VRL Logistics Ltd.

IPO Analysis

Advise: Subscribe

Company Update

13 t h April, 2015
Issue Details
Offer Price Band

` 195 - 205

Face Value

10

Shares Offered (in crores) 2.28 2.31

Issue Size (in crores)

`451 - 468
Fresh Issue & Offer
for sale
Sankeshwar Group

Type
Promoters

Listing (Stock Exchange) NSE, BSE

Offer Open Date

15th Apr, 2015

Offer Close Date

17th Apr, 2015

Objects of the issue: The primary objective of the fresh issue of

`117crores; is to utilize `67.4crores for purchasing new vehicles for
good transportation and `28crores for repaying certain part of the
existing debt. Apart from the primary objective, it expects to receive
the benefits of listing the equity shares on the stock exchanges. The
company will not receive any proceeds of the offer and all the
proceeds will go to the Selling Shareholders.

Website: www.vrlgroup.in
Scrip Estimates
1,785 1,870

Market Cap (` Crores)

EPS 9M-FY15 (annualized) (`)
P/E(x)

11.2
17.4 18.3

Share Holding Pattern (%) Pre Offer Post Offer

Promoter & Promoter
Group
New Silk Route PE
Mauritius LLP
Public & Others
Financials
(Rs crore)
Sales

FY12

FY13

77.21

69.57

22.51

5.16

0.28

25.27

FY14

1130

1325

1494

1274

938

1130

1287

1060

EBIDTA

192

195

207

214

17.0

14.7

13.8

16.8

Depreciation

70

82

87

69

Interest

65

59

60

45

10

PBT

62

63

77

105

PAT

77

46

57

72

Other Inc.

PAT (%)

6.8

3.4

3.8

5.6

Equity

71

1812

86

86

10.8

0.3

6.7

8.4

10.7

5.8

7.2

8.4

EPS (Rs)
Wt. Avg.
EPS (Rs)

Investors should read the risk factors and more

detailed information in the Prospectus and the
application form before investing in the issue.

Website: www.way2wealth.com
Analyst: Ronak Morjaria
Tel: +9122-666338959
Email: ronakd@way2wealth.com

Investment Rationale

Large fleet of owned vehicles: VRL owns approximately 4,000

vehicles; which includes 3,546 goods transport vehicles and 455
buses. It majorly uses vehicles of Ashok Leyland (goods transport)
and Volvo (buses). Since the vehicles are owned by the company,
it reduces the hiring and operational costs significantly. Owning
the vehicles also ensures control of the value chain and service
quality. It helps the company build reputation with its customers
by ensuring timely delivery of the consignments. The company has
variety of goods transport vehicles, which helps them to serve a
diverse mix of consignments. Their vehicles also have
approximately 10% higher carrying capacity compared to others,
since they have an in-house vehicle body designing facility. The
trucks are under full utilization levels and buses operate at
approximately 70-75% utilization levels.

Hub-and-spoke operating model: VRL operates on a hub-andspoke model for carrying out its goods transport activities. With
the help of this model, the company is able to offer their
customers deliver their goods and parcels of different sizes &
weights at multiple locations with multiple pick-ups and delivery
points. The company also provides storage facility to its customers
and charges for the facility depending on product type, size,
weight and number of days it has to be held in their warehouse.

Cost benefit due to tie-ups and in-house maintenance facilities:

VRL utilizes approximately 1.7 to 1.8 lakh litres of diesel daily for
its goods transport and bus travel business. The company has tieup with Indian Oil Corporation (IOC) at 70 different locations
across India, where they are given a discount of `1 per litre of
diesel. They also have tie-ups for tyre repair and replacement,
which saves approximately 8-10% of the cost. The company also
has in-house Ashok Leyland servicing centre along with
arrangement of spare parts of AL and Volvo at is Hubballi centre
itself. This enables efficient and on time repairs and maintenance
of vehicles and replacement of spare parts.

9M-FY15

Expenditure
EBIDTA (%)

VRL Logistics Ltd. is one of the leading surface logistics and parcel
delivery service provider in India with its presence spread across 28
states and 4 union territories with branch network of approximately
624 branches in India. Apart from its logistics business, its other
business segments include bus travel operation, wind power
generation and air charting service.
VRL Logistics Ltd. reported a net profit of `71.69 crore and total
revenues of `1,273.8 crore during 9M-FY15. The goods transportation
business segment contributed approximately 76% of total revenues and
bus transportation contributed approximately 20% during 9M-FY15. As
of 31st December, 2015 the companys Long Term Debt Equity ratio
stood at 1.09 times.

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No. 14, Frontline Granduer, Walton Road, Bangalore-560001
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IPO Analysis

Key Concerns

The Company is exposed to fluctuations in the prices of fuel and

the ability to pass on the cost due to increase in fuel prices to its
customers. On an average fuel accounts for approximately 28% 30% of the total annual sales; thus inability to pass on such
increase might hit the margins and the bottomline.

The Company is also exposed to the risk of sufficient freight

volumes and passenger occupancy; since the company is exposed
to high fixed cost. Thus inability to generate sufficient volumes
and adequate passenger occupancy due to competition may
affect the turnover and profitability of the company.

Valuation and Investment Argument:

At the offer price bands, the issue is available at P/E of 17.4x 18.3x
its 9M-FY15 EPS (annualized) of `11.2. We believe the growth
prospects for Indias road transport to improve as the government
takes steps to increase investment in national highways. The
companys internal strengths such as large fleet of owned
vehicles, wide distribution network & diversified customer base
will enable the company to ride this wave of opportunity
successfully. Hence we recommend Subscribe to this issue.

WAY2WEALTH Brokers Private Ltd.,

No. 14, Frontline Granduer, Walton Road, Bangalore-560001
Email: research@way2wealth.com website: www.way2wealth.com

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IPO Analysis

1,494

1600
1,325

Sales (Rs. in Crores)

1400

1274

1,130

1200
889

1000
800
600
400
200
0

FY11

FY12

FY13

FY14

9M-FY15

Source: Company, W2W Research

EBIDTA

EBIDTA (%)

250
17.0

200

14.7

13.8

150
100
50
0
FY11

FY12

FY13

FY14

20.0
18.0
16.8 16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0

EBITDA Margins (%)

EBITDA (Rs. in Crores)

18.7

9M-FY15

Source: Company, W2W Research

90
80
70
60
50
40
30
20
10
0

PAT (%)
8.0
7.0

6.8
5.8

5.6

6.0
5.0

3.4

4.0

3.8

3.0
2.0
1.0
0.0

FY11

FY12

FY13

FY14

Source: Company, W2W Research

WAY2WEALTH Brokers Private Ltd.,

No. 14, Frontline Granduer, Walton Road, Bangalore-560001
Bangalore
560001
Email
ail: research@way2wealth.com website: www.way2wealth.com
om

Way2wealth
h Research
R
is also available on Bloomberg WTWL
WL <GO>

9M-FY15

PAT Margin (%)

PAT (Rs. in Crores)

PAT

IPO Analysis

Team
Analyst

Designation

Nilesh Doshi

President (Research)

Sector

Mahesh Bendre

AVP

Capital Goods, Auto, Auto Ancillary

Email

Telephone

nilesh.doshi@tssl.in

+9122-6633 8950

maheshbendre@way2wealth.com

+9122-6146 8937

Shivani V. Vishwanathan

Sr. Research Analyst

FMCG, Auto

shivani.mehra@tssl.in

+9122-6663 8956

Nisha Harchekar

Sr. Research Analyst

Chemicals, Textiles

nishaharchekar@way2wealth.com

+9122-6146 2952

Ronak Morjaria

Research Associate

ronakd@way2wealth.com

+9122-6633 8959

Vijay Gyanchandani

Research Associate

vijaygyanchandani@way2wealth.com

+9122-6633 8272

Institutional Sales

Designation

Email

Telephone

Ramanjaneyulu BV

Institutional Head Sales

raman@way2wealth.com

+9122-6146 2956

Vinod Vijay Birla

Senior Manager

vinodbirla@way2wealth.com

+9122-4019 2998

Bhavika Ravasia

Senior Manager

bhavikaravasia@way2wealth.com

+9122-4019 2995

Institutional Dealing

Designation

Email

Telephone

Ajay Prabhudesai

Assistant Vice President

ajay.prabhudesai@tssl.in

+9122-4027 8930

Mitul Doshi

Senior Executive

mitul.doshi@tssl.in

+9122-4027 8932

Gautam Vyas

Institutional Sales Trader

gautam.vyas@tssl.in

+9122-4027 8934

WAY2WEALTH Brokers Private Ltd.,

No. 14, Frontline Granduer, Walton Road, Bangalore-560001
Email: research@way2wealth.com website: www.way2wealth.com

Way2wealth Research is also available on Bloomberg WTWL <GO>

IPO Analysis

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WAY2WEALTH Brokers Private Ltd.,

No. 14, Frontline Granduer, Walton Road, Bangalore-560001
Email: research@way2wealth.com website: www.way2wealth.com

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