Missed Gati & TCI? You Can Make Up With Snowman Logistics IPO

First of all, you must note that the savvy investors are making a bee-line for logistics stocks.

Investing legend Radhakishan Damani showed everyone the path when he grabbed Transport Corp of India and Gati at throwaway prices.

The other stock wizards took the hint from Radhakishan Damani and rushed to tuck into their own favourite logistics stocks.

Sankaren Naren of ICICI Mutual Fund tucked into Gateway Distriparks while Ashish Chugh of Hidden Gems was enamoured by Sical Logistics.

Prashant Jain of HDFC Mutual Fund staked his claim on Sanghvi Movers, bringing the beleaguered stock back into the radar of investors after it had been unceremoniously booted out by ICICI-Direct.

Ramesh Damani, the Nawab of Dalal Street, has a soft corner for PSU stocks. So, he put his money on Balmer Lawrie. Ramesh Damani fondly described Balmer Lawrie as a “fool proof” business, suggesting that the company would thrive despite all mismanagement.

Now, if you have been left high and dry without a single logistics stock in your portfolio, you don’t have to despair because Snowman Logistics IPO is here to give you the opportunity.

Daljeet Kohli and Santosh have carefully dissected the innards of Snowman Logistics to check whether any dangers lie lurking there. Luckily, there are none and the duo has given the green signal to us to invest in the stock.

Astha Jain of Hem Securities has also given the green signal and so has Sharekhan.

Reading all three research reports, the following are the salient points why you can trust Snowman Logistics with your money:

(i) Reputed promoters: Snowman Logistics’ promoter is Gateway Distriparks Ltd with a 54.04% stake. Some other shareholders are Mitsubishi Logistics Corporation (2.92%), Mitsubishi Corporation (12.57%), IFC (12.40%) and Norwest Venture Partners, Mauritius (13.78%);

(ii) Low Debt: Unlike other infra companies which are reeling under heavy debt, Snowman Logistics has a low debt:equity ratio of 0.5x pre-IPO and 0.1x post-IPO;

(iii) Huge business opportunity: The increased government thrust towards Cold Storage with a view to preventing wastage of food grain means that there is huge scope for Temperature Controlled logistics business. The Temperature controlled Cold Storage business is reporting 15-20% growth in the last few years and has huge growth potential;

(iv) Snowman Logistics is a dominant player: At FY14-end, Snowman Logistics had 23 temperature controlled warehousing facilities at 14 locations across the country (including Mumbai, Chennai, Bengaluru and Kolkata). It has reported 53% CAGR capacity growth during FY11-14. At FY14-end, Snowman Logistics had 370 reefer vehicles (307 of them leased and 63 owned);

(v) Valuations: On a post-issue basis, at FY14 EPS of Rs 1.4, at upper price band of Rs 47, Snowman Logistics’ offer is being made at a P/E multiple of 34.0x. While this is by no means “cheap”, it is also not unreasonable considering the valuations of its peers such as Gati, AllCargo and Concor, which have smaller exposure to the fast growing Cold Storage space.

So, there you have it. Don’t let the high P/E of 34x deter you. However, given that only 10% is reserved for retail investors, it will be quite a challenge to get a decent quantum of the stock.