What you must know about S J Logistics IPO?

S J Logistics (India) Ltd was incorporated in the year 2003, to provide logistics and supply chain solutions to its customers. S J Logistics (India) Ltd provides freight forwarding, customs clearance, and transportation handling services and are one of the well-entrenched players in this business. In the fiscal year FY22-23, S J Logistics (India) Ltd processed a total of 3,100 bills of lading to various countries. Bill of lading is the invoice for global trade. These included invoices of products to countries in Africa, Latin America, Australia, Europe, the Gulf, Southeast Asia, and Russia. In addition, S J Logistics (India) Ltd also has mutual cooperation agreements with counterparts in countries like Ecuador, Brazil, Chile, Peru, the United States, Paraguay, Bolivia, Hong Kong, China, Taiwan, Vietnam, and others for logistics and freight forwarding related services.

S J Logistics (India) Ltd two subsidiary companies: SJA Logisol India Private Limited (SJALIPL) and S. J. L. Group (Singapore) Pte Ltd. For handling some of its niche businesses. The company has a strong presence across the globe and plays a key intermediary role in facilitating global trade with a number of critical trade partners. Over the year, S J Logistics (India) Ltd has built up key business entry barriers like long-standing business track record, strong relationships with the diverse client base, full range of logistics services on offer; either directly or through cooperation arrangements, massive agency, and outsourcing  network for enhancing efficiency of operations etc. The IPO of S J Logistics (India) Ltd will be listed and traded on the SME segment of the NSE.

Key terms of the S J Logistics (India) IPO

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

• The issue opens for subscription on 12th December 2023 and closes for subscription on 14th December 2023; both days inclusive.
   
• The company has a face value of ₹10 per share and it is a book building issue. The issue price for the fresh issue IPO has been fixed in the price band of ₹121 to ₹125 per share. Being a book built issue, the final price will be discovered via book building process.
   
• The IPO of S J Logistics (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, S J Logistics (India) Ltd will issue a total of 38,40,000 shares (38.40 lakh shares), which at the upper IPO band price of ₹125 per share aggregates to a fresh IPO fund raising of ₹48.00 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 38.40 lakh shares, which at the upper price band of ₹125 per share will aggregate to ₹48.00 crore.
   
• Like every SME IPO, this issue also has a market making portion with a market maker portion allocation of 1,93,000 shares. The market maker for the issue is Hem Finlease 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 Rajen Hasmukh Lal Shah. The promoter holding in the company currently stands at 67.55%. However, post the fresh issue of shares in the IPO, the promoter equity holding share will get diluted to 49.64%.
   
• The fresh issue funds will be used by the company for repayment / prepayment of loans, and working capital funding gaps. Part of the monies raised will also go towards meeting the general corporate expenses of the company.
   
• Hem Securities Ltd will be the lead manager to the issue, and Maashitla Securities Private Ltd will be the registrar to the issue. The market maker for the issue is Hem Finlease Private Ltd.

IPO allocation and minimum lot size for investment

S J Logistics (India) Ltd has allocated 5.03% of the issue size for the market makers to the issue, Hem Finlease Private Ltd. The net offer (net of market maker allocation) will be divided between the qualified institutional buyers (QIBs), retail investors and the HNI / NII investors. The breakdown of the overall IPO of S J Logistics (India) Ltd in terms of the allocation to various categories are captured in the table below.

The minimum lot size for the IPO investment will be 1,000 shares. Thus, retail investors can invest a minimum of ₹125,000 (1,000 x ₹125 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 2,000 shares and having a minimum lot value of ₹250,000. 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 S J Logistics (India) IPO (SME)

The SME IPO of S J Logistics (India) Ltd IPO opens on Tuesday, December 12th, 2023 and closes on Thursday, December 14th, 2023. The S J Logistics (India) Ltd IPO bid date is from December 12th, 2023 10.00 AM to December 14th, 2023 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is December 14th, 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 S J Logistics (India) Ltd

The table below captures the key financials of S J Logistics (India) Ltd for the last 3 completed financial years.

Data Source: Company DRHP filed with SEBI

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

• The revenue spike has been sharp in the latest year, although that is due to a fall in the previous year. However, the erratic sales growth has been compensated by the strong growth in the net profits.
   
• The net margins have been in the range of 5-6% in the latest year. However, here again, the comparisons are tough since the company had seen a sharp profit spike in the latest year, and so had the net margins. Even ROE is only meaningful for the latest year as it has nearly doubled and not comparable with previous years.
   
• Being a capital light business, the asset turnover ratio or the asset sweating ratio has been above 2.00 on an average basis. This may not be too representative as here the expenses ratio would matter more than the asset turnover ratio, in this sector.

The company has latest year EPS of ₹8.84 and weighted average EPS of ₹5.58 for the last 3 years. On the latest year EPS, the P/E ratio works out to the range of 14X to 15X times. However, a lot will depend on what level the EPS sustains in the long run since growth has been quite robust only in the latest year. By latest year valuations, the company looks reasonably priced, so it is the sustainable EPS that will matter. The focus would be on the next few quarters. This is generally a cyclical and low margin business so investors must keep risk in mind when investing. Investing in this IPO is best suited to investors willing to take on higher risk and wait for longer.