What you must know about Kaushalya Logistics IPO?

Kaushalya Logistics Ltd was incorporated in the year 2007 to provide clearing and forwarding services to a leading cement company in India. In addition, Kaushalya Logistics Ltd  also distributes electronics and home appliances through its digital e-commerce platform. Broadly, the company offers logistics, transportation  and warehousing and distribution services. Recently, the company has also forayed into real estate development, although it is still a very nascent business. Under the logistics & transportation vertical, Kaushalya Logistics Ltd provides customised clearing and forwarding services to cement companies; which includes multimodal transportation, pick-up, packing, delivery, and distribution. The company also undertakes all the relevant documentation work.

The land transportation vertical covers the movement of goods by land. Kaushalya Logistics Ltd  also receives the goods shipped by rail from the cement companies and organises the local transport to the warehouses and the last mile delivery of the cement bags. In addition, Kaushalya Logistics Ltd  also offers warehousing services through warehouses that are either owned or rented by the customers. Kaushalya Logistics Ltd offers the total gamut of warehousing solutions, from creating invoices and delivery bills via customer ERP system to organising transportation for delivery to distributors via third-party providers. The company takes full responsibility for door-to-door delivery from the collection point to the delivery point, including passage, taxation, and documentation along the way. Its services are offered across the states of Tamil Nadu, Kerala, Karnataka, Bihar, and Rajasthan, with its head office in New Delhi and a regional office in Chennai. Kaushalya Logistics Ltd employees a team of 142 experts in specialized areas of making the process flow possible.

Key terms of the SME IPO of Kaushalya Logistics Ltd

Here are some of the highlights of the Kaushalya Logistics IPO on the SME segment of the National Stock Exchange (NSE).

• The issue opens for subscription on 29th December 2023 and closes for subscription on 03rd January 2024; both days inclusive.
   
• The company has a face value of ₹10 per share and it is book built issue. The issue price for the IPO has been fixed in the booking building price band of between ₹71 and ₹75 per share. The final price will be discovered through book building, within this range.
   
• The IPO of Kaushalya Logistics Ltd has a fresh issue component and an offer for sale (OFS) portion. It must be remembered that 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, Kaushalya Logistics Ltd will issue a total of 33,80,000 shares (33.80 lakh shares), which at the upper IPO price band of ₹75 per share aggregates to a fresh fund raising of ₹25.35 crore.
   
• The offer for sale (OFS) portion of the IPO of Kaushalya Logistics Ltd will entail the sale of 15,00,000 shares (15.00 lakh shares), which at the upper IPO price band of ₹75 per share aggregates to a total OFS size of ₹11.25 crore.
   
• The OFS will be offered entirely by the promoter group. Out of the 15 lakh shares offered under the OFS; promoter Uddhav Poddar will offer 3.75 lakh shares while Bhumika Realty Private Ltd (promoter group company) will offer 11.25 shares.
   
• As a result, the total size of the IPO will entail the issue and sale of 48,80,000 shares (48.80 lakh shares), which at the upper IPO price band of ₹75 per share aggregates to overall IPO issue size of ₹36.60 crore.
   
• Like every SME IPO, this issue also has a market making portion with a market maker inventory allocation of 2,44,800 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 Uddhav Poddar, Uddhav Poddar HUF, and Bhumika Realty Private Ltd. The promoter holding in the company currently stands at 99.99%. However, post the fresh issue of shares in the IPO, the promoter equity holding share will get diluted to 72.98%.
• The fresh issue funds will be used by the company for repayment of unsecured loans of the company and for working capital needs. Part of the monies raised will also go for meeting the general corporate expenses of the company.
   
• Khandwala Securities Ltd will be the lead manager to the issue, and Skyline Financial 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

Kaushalya Logistics Ltd 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 HNI / NII investors. The breakdown of the overall IPO of Kaushalya Logistics 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 ₹120,000 (1,600 x ₹75 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 ₹240,000. 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 Kaushalya Logistics Ltd IPO (SME)

The SME IPO of Kaushalya Logistics Ltd IPO opens on Friday, December 29th, 2023 and closes on Wednesday, January 03rd, 2024. The Kaushalya Logistics Ltd IPO bid date is from December 29th, 2023 10.00 AM to January 03rd, 2024 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is January 03rd, 2024.

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. The credit of shares to the demat account on January 05th 2023, will be visible to investors under the ISIN Code – (INE0Q2V01012).

Financial highlights of Kaushalya Logistics Ltd

The table below captures the key financials of Kaushalya Logistics 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 revenues have grown very sharply in the latest year so the previous growth periods may not be too relevant for the company. Most of the traction was only visible in the latest year for the company. Profits have grown at a more mellowed rate.
   
• The net margins have been very subdued in the latest year due to the surge in revenues, but the ROE is more stable at above 30% and that is a good indication. Even the ROA is relatively stable at over 5% on a consistent basis.
   
• Being a capital light business, the asset turnover ratio is attractive, but it is only in the latest year and in previous years it was below 1. However, if you combine the sweating with the ROA, it does sound like an interesting proposition.

The company has latest year EPS of ₹470.58 and weighted average EPS of ₹352.21 for the last 3 years. Either ways, the valuations look attractive. Investors should be wary of the sharp spike in revenues in the latest year and a lot of the valuation assumptions will depend on being able to maintain this tempo of growth in the future too. Investors can look at this IPO from a longer term perspective with a higher risk appetite only.