What you must know about Marinetrans India IPO?

Net Marinetrans India Ltd was incorporated in the year 2004 and it is engaged in the business of sea freight forwarding. Marinetrans India Ltd started off as a freight forwarder and later expanded to offer Door-to-Door Delivery and 3PL services for the logistics industry. It has struck a series of informal agreements and arrangements with the Third Party Logistics (3PL) players. Marinetrans India Ltd provides its clients with a wide range of transport management and freight-related services. This is largely accounted for by Freight Forwarding, which covers both sea and air freight. The company is headquartered in Navi Mumbai, Maharashtra, and has branches in Ahmedabad, Gujarat. Some of the key ports that Marinetrans India Ltd operates through include JNPT, Nhava Sheva, Mundra, Kandla, Chennai, Vizag, and others and these are used as the hub to move cargo across the world.

Marinetrans India Ltd operates largely as a syndicator of this service. Its primary duty to the client is to obtain and confirm the Sales Booking Request, confirm the Shipping Line, ensure direct customer transport, stuffing, and transportation within the dock area. In short, Marinetrans India Ltd acts as the single point of contact between the Shipping Line and the customer and coordinates the entire activity value chain till the delivery of the goods. Marinetrans India Ltd does not operate through ports directly. Overall, Marinetrans India Ltd handles freight, project handling, logistics, warehousing, import / export documentation and process flows, sea air shipment, cross trade, break bulk handling and transportation.

Key terms of the Marinetrans India IPO (SME)

Here are some of the highlights of the Marinetrans India IPO on the SME segment of the National Stock Exchange (NSE).

• The issue opens for subscription on 30th November 2023 and closes for subscription on 05th December 2023; both days inclusive.
   
• The company has a face value of ₹10 per share and it is a fixed price issue. The issue price for the fresh issue IPO has been fixed at ₹26 per share. Being a fixed price issue, there is no question of price discovery in this case.
   
• The IPO of Marinetrans India Ltd has only a fresh issue component with no book built portion. It must be remembered that the fresh issue portion is EPS dilutive and equity dilutive, but OFS is just a transfer of ownership and  hence it is not EPS or equity dilutive.
   
• As part of the fresh portion of the IPO, Marinetrans India Ltd will issue a total of 42,00,000 shares (42 lakh shares), which at the IPO fixed price of ₹26 per share aggregates to a total IPO fund raising of ₹10.92 crore.
   
• Since there is no offer for sale portion, the total size of the fresh issue will also be the total size of the IPO. Hence the total IPO size will also comprise of 42,00,000 shares, which at the fixed IPO price of ₹26 per share will aggregate to ₹10.92 crore.
   
• Like every SME IPO, this issue also has a market making portion with a market maker portion allocation of 2,16,000 shares. The market maker for the issue is NNM Securities Private Ltd and they will provide two-way quotes to ensure liquidity on the counter post listing and low basis costs.
   
• The company has been promoted by Tirah Kumar, Babu Kotian, and Arunkumar Hegde. The promoter holding in the company currently stands at 100.00%. However, post the fresh issue of shares in the IPO, the promoter equity holding share will get diluted to 67.00%. The IPO is normally mandated to bring the promoter stake below 75%, which is part of the listing agreement with the stock exchanges.
   
• The fresh issue funds will be used by the company for funding the working capital needs of the company. A part of the issue proceeds will also go towards meeting general corporate expenses as well as towards the issue costs.
   
• Swaraj Shares and Securities Private Ltd will be the lead manager to the issue, and Skyline Financial Services Private Ltd will be the registrar to the issue. The market maker for the issue is NNM Securities Private Ltd.

IPO allocation and minimum lot size for investment

Marinetrans India Ltd has allocated 5.04% of the issue size for the market makers to the issue, Rikhav Securities Ltd. The net offer (net of market maker allocation) will be divided between the retail investors and the HNI / NII investors in equal proportion. The net offer in this case is the offer size, net of the market maker quota allocation. The breakdown of the overall IPO of Marinetrans India Ltd in terms of the allocation to various categories is captured below.

The minimum lot size for the IPO investment will be 4,000 shares. Thus, retail investors can invest a minimum of ₹104,000 (4,000 x ₹26 per share) in the IPO. That is also the maximum that the retail investors can invest in the IPO. HNI / NII investors can invest a minimum of 2 lots comprising of 8,000 shares and having a minimum lot value of ₹208,000. There is no upper limit on what the QIBs as well as what the HNI / NII investors can apply for. The table below captures the break-up of lot sizes for different categories.

Key dates to be aware of in the Marinetrans India IPO (SME)

The SME IPO of Marinetrans India Ltd IPO opens on Thursday, November 30th, 2023 and closes on Tuesday, December 05th, 2023. The Marinetrans India Ltd IPO bid date is from November 30th, 2023 10.00 AM to December 05th, 2023 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is December 05th, 2023.

It must be noted that in ASBA applications, there is no refund concept. The total application amount is blocked under the ASBA (applications supported by blocked amounts) system. Once the allotment is finalized, only the amount is debited to the extent of the allotment made and the lien on the balance amount is automatically released in the bank account.

Financial highlights of Marinetrans India Ltd

The table below captures the key financials of Marinetrans India Ltd for the last 3 completed financial years.

Data Source: Company RHP filed with SEBI

Here are some of the key takeaways from the financials of the company for the last 3 years.

• The revenue growth has been erratic and while it grew rapidly in FY22, the revenue growth actually faltered in FY23 and can be attributed to the growth slowdown in exports. Most global buyers have bene on the side lines.
   
• The net margins have been around the 1% in the latest year. This has been consistent around these levels and that is not much to talk about. ROE at 9% and ROA at around 5.8% are looking OK, but valuations may be hard to justify.
   
• Being a capital light business, the asset turnover ratio or the asset sweating ratio has been consistently very high. Hopefully, the loan repayment post the IPO should be able to improve this ratio, but it remains a challenge.

The company has weighted average EPS of ₹2.44 over the last 3 years, which discounts the IPO price of ₹26 per share by around 10.11 times P/E ratio. If the latest year alone is considered as the benchmark, then the stock is trading at about 14.5 times earnings. However, a lot will depend on what level the EPS sustains in the long run since the numbers have been volatile and margins have been slow to grow. The company has reported relatively tepid sales growth and margin numbers. Justifying the valuation of 14.5 times latest year earnings I going to be tough. Investors may take a cautious approach to the stock.