Western Carriers (India) IPO Alert

Western Carriers (India) Limited IPO Alert: Key Details and Risk Factors

Western Carriers (India) Limited, a prominent player in the logistics sector, is set to launch its Initial Public Offering (IPO) from September 13, 2024, to September 18, 2024. This IPO presents an opportunity to invest in a rail-focused, asset-light logistics company with a strong presence across various industries. Here’s everything you need to know about this upcoming IPO.

IPO Overview

• Total Size: ₹492.88 crores
• Fresh Issue: ₹400 crores (2.33 crore shares)
• Offer for Sale: ₹92.88 crores (0.54 crore shares)
• Price Band: ₹163 – ₹172 per share
• Market Cap Post-IPO: ₹1,753.63 crores
• Listing On: BSE and NSE (Tentative Listing Date: September 23, 2024)

Risk Factors to Consider

1. Customer Concentration: The company’s dependency on a few key clients in the metals and FMCG industries could impact its stability. A downturn in these sectors might affect operational efficiency.
2. Technological and ESG Pressures: Rapid technological advancements and rising Environmental, Social, and Governance (ESG) expectations may increase operational costs.
3. Legal Proceedings: Ongoing legal issues, including a case against a promoter, could negatively affect the company’s reputation and operations.
4. Working Capital Needs: Western Carriers faces potential cash flow issues due to delayed payments from customers and tight payment terms from service providers. High credit risk and working capital pressure could strain financial stability. The company is also exposed to credit risk from customers and vendors who may delay payments or fail to meet contractual obligations. The gap between trade payables and receivables further increases the working capital pressure, potentially affecting the company’s cash flow cycle and financial stability.
5. Debt Obligations: With significant debt of ₹3,527.31 million as of July 31, 2024, high leverage could affect growth, cash flow, and financial stability.
6. Promoter Issues: Western Carriers’ Promoters, Rajendra Sethia (Chairman and Managing Director) and Kanishka Sethia (Whole-time Director and CEO), were directors of Western Conglomerate Limited, a listed company. During their tenure, the company’s shares were suspended from trading on the Calcutta Stock Exchange.
7. Western Carriers’ Promoter Group includes Narendra Sethia, the brother of Promoter Rajendra Sethia, but the company was unable to obtain necessary disclosures or confirmations from him or related entities. SEBI denied an exemption request, so the company disclosed the NS Promoter Group based on publicly available information. Ongoing legal proceedings and complaints involving Narendra Sethia and other entities are also noted.

IPO Details

• Lot Size:
  • Retail: Minimum 87 shares (₹14,964)
  • sNII: Minimum 14 lots (₹209,496)
  • bNII: Minimum 67 lots (₹1,002,588)
• Key Dates:
  • Allotment Finalization: September 19, 2024
  • Listing Date: September 23, 2024

Company Overview

Incorporated in 2011, Western Carriers (India) Limited is a leading 4PL logistics company specializing in rail-based, multi-modal logistics solutions. Serving major industries like FMCG, pharmaceuticals, and chemicals, the company boasts clients such as Tata Steel, Hindustan Unilever, and Vedanta Limited.

Financial Metrics (as of March 31, 2024)

• ROE: 22.41%
• ROCE: 29.23%
• Debt/Equity Ratio: 0.67
• EPS (Pre-IPO): ₹10.21 | Post-IPO: ₹7.88
• P/E Ratio (Pre-IPO): 16.85x | Post-IPO: 21.83x
• P/BV: 3.4x

Utilization of Proceeds

• Repayment of Borrowings: ₹163.5 Crore
• Capital Expenditure for Vehicles and Containers: ₹151.7 Crore
• General Corporate Purposes

Grey Market Premium (GMP)

Currently, the Grey Market Premium stands at ₹57 per share, indicating a positive investor sentiment towards the IPO.

Conclusion

Investors should carefully consider the risk factors and the company’s financial health before investing in Western Carriers (India) Limited’s IPO. With significant growth potential and robust industry presence, this IPO could be a notable addition to your investment portfolio but there is serious doubts about authenticity of promoters.