TVS Supply Chain
about 9 months ago
IPO Size: Rs. 880 cr
- Rs. 600 cr fresh issue, for debt repayment of Rs. 525 cr, of total Rs. 1,990 cr
- Rs. 280 cr Offer for sale (OFS), mainly by PE investor Tata Capital (Omega), looking to trim its 4.3% holding to 1.3% and by other individual shareholders.
Price band: Rs. 187-197 per share
M cap: Rs. 8,617 cr, implying 10% dilution
- 75% allocation to QIBs and only 10% retail, as loss in FY20 and FY21
IPO Date: Thu 10th Aug to Mon 14th Aug 2023, Listing: Thu 24th Aug 2023
Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.
Integrated Supply Chain Solutions Provider
TVS Supply Chain is an integrated player, with FY23 revenue of Rs. 10,235 cr, split as 35% from industrials, auto 23%, consumer 12% and tech and tech infra another 12%.
Company is part of the TVS Mobility Group, comprising listed company TVS Srichakra and unlisted auto distribution business, and is not part of listed TVS Motors Group.
Top 6 Reasons why this IPO is Not Exciting:
- Only 30% revenue from India and balance overseas. Slowing global economies, especially European (46% of revenue) raises caution.
- In FY23, when company’s revenue grew 11% YoY to Rs.10,235 cr, PBT declined 3% YoY to Rs. 45 cr. Infact, FY23 other income stood at Rs. 76 cr, which included Rs. 53 cr forex gain. So, if other income is excluded from reported PBT, company has incurred net loss of Rs. 30 cr in FY23, even at such large scale of operations, when it is among the largest integrated supply chain solution providers.
- Thus, FY23 RoE of 5.5% and RoCE of 6.7% are very low, despite operating on an ‘asset-light’ model, wherein, warehouses and transport vehicles are leased, not owned. RoE is below bank interest rate as well, highlighting weak business fundamentals.
- On FY23 PAT of Rs. 40 cr and an EPS of Rs. 1.02, historic PE multiple is 193x. Even if all positives are priced in and Rs. 150 cr PAT is projected for FY25E, even then one year forward PE multiple of 57x, makes the IPO very expensive. MNC Blue Dart with 6% net margin is ruling at a lower PE of 45x.
- Dull Returns for existing shareholders – Tata Capital is making 14.6% IRR on its 8 year investment in the company, which is equivalent to average long-term Nifty returns. Another PE investor in the company, Mahogany, although not selling in the OFS, is making just 10% IRR on its 3.5 year old investment.
- Recent past IPOs of logistics solutions providers have not rewarded investors: share prices of Delhivery, Mahindra Logistics, Future Supply Chain are all trading below IPO price.
9th Aug 2023 at 09:13 pm
9th Aug 2023 at 08:15 pm