What you must know about Committed Cargo Care IPO?

Committed Cargo Care Ltd was incorporated in 1998 as a Third Party Logistics (TPL) provider. The company essentially specializes in handling import and export cargo and also provides integrated services pertaining to the same. Its integrated logistics management suite comprises of cargo management solutions, order management, international freight management, customs and cross-border movement, heavy and over-dimensional cargo movement, etc. It has a wide array of clients spread across different sectors including automotive, heavy engineering, telecom, food, agri-products, FMCG, paints, garments, pharmaceutical products, dairy products as well as e-commerce products. The business model of Committed Cargo Care Ltd is broken up into 4 key verticals viz. custom brokerage, Air Freight, Express Freight and Sea freight.

Committed Cargo is a licensed custom broker and operates from a fully equipped freight facility with online filing facility with custom EDI. This enables the company to offer top of the line and efficient import and export services to clients. The Air Freight vertical specialises in providing international airfreight to shippers, consignees, and sub agents. It is closely linked to the first vertical that offers custom tailored airfreight logistic solutions for a wide variety of cargo. The express freight vertical is the express courier delivery service that delivers packages to any part of the world with safety and speed. It operates as a leading aggregator in the industry with an extensive network across the globe and tie-ups with major leaders of the industry. Finally, the sea freight vertical offers a wide range of intermodal ocean transport - time-definite, door delivered to any point on the globe through long-term contracts with reliable carriers. The company has its key hubs at Delhi, Mumbai, Jaipur, and Ludhiana with network of associate offices in India and abroad.

Key terms of the SME IPO of Committed Cargo Care Ltd

Here are some of the highlights of the Committed Cargo Care IPO on the SME segment of the National Stock Exchange (NSE).

• The issue opens for subscription on 06th October 2023 and closes for subscription on 10th October 2023; both days inclusive.
   
• The company has a face value of ₹10 per share and it is a fixed price issue. The issue price for the fresh issue IPO has been fixed at ₹77 per share. Being a fixed price issue, there is no question of price discovery in this IPO.
   
• The IPO of Committed Cargo Care Ltd has only a fresh issue component with no book built portion. It must be remembered that the fresh issue portion is EPS dilutive and equity dilutive, but OFS is just a transfer of ownership and  hence it is not EPS or equity dilutive.
   
• As part of the fresh portion of the IPO, Committed Cargo Care Ltd will issue a total of 32,44,000 shares (32.44 lakhs), which at the fixed IPO price of ₹77 per share aggregates to a total fund raising of ₹24.98 crore.
   
• Since there is no offer for sale portion, the total size of the fresh issue will also be the total size of the IPO. Hence the total IPO size will also comprise of 32.44 lakh shares, which at the fixed IPO price of ₹77 per share will aggregate to ₹24.98 crore.
   
• Like every SME IPO, this issue also has a market making portion with a market maker portion allocation of 1,64,800 shares. The market maker for the issue is Nikunj Stock Brokers Ltd and they will provide two-way quotes to ensure liquidity on the counter post listing and low basis costs.
   
• The company has been promoted by Rajeev Sharma, Nitin Bharal, Sonia Bharal, Narendra Bisht and Yashpal Arora. The promoter holding in the company currently stands at 98.00%. However, post the fresh issue of shares and the OFS, the promoter equity holding share will reduce to 68.63%.
   
• The fresh issue funds will be used by the company for meeting its working capital funding gaps and for general corporate expenses. Part of the monies raised will also go towards meeting the expenses of the issue.       
   
• While Fedex Securities Private Ltd will be the lead manager to the issue, Bigshare Services Private Ltd will be the registrar to the issue. The market maker for the issue is Nikunj Stock Brokers Ltd.

IPO allocation and minimum lot size for investment

The company has allocated 5.08% of the issue size for the market makers to the issue, Nikunj Stock Brokers Ltd. The net offer (net of market maker allocation) will be divided equally between the retail investors and the non-retail investors, comprising predominantly of the HNI / NII investors. The breakdown of the overall IPO of Committed Cargo Care Ltd in terms of the allocation to various categories are captured in the table below.

The minimum lot size for the IPO investment will be 1,600 shares. Thus, retail investors can invest a minimum of ₹123,200 (1,600 x ₹77 per share) in the IPO. That is also the maximum that the retail investors can invest in the IPO. HNI / NII investors can invest a minimum of 2 lots comprising of 3,200 shares and having a minimum lot value of ₹246,400. There is no upper limit on what the QIBs as well as what the HNI / NII investors can apply for. The table below captures the break-up of lot sizes for different categories.

Key dates to be aware of in the Committed Cargo Care Ltd IPO (SME)

The SME IPO of Committed Cargo Care Ltd IPO opens on Frodau, October 06th, 2023 and closes on Tuesday, October 10th, 2023. The Committed Cargo Care Ltd IPO bid date is from October 06th, 2023 10.00 AM to October 10th, 2023 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is October 10th, 2023.

It must be noted that in ASBA applications, there is no refund concept. The total application amount is blocked under the ASBA (applications supported by blocked amounts) system. Once the allotment is finalized, only the amount is debited to the extent of the allotment made and the lien on the balance amount is automatically released in the bank account.

Financial highlights of Committed Cargo Care Ltd

The table below captures the key financials of Committed Cargo Care Ltd for the last 3 completed financial years.

Data Source: Company DRHP filed with SEBI

Here are some of the key takeaways from the financials of the company for the last 3 years.

• The fall in revenues in the latest year is more due to the downturn in global trade that is visible in the form of weak exports and imports overall from India. That has hit the business volumes of most trade related services, where the company operates.
   
• The net margins have been in the range of 3% to 4% on an average, which his considered OK for a company in this industry where operating costs tend to be quite high. Even the ROE ratio of 10% to 12% is the norm in this industry.
   
• Being a capital light business, the asset turnover ratio or the asset sweating ratio has been above 3 on a consistent basis. This may not be too representative as here the expenses ratio would matter more than the asset turnover ratio.

The company has latest year EPS of ₹7.04 and weighted average EPS of ₹5.39 for the last 3 years. This makes the company valuation at about 10 times based on past earnings, so on future earnings, it should be more attractive. The slowdown in global trade is temporary and this segment is growing at a rapid pace, so the volumes should grow in tandem. The stock would be a fit for investors with a longer time frame and a higher risk appetite.