Mahindra Logistics ends flat on debut

The shares of Mahindra Logistics, subsidiary of automobile company Mahindra & Mahindra (M&M), ended flat during the stock market debut on Friday. The stock closed at Rs 429, the price at which it had issued shares to investors in its Rs 830-crore initial public offering (IPO) last week.

In intra-day trade, it hit a high of Rs 434 and a low of Rs 416 on the National Stock Exchange (NSE). Shares worth Rs 436 crore were traded on the NSE and another Rs 64 crore on the BSE. The IPO had 7.9 times subscription, with the institutional and retail (small investor) portion seeing 16 times and six times more demand than the shares on offer. The employee and wealthy investor portion of the IPO were subscribed twofold each.

In the IPO, parent M&M and private equity investor Kedaara Capital sold shares worth Rs 415 crore each. After that, the promoter holding has come down from 74.6 per cent, to 61.1 per cent. At Friday’s close, Mahindra Logistics had a market capitalisation of Rs 3,053 crore. The shares of M&M, which holds 58.8 per cent stake in the company, gained 2.3 per cent to Rs 1,393 crore on Friday.

The subsidiary now operates as a third-party logistics services provider. Prior to 2008, it was a division of M&M, serving the transportation and distribution, warehousing and in-factory logistics need of the company. In 2014, Kedara Capital had bought 22.99 per cent stake for Rs 200 crore, implying a market cap of Rs 870 crore.

At the current market price, the company is valued at 67 times its 2016-17 earnings.

Analysts had termed this expensive, as the company's growth in the past three financial years hasn’t been encouraging. Between FY15 and FY17, the compounded growth in revenue and net profit was 18 per cent eight per cent, respectively, with negative operating cash flow in the past two years, said a report from Centrum. 

Mahindra Logistics is the 29th company to list this year after an IPO. Of the 29, only 15 have gained five per cent or more on the trading debut.