significant losses in FY22 and FY23, primarily due to employee benefit expenses exceeding revenue for the period. The company highlighted that the largest costs are employee-related expenses and manpower services, primarily for sales, distribution, and marketing personnel.
However, the company reduced its losses in FY24, and the tide has now turned, with Q1 posting a profit of Rs 32 crore. The company has also significantly reduced its finance costs in FY24 compared to previous periods.
Valuation & Outlook
| Company Name |
P/E |
P/B |
RoE (%)* |
| Zinka Logistics Solutions Ltd |
39 |
5 |
- |
| Listed Peer |
| CE Info Systems Ltd |
76 |
14 |
23 |
*RoE: Based on FY24 data
The issue is priced with a P/BV ratio of 14.60 times, calculated using its Net Asset Value (NAV) of Rs 18.70 as of June 30, 2024. At the upper price cap, it is priced at a P/BV ratio of 5.38 times, considering its post-IPO NAV.
With the company’s FY24 earnings and fully diluted equity capital, the price-to-earnings (P/E) ratio remains in negative territory. Based on the annualized FY25 earnings, the P/E ratio stands at 39.
As a result, the company has outperformed its listed peer in terms of valuation. Zinka Logistics delivered a 9 per cent return on equity for the three-month period ending June 30, 2024, with potential for even higher returns if the company successfully boosts its bottom line.
The Indian trucking industry is a crucial part of the country’s logistics sector. According to the Redseer Report, it is a USD 18 billion to USD 25 billion revenue pool in Fiscal 2024 and is expected to grow to USD 35 billion by Fiscal 2028.
Given the optimistic industry outlook, the company’s established market position, diverse presence, strong revenue growth, and potential for further expansion after turning profit-positive, we foresee a promising future. However, this outlook depends on the company’s ability to maintain profitability, and there are certain uncertainties.
Therefore, we recommend that risk-taking investors with surplus funds can consider subscribing to the issue with a moderate subscription.