Leap India IPO: Subscription opens on Aug 7; should you apply or avoid?

Analysts noted that Leap India is working capital-intensive, which raises concern over healthy cash flow conversion.

Leap IPO review: Leap India Ltd's IPO will open for subscription on Friday (August 7)  and conclude on August 11 (Tuesday). The company has fixed a price band of ₹151-159 per share.

 

The company's ₹2,480 crore IPO is entirely a mix of fresh issue and offer for sale. The fresh issue component is made up of 3.01 crore equity shares, and the OFS is up to 12.5 crore shares by existing shareholders. On the OFS, the company will not receive any proceeds from the public offering.

Leap IPO review

Analysts have shared a ‘Neutral’ view on Leap IPO, noting that the company has a resilient business model and a diversified customer base.

 

 

SBI Securities noted that Leap India Ltd. is India’s largest on-demand asset-pooling provider, offering pallets, containers and material handling equipment (MHE) to businesses across diverse industries under reusable rental and pooling arrangements. The company manages the entire asset lifecycle, including procurement, deployment, digital tracking, retrieval, repair, maintenance and redeployment, enabling customers to access essential supply-chain infrastructure without incurring the cost and operational burden of ownership.

 

However, the brokerage noted that while Leap is a market leader in India's asset-pooling industry, it is working-capital intensive as reflected in its elevated receivable days of 131, thus raising concern over healthy cash flow conversion. Hence, we assign a ‘Neutral’ rating to the issue and would like to track the performance of the company for a few quarters post listing.

 

Another brokerage firm, Swastika, noted that the company has a strong leadership position in a niche asset pooling industry with high entry barriers. Well-positioned to benefit from the underpenetrated pallet pooling market in India. Based on its recent financial data, the issue appears exorbitantly priced. The company is extracting a higher premium for its IPO following its virtual monopolistic business model. However, the risk-reward appears unfavourable for investors due to demanding valuation and modest return ratios.

 

In terms of risk, the brokerage also noted that the company’s customer non-renewal or contract termination may affect cash flows. Swastika has assigned a ‘Neutral’ rating to the IPO.

Leap IPO GMP, lot size 

Leap India shares are commanding a modest premium in the unlisted market, according to grey market trackers. As of 2 PM, Leap India shares traded at ₹165.5 in the grey market, reflecting a premium of ₹6.5 or 4.09 per cent over the upper price band.

 

Investors can bid for a minimum of 94 equity shares and in multiples thereof. As  per the details, 50 per cent has been reserved for Qualified Institutional Buyers (QIBs), 15 per cent for Non-Institutional Investors (NIIs), and the remaining 35 per cent for retail investors.

 

The equity shares of Leap India are proposed to be listed on the BSE and NSE on or around August 14.

 

JM Financial Ltd is the book-running lead manager and MUFG Intime India Pvt.Ltd is the registrar of the issue.

 

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Disclaimer: View and outlook shared belong to the respective brokerages/analysts and are not endorsed by Business Standard. Readers' discretion is advised.