Issuing shares at exorbitant rate to unknown entities and then promoter acquiring same shares at a heavy discount followed by a bumper bonus within four days’ of acquisition raise serious doubts.
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OFFER AT A GLANCE |
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Name |
Tiger Logistics (India) Ltd |
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Public Offer |
Fresh issue of 11.4 lakh equity shares |
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Offer Price |
Rs 66 |
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Offer Amount |
Rs 7.52 cr |
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IPO% on Total Equity |
27.0% |
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Post-IPO Free Float |
27.0% |
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Application Quantity |
2000 & Multiples of 2000 |
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Bid/Offer Opens |
August 27, 2013 |
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Bid/Offer Closes |
August 29, 2013 |
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Listing |
SME Platform of BSE |
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IPO Grading |
Nil |
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Lead Manager |
Sarthi Capital |
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Registrars |
Bigshare Services |
Public Offer
The 13-year-old New Delhi-based Tiger Logistics (India) Ltd is going public with a fresh equity issue of 11.4 lakh shares of Rs 10 each at a fixed price of Rs 66 a piece aggregating to Rs 7.52 cr. Of the public offer, 58000 shares are reserved for the `market maker’ to the issue, Sarthi Capital Advisors, who is not only lead-managing the offer but has also underwritten the entire offer. Applicants to this issue should apply for a minimum of 2,000 shares (Rs 1.32 lakh). The shares are to be listed on the SME platform of BSE.
Issue Objective
The main objects of the present IPO are to fund the working capital requirements (Rs 6.4 cr) and achieve the benefits of listing on the stock exchange. Interestingly, the lead managers’ previous maiden SME issue, Bothra Metals, too had similar objectives!
Untested Management
Incorporated in the year 2000, Tiger is engaged in logistics business since 2003. The company is controlled by Harpreet Singh Malhotra (41 years) and his wife Benu Malhotra (46). Intriguingly, the core individual promoters hold less than 30% of the pre-issue equity of Rs 3.09 cr. More than 65% of the equity is held by three private companies – Brahma Suppliers (48.6%), Tiger Softech (9.7%) and Yieshu Finance (7.5%). In the post-issue equity of Rs 4.23 cr, the individual promoters would hold only about 21% and the private companies would control more than 48%. Notwithstanding a decent financial record in the last 5 years, the company is yet to join the dividend list.
Financial Track
Tiger Logistics offers customized service packages without size and weight restrictions. Its services include ocean and air freight forwarding, project cargo handling, custom clearance and warehousing/transportation. In fiscal 2013, Tiger had a gross block of Rs 6.5 cr (Net Block being Rs 3.6 cr) and posted a top line of Rs 123 cr on which it netted Rs 3.39 cr. In fact, the company’s performance has steadily improved in recent years and its net operating cash generation has been consistently positive for the last five years. On a tiny capital base, earnings have been attractive though the company chose not to distribute the profits by way of dividend.
However, what’s intriguing is the company’s inconsistent pricing of the share. In 2001, it allotted shares to individual promoters at par (Rs10). Four years later (in 2005) it charged as high as Rs 190 to two little known companies namely, C V Metal Powders (Haryana) Ltd and B Finlease India Pvt Ltd, whose ownership and credentials are not disclosed. Surprisingly, these companies sold the same shares to the individual promoter at a heavily discounted price of Rs 10 two years later. Astonishingly, within four days of acquisition by the individual promoter, the company came out with a bumper 34:1bonus issue!
Prospects
Logistics industry, no doubt, has immense potential for growth in the liberalized economy. Tiger’s operations being working capital intensive, the company’s profitability should improve once the issue proceeds are deployed into operation. As such, the company should not find it difficult to service the post-issue capital of Rs 4.23 cr. In fact, if the current profitability is any indication, the company’s bottom line could outgrow its equity base in a year’s time. Nevertheless, a disturbing factor is, the promoters have many companies in logistics-related line which may mar the prospects of the public company if they shift focus to their closely held companies.
Valuation
Perhaps for a SME issue from a little known first generation promoter, a price of Rs 66 may look steep. Incidentally, Tiger is the highest-priced SME IPO on the BSE till date. While the company’s track record may justify a price of Rs 66, the promoters’ cost of holding (just 29 paise per share), the poor discounting of established players and the absence of dividend make the offer price unattractive.
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HOW TIGER COMPARES WITH OTHER LOGISTICS STOCKS |
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SCRIP NAME |
M-CAP |
P/E |
P/BV |
P/FV |
P/R |
P/NB |
OPM |
YIELD |
PRICE |
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Rs Cr |
(X) |
% |
(Rs) |
|||||
|
Gateway Distriparks |
1,195 |
23.7 |
1.8 |
11.0 |
6.0 |
6.2 |
42.1 |
6.4 |
110.05 |
|
Allcargo Logistics |
922 |
9.4 |
0.8 |
36.5 |
0.9 |
0.9 |
19.0 |
2.1 |
72.95 |
|
Transport Corp |
335 |
6.3 |
0.9 |
23.0 |
0.2 |
0.8 |
7.2 |
2.2 |
46.00 |
|
Sical Logistics |
315 |
22.0 |
0.8 |
5.7 |
0.6 |
2.4 |
11.1 |
0.0 |
56.70 |
|
Gati |
206 |
9.6 |
0.2 |
11.9 |
1.4 |
2.1 |
3.5 |
2.1 |
23.80 |
|
Arshiya International |
77 |
– |
0.1 |
6.2 |
0.1 |
0.1 |
11.4 |
0 |
12.39 |
|
Shreyas Shipping |
51 |
4.7 |
0.3 |
2.3 |
0.2 |
0.2 |
15.2 |
2.2 |
23.00 |
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Patel Integrated |
16 |
9.4 |
0.2 |
1.0 |
0.0 |
0.3 |
3.1 |
4.9 |
10.30 |
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Tiger Logistics |
28 |
6.0 |
1.2 |
6.6 |
0.2 |
7.8 |
4.3 |
0.0 |
66.00 |