Mahindra Logistics IPO subscribed 1.32 times

Mahindra Logistics operates as third-party logistics services provider; price band for IPO fixed at Rs 425-429 per share

The Rs 830-crore initial public offering (IPO) of Mahindra Logistics, an arm of Mahindra & Mahindra (M&M), garnered a subscription of 1.32 times on Wednesday, a day before its close. 

The institutional portion of the IPO was subscribed 76 per cent, while that of non-institutional investor was subscribed 10 per cent. The small investor portion was subscribed 2.2 times. 

Mahindra Logistics operates as a third-party logistics services provider. 

The IPO is entirely an offer for sale, with parent M&M and private equity investor Kedaara Capital selling shares worth Rs 415 crore each. After the IPO, the promoter holding in the company will come down from 74.6 per cent to 61.1 per cent. 

The price band for the IPO was fixed at Rs 425-429 per share. “At the higher end, the issue is priced at a price-to-earnings multiple of 66.9 times on FY17 basis, which appears to be expensive, given the low financial performance (FY15-17 — revenue and profit after taxes CAGR of 18 per cent and eight per cent, respectively, with negative operating cash flows in the last two years),” says a note by Centrum. 

“Based on its growth story, diversification strategy, strong parent repute and post goods and services tax (GST) attractiveness of the logistics sector, we assign subscribe rating to the issue,” says another note by Angel Broking.

Prior to 2008, Mahindra Logistics operated as a division of M&M serving the transportation and distribution, warehousing and in-factory logistics requirements for the company. 

After 2008, the business was transferred to Mahindra Logistics. In 2014, Kedara Capital had bought 22.99 per cent stake in the company for Rs 200 crore, implying market capitalisation of Rs 870 crore. At IPO price, Mahindra Logistics will be valued at Rs 3,000 crore.