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Mahindra Logistics Limited - Chanakya Ni · PDF fileMahindra Logistics Limited ... JSW Steel...

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  • IPO Note 30 October 2017

    Mahindra Logistics Limited

    RETAIL RESEARCH P a g e | 1

    RETAIL RESEARCH

    Background & Operations: Mahindra Logistics Limited 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 the CRISIL Report. Its competitive advantage is its asset-light business model pursuant to which assets necessary for its operations such as vehicles and warehouses are owned or provided by a large network of business partners. Its 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. It operates in two distinct business segments, SCM and PTS.

    SCM business: MLL offers customized and end-to-end logistics solutions and services including transportation and distribution, warehousing, in-factory logistics and value added services to its clients. It operated its SCM business 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 the other assets and services for its SCM business. MLLs asset-light business model along with its solutions design capabilities enables it 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. Certain key clients for SCMs business include Volkswagen India Private Limited, Vodafone India Limited, Thermax Limited, JSW Steel Limited, Ashok Leyland Limited, Siemens Limited, Bosch Limited, BMW India Private Limited, 3M India Limited, and Mercedes-Benz India Private Limited. In Fiscals 2017 and 2016, MLLs SCM

    business won several prestigious awards including the 3PL Achiever of the Year 2017 award by Global Logistics Excellence Awards, the CII Supply Chain and Logistics Excellence (SCALE) Award 2017 and the 3PL Company of the Year 2016 award by Logistics Asia Awards.

    PTS business: MLL provides technology-enabled people transportation solutions 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. It offers its services through a fleet of vehicles provided by a large network of over 500 business partners. Certain key clients in India for PTS business include Tech Mahindra Limited, AXISCADES Engineering Technologies Limited and ANZ Support Services India Private Limited. MLLs 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. Its other subsidiary, Lords, provides international freight forwarding services for exports and imports, customs brokerage operations, project cargo services and charters Objects of Issue:

    The objects of the Offer is to achieve the benefits of listing the Equity Shares on the Stock Exchanges and for the Offer for Sale. Further, MLL expects that listing of the Equity Shares will enhance its visibility and brand image and provide liquidity to its Shareholders. The listing will also provide a public market for the Equity Shares in India. MLL will not receive any proceeds from the Offer and all the proceeds will be received by the Selling Shareholders, in proportion to the Equity Shares offered by the respective Selling Shareholders as part of the Offer.

    Competitive Strengths An asset-light business model which allows flexibility and scalability in operations and high capital efficiency: MLL operates its business primarily on the basis of an asset-light business model which enables it to offer a variety of flexible, scalable, solutions and services based on its clients requirements and handle complexities that are unique to the Indian logistics industry. This business model also allows MLL to

    Issue Snapshot:

    Issue Open: Oct 31 Nov 02, 2017

    Price Band: Rs. 425 429 (A discount of Rs 42 is offered to Eligible Employees) Issue Size: 19,332,346 Equity Shares (Entirely Offer for sale)

    Offer Size: Rs.821.62 crs 829.36 crs

    QIB Upto 9,603,672 eq sh Retail atleast 6,722,572 eq sh Non Institutional atleast 2,881,102 eq sh Employee Reservation Upto 125,000 eq sh

    Face Value: Rs 10

    Book value: Rs 53.35 (June 30, 2017) Bid size: - 34 equity shares and in multiples thereof

    100% Book built Issue

    Capital Structure: Pre Issue Equity: Rs. 71.14 cr Post issue Equity: Rs. 71.14 cr Listing: BSE & NSE

    Book Running Lead Manager: Kotak Mahindra Capital Company Limited and Axis Capital Limited Registrar to issue: Link Intime India Private Limited

    Shareholding Pattern

    Shareholding Pattern

    Pre

    issue %

    *Post

    issue %

    Promoter and

    Promoter Group

    74.64 61.05

    Public & Others 25.36 38.95

    Total 100.0 100.0

    Source for this Note: RHP

  • RETAIL RESEARCH

    RETAIL RESEARCH P a g e | 2

    manage any fluctuations in demand more efficiently and minimize any adverse effects resulting from cyclical movements. The Mahindra brand and its experience in the logistics industry has enabled MLL to build long-standing relationships with a large number of its business partners who provide the operating assets it uses for its SCM and PTS businesses. An asset-light business model also helps MLL reduce its 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.

    Customized, technology driven logistics solutions: Technology is integral to MLLs business and operations. It has focused significantly on technologies which has enabled it to offer cost-efficient and customized logistics solutions to its clients. On several occasions, it has developed innovative solutions to address complex challenges which are unique to its clients industries. MLLs technology systems has also enabled to control and command operations, undertake real-time tracking of vehicles, provide end-to-end visibility of operations and make timely corrective interventions. Its investments in technology has allowed MLL to:

    study, model, design and optimize supply chain and logistics solutions for clients;

    manage inventory as well as connect and exchange information with clients systems allowing to control any supply chain gaps; and

    plan and optimize routes, transportation networks and consignment loads which has resulted in adherence to committed transit time and cost optimization for clients.

    MLL has also automated the end-to-end solutions it provide to its clients for its PTS business, from route planning and route allocation to operational tracking of trips, safety and emergency response and finally, billing and collections

    Integrated, end-to-end logistics services and solutions: MLLs integrated, end-to-end logistics services focus on creating solutions that address the requirements of its clients across SCM and PTS businesses. Use of integrated, end-to-end solutions from a single 3PL logistics service provider such as MLL results in enhanced cost efficiencies for its clients, which encourages them to use its services. As part of its SCM business, it offers a wide range of solutions including transportation and distribution, warehousing, in-factory logistics and other value added services. In domestic transportation, it offer short, medium and long haul transportation as well as in-city distribution services. It offers international freight forwarding services through its subsidiary, Lords. It offers multi-user warehousing services as well as built-to-suit, customized warehousing solutions. It provides its clients with value added services such as packaging, bundling and quality checks. MLLs in-factory logistics solutions usually involve the storage and management of input materials and semi-finished goods, the building of kits and their arrangement in sequence and the movement of such materials to its clients production line. MLLs business development and solutions design functions are dedicated to, and specialize in, designing customized integrated logistics solutions for its clients, which has helped improve service levels, cost, quality, scalability and visibility of its clients supply chain. This, along with a combination of its pan-India logistics and transportation network and diversified service portfolio, has made it possible for the company to attract and retain clients across various industry segments. In its PTS business, it fulfil the end-to-end people transportation requirements for select clients through management of their transportation desks. This service offering not only delivers better control and quality, but also ensures safety and generates cost advantages for its clients. The Mahindra brand and support from the Mahindra Group: MLL is a part of the Mahindra Group, which is a well-diversified group with operations across several industries and countries. It is managed by Mahindra Partners, which is a division of M&M and manages certain of its investments. As a part of the Mahindra Group, MLL adhere to high levels of professionalism and corporate governance standards. Its association with the Mahindra Group lends it the credibility which has assisted in buildin

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