Future Supply Chain Solutions IPO Opens Today; Should You Invest?

Future Supply Chain solutions is raising Rs. 650 crore through an  initial public offering (IPO). The company is offering 68,49,200 shares to public and has a price band of Rs 660-664. As per the IPO offer, the investors can bid for a minimum lot of 22 shares, then the bids can be made in same multiples, and the issue will close on 08 Dec 2017. PE investor Griffin Partners and promoter company Future Enterprises Ltd are together selling 24.43 per cent of the company’s post-offer equity.

Future Supply Chain – Business Overview

Future Supply Chain solutions is considered as the largest third-party logistics solution provider. The company is promoted by Future Enterprises Limited, which is promoted by Kishore Biyani. The company provide services in three key business segments – contract, express and temperature controlled logistics. As of July 31, 2017, the company had run the contract logistics operations through 42 distribution centres across India.

Valuation

For the half-year ended September 2017, the net worth stood at Rs 326 crore, which translates into a book value per share of Rs 81. The Revenue of the company has grown at a compounded annual growth rate of 17 percent and net profit grew at 36 percent over FY15-17. At the upper end, Future Supply Chain will command a valuation of Rs 2,660 crore, the issue is priced at 58.1 times its post dilution EPS on FY17 and 39.9 times on H1FY18 (annualised) basis

Risks

The company is affected by the Indian economic conditions, consumer spending capacity, technological disruptions, competition from a number of international and domestic third-party logistics companies. Further, the delays or defaults in payment by the customers could affect the financial condition and operations. The company’s large portion of the contract logistics operations is done through the distribution centres in Nagpur, therefore any damage or disruption of these distribution centres would affect the business. Additionally, there are several associated with the setting up of the new facilities and improper handling of goods at the facilities would also affect the business.

Should you Invest?

Most of the brokerage firms are recommending it to “Buy” for Future Supply Chain IPO as the issue is fairly priced and cheaper than its peers.