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edAshika Research - Equities
IPO Note: Mahindra Logistics Ltd.
Company Name Mahindra Logistics Ltd.
Issue Opens October 31, 2017 to November 02, 2017
Price Band Rs. 425 to Rs. 429
Bid Lot 34 Equity Shares and in multiples thereof.
The Offer Public issue of 19,332,346 Equity shares of Face value Rs. 10 each, (Comprising of Offer for Sale by
Issue Size Rs. 821.62 829.36 Crore
IPO Process 100% Book Building
Face Value Rs. 10.00
Exchanges NSE & BSE
BRLM Kotak Mahindra Capital Company Limited and Axis Capital Limited
Registrar Link Intime India Private Limited
Industry: Logistics Reco: Subscribe Date: October 30, 2017
1008, Raheja Centre, 214, Nariman Point, Mumbai-400 021, Ph- 022 6611 1700, Extn. - 704 www.ashikagroup.com
Issue Break up
Issue Size Allocation Equity Shares*
QIB 50% 9,603,673
HNI 15% 2,881,102
RII 35% 6,722,571
Total Public 100% 19,207,346
*Based on higher price band @ Rs. 429
Mahindra Logistics Ltd. (MLL) - a Mahindra group company is one of Indias largest 3PL solutions providers in the Indian
logistics industry which was estimated at Rs. 6.40 trillion in fiscal 2017 according to CRISIL report. MLLs competitive
advantage is its asset-light business model pursuant to which assets necessary for operations such as vehicles and
warehouses are owned or provided by a large network of business partners. Technology enabled, asset-light business
model allows for scalability of services as well as the flexibility to develop and offer customized logistics solutions across a
diverse set of industries. Company operates in two distinct business segments, Supply Chain Management (SCM) and
corporate People Transport Solutions (PTS).
Under SCM business it offers customized and end-to-end logistics solutions and services including transportation and
distribution, warehousing, in-factory logistics and value added services to clients through a pan-India network comprising
24 city offices and over 350 client and operating locations as at August 31, 2017. It has a large network of over 1,000
business partners providing vehicles, warehouses and other assets and services for SCM business. As at August 31, 2017,
MLL managed over 10.0 million square feet of warehousing space spread across pan-India network of multi-user
warehouses, built-to-suit warehouses, stockyards, network hubs and cross-docks. As at August 31, 2017, it operated in-
factory stores and line-feed at over 35 manufacturing locations. Such model of its operations enables company to serve over
200 domestic and multinational companies operating in several industry verticals in India, including automotive,
engineering, consumer goods, pharmaceuticals, e-commerce and bulk. Its client list includes Volkswagen India, Vodafone
India, Thermax, JSW Steel, Ashok Leyland, Siemens, Bosch, BMW India, 3M India and Mercedes-Benz India.
MLL provides technology-enabled PTS and services across India to over 100 domestic and multinational companies
operating in the IT, ITeS, business process outsourcing, financial services, consulting and manufacturing industries.
Objects of the Offer
Offer for Sale
The Company will not receive any proceeds of the Offer for Sale by the
Selling Shareholder. The objects of the Offer are to achieve the benefits of
listing the Equity Shares of the Company on the Stock Exchanges. The listing
of the Equity Shares will enhance the Companys brand and provide liquidity
to the existing Shareholders. (upto 9,666,173 Equity Shares by Mahindra &
Mahindra, up to 9,271,180 Equity Shares by Normandy Holdings and up to
394,993 Equity Shares by Kedaara Capital)
edAshika Research - Equities
21008, Raheja Centre, 214, Nariman Point, Mumbai-400 021, Ph- 022 6611 1700, Extn. - 704 www.ashikagroup.com
As at August 31, 2017, it operated PTS business in 12 cities and over 120 client and operating locations across India.
Certain key clients in India for PTS business include Tech Mahindra, AXISCADES Engineering and ANZ Support Services.
Companys subsidiary, 2X2 Logistics, provides logistics and transportation services to OEMs to carry finished automobiles
from the manufacturing locations to stockyards or directly to the distributors through specially designed vehicles. MLLs
other subsidiary, Lords, provides international freight forwarding services for exports and imports, customs brokerage
operations, project cargo services and charters.
An asset-light business model helps MLL to reduce capital expenditure requirements, mitigate the effects of operational
risks relating to direct fuel costs, maintenance costs and depreciation in addition to reducing the effect of any risks
emanating from changes in laws and regulations. This also enables it to deploy and utilize capital more efficiently, as
reflected in companys adjusted ROE which is at 33.77% in FY17. Revenue from the SCM division, which contributed ~89%
to total revenue in FY17, has grown at a CAGR of 17% over FY13-17 to ~Rs24bn with the larger share coming from Non-
Mahindra group. The revenue from operations of SCM business, attributable to Non-Mahindra group clients, has increased
at a CAGR of ~65% over FY15-17 to Rs9.5bn, reducing its dependence on the Mahindra group. The PTS business,
comprising 10% of total revenue, has also seen a steady growth of 5% CAGR over FY13-17 to Rs2.9bn.
Mahindra Logistic ltd. (MLL), a part of Mahindra & Mahindra group, is one of the largest 3rd party logistic (3PL) solution
providers in Indian logistic industry. MLL is an asset light, integrated, end to end and technology driven 3PL company with
presence in two distinct business segments including Supply chain management (SCM) and Corporate people transport
solutions (PTS). In SCM segment, it offers customized and end to end logistics solution & services, including transportation,
distribution, warehousing, in-factory logistics and value-added services to various clients. In PTS business, MLL provides
technology-enabled people transportation solutions & services across India to over 120 domestic as well as MNCs
operating in IT, ITeS, BPO, Financial Services, Consulting and Manufacturing industries. Companys SCM division contributes
~89% of the total revenue, while PTS division contributes rest of the revenue. During FY13-17, revenue from SCM segment
has increased at a CAGR of 17%, with larger share contributed by non-Mahindra GROUP. Revenue from Non-Mahindra
group has increased at a CAGR of ~65% over FY15-17, thus gradually reducing its dependence on the Mahindra Group. In
SCM segment, company offers services to various industries across India including automotive, engineering, consumer
goods, pharmaceuticals, e-commerce and bulk. The company has a pan India network comprising 24 city offices and a large
network of over 1,000 business partners, providing assets such as vehicles, warehouses and other services to ~350 clients.
As per the management, in SCM segment, transportation : warehousing mix is at 86%:14% vs industry average at
89%:11%. MLL intends to take warehousing share higher in bid to get GST related benefits. Further, as per business
segment wise warehousing commands higher margins vs transportation. In SCM segment, MLL has 180 non M&M
customers, with top 25 clients contributing 70% of non M&M business. Currently, MLL is managing over 10mn sqft of
warehousing space spread across India under various heads such as multi-user warehouses, built-to-suit warehouses,
stockyards, network hubs and cross-docks. Currently, MLL operated in-factory stores and line-feed at over 35
manufacturing locations across the country. Further, MLL has recently set up a warehouse in Gurugram with an aggregate
space of 191,000 sqft, which is well connected to several manufacturing and consumption clusters in India. It is also in the
process of setting up additional large format and multi-user warehouses in certain strategic locations on a long-term lease
basis. Company has two subsidiary named 2X2 logistics, which provides logistics and transportation services to OEMs
and Lords, which provides international freight forwarding services for exports and imports.
On financial front, MLL registered a revenue growth of 15% CAGR over FY13-17, while EBITDA grew at a CAGR of 20%
during the same period. Net profitability growth during FY13-17, grew at a pace of 17% CAGR. At net level, company
earned lower margin of 1.7% which is a drag on its financial performance. The issue is comprised of offer for sale from
promoters and other strategic investors. India has high logistic cost as compared to developed and other emerging
countries. Thus, there is immense potential in Indian logistic space given its long term growth opportunity. MLL is well
positioned to gain an uptick in the logistic sector on the back of its strong parentage, asset light business model and large
network of business partners. Further, logistic sector would be benefited most from the rollout of GST. On valuation front,
at upper price band the issue is valued at P/E multiple 66x on FY17 EPS. Due to its a