Committed Cargo NSE SME IPO review (Apply)

Committed Cargo NSE SME IPO review (Apply)

• CCCL is a specialized 3PL solutions provider and has long-term relations with its customers.
• While its top line marked inconsistency, its bottom line kept surging.
• Based on FY24 annualized earnings, the issue appears fully priced.
• The growing economy indicates bright prospects for the segment.
• Investors may park funds for medium to long-term rewards.

ABOUT COMPANY:

Committed Cargo Care Ltd. (CCCL) is a 3PL (third-party Logistic) provider that specializes in handling Import and Export Cargo and provides integrated services to customers. Earning and maintaining a reputation for dependable and complete worldwide cargo movement solutions with the motto “Customer Pride”.

The Company started its operations as a Clearing House Agent. Committed Group has established its hub in Delhi, Mumbai, Chennai, Jaipur, Ludhiana, and Agra, and a reliable network of associate offices in India and the world over and is also an accredited member of FIATA, The Air Cargo Agent Association of India (ACAAI) and International Air Transport Association (IATA).

CCCL provides integrated logistics services such as cargo management solutions, order management, international freight management, customs and cross-border movement, heavy and over-dimensional cargo movement, etc. Its well-established network and tracking software enable it to provide fast and reliable information to clients. Thus, capable of handling – packaging, warehousing, freight forwarding, customs clearance of export and import cargo of commercial consignments, diplomatic and non-diplomatic consignments, special services, and forwarding of cargos, with an objective to provide the most convenient and cost-effective transportation method by air, courier, sea, and road any time & anywhere around the globe. The company is able to provide all sorts of logistics solutions under one roof.

Its customers operate in various sectors across India, including automotive and heavy engineering, telecom, food and agro, fast-moving consumer goods (“FMCG”), paint, handicrafts, e-commerce products, garments, pharma and dairy. Over the years, it nurtured capabilities and specialized in the segment of project logistics where CCCL takes care of end-to-end pickup, clearance, and delivery for all kinds of heavy and over-dimensional cargo. Project cargo is a specialized activity requiring detailed planning, scheduling, and technical expertise. The Company does direct business with some of the major local and global players in the industry. It has been working with some of these players for over 20 years. As of August 31, 2023, it had 169 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:

The company is coming out with its maiden IPO of 3240000 equity shares of Rs. 10 each at a fixed price of Rs. 77 per share to mobilize Rs. 24.95 cr. The issue opens for subscription on October 06, 2023, and will close on October 10, 2023. The minimum application to be made is for 1600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 29.97% of the post-IPO paid-up capital of the company. CCCL is spending Rs. 3.54 cr. for this IPO process, and from the net proceeds, it will utilize Rs. 15.96 cr. for working capital, and Rs. 5.45 cr. for general corporate purposes.

Fedex Securities Pvt. Ltd. is the sole lead manager and Bigshare Services Pvt. Ltd. is the registrar of the issue. Nikunj Stock Brokers Ltd. is the market maker for the company. Neomile Corporate Advisory Ltd. is the advisor to the company.

Having issued initial equity capital at par value, the company issued further equity shares at a price of Rs.100 per share in March 2007 and also issued bonus shares in the ratio of 11 for 1 in January 2018. The average cost of acquisition of shares by the promoters is Rs. NIL, Rs. 0.61, and Rs. 0.85 per share.

Post-IPO, CCCL’s current paid-up equity capital of Rs. 7.57 cr. will stand enhanced to Rs. 10.81 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 83.23 cr.

FINANCIAL PERFORMANCE:

On the financial performance front, for the last three fiscals, CCCL has posted a total income/net profit of Rs. 113.86 cr. / Rs. 2.32 cr. (FY21), Rs. 146.12 cr. / Rs. 3.09 cr. (FY22), and Rs. 122.43 cr. / Rs. 5.33 cr. (FY23). For 1M of FY24, it earned a net profit of Rs. 0.54 cr. on a total income of Rs. 9.59 cr. According to the management, during the Pandemic period, freight rates skyrocketed and that was attributed to the surge in the top line.

For the last three fiscals, CCCL has reported an average EPS of Rs. 5.39 and an average RoNW of 15.51%. The issue is priced at a P/BV of 1.98 based on its NAV of Rs. 38.82 as of April 30, 2023, and at a P/BV of 1.55 based on its post-IPO NAV of Rs. 49.77 per share.

If we attribute annualized FY24 earnings to the post-IPO fully diluted paid-up equity capital of the company, then the asking price is at a P/E of 12.84. The issue appears fully priced based on its annualized FY24 earnings.

The company has posted PAT margins of 2.04% (FY21), 2.11% (FY22), 4.36% (FY23), and 5.64% (1M-FY24), and RoCE margins of 15.80%, 17.52%, 24.06%, and 2.43% respectively for the corresponding periods.

As per the management, since things have started to be back to normal, the freight rates are at realistic levels, and because of it, the top-line declined, but for real profits, tonnage is most important and that has marked growth over the pandemic period scale. The company also gave thrust on custom brokerage services which emerged as the high margin activity for them and this trend will continue going forward. In the next two to three years the company mulls a Pan-India presence with its niche services.

DIVIDEND POLICY:

The company has not paid any dividends since incorporation. It will adopt a prudent dividend policy based on its financial performance and future prospects.

COMPARISON WITH LISTED PEERS:

As per the offer document, CCCL has shown Jet Freight, Total Transport, and Tiger Logistics as their listed peers. They are trading at a P/E of 00, 18.07, and 20.92 (as of October 04, 2023). However, they are not comparable on an apple-to-apple basis.

MERCHANT BANKER’S TRACK RECORD:

This is the 21st mandate from Fedex Securities in the last four fiscals (including the ongoing one). Out of the last 10 listings, 3 opened at discount, 1 at par, and the rest with premiums ranging from 1.47% to 108.93% on the date of listing.

Conclusion / Investment Strategy
The company is operating in a highly competitive segment. It marked inconsistency in its top line, but the bottom line kept growing. The growing economy indicates bright prospects for this segment. Based on FY24 annualized earnings, the issue appears fully priced. Investors may park funds for medium to long-term rewards.

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