Way2wealth recommends subscribing to VRL Logistics IPO on VRL's internal strengths & diverse customer base

1. Company UpdateCompany UpdateCompany UpdateCompany Update
WAY2WEALTH Brokers Private Ltd.,
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Email: research@way2wealth.com website: www.way2wealth.com
No. 14, Frontline Granduer, Walton Road, Bangalore-560001
Way2wealth Research is also available on Bloomberg WTWL <GO>
Scrip Estimates
Market Cap (` Crores) 1,785 – 1,870
EPS – 9M-FY15 (annualized) (`) 11.2
P/E(x) 17.4 – 18.3
Share Holding Pattern (%) Pre Offer Post Offer
Promoter & Promoter
Group
77.21 69.57
New Silk Route PE
Mauritius LLP
22.51 5.16
Public & Others 0.28 25.27
Financials
FY12 FY13 FY14 9M-FY15
(Rs crore)
Sales 1130 1325 1494 1274
Expenditure 938 1130 1287 1060
EBIDTA 192 195 207 214
EBIDTA (%) 17.0 14.7 13.8 16.8
Depreciation 70 82 87 69
Interest 65 59 60 45
Other Inc. 5 9 10 6
PBT 62 63 77 105
PAT 77 46 57 72
PAT (%) 6.8 3.4 3.8 5.6
Equity 71 1812 86 86
EPS (Rs) 10.8 0.3 6.7 8.4
Wt. Avg.
EPS (Rs)
10.7 5.8 7.2 8.4
Investors should read the risk factors and more
detailed information in the Prospectus and the
application form before investing in the issue.
Website: www.way2wealth.com
Issue Details
Offer Price Band ` 195 - 205
Face Value 10
Shares Offered (in crores) 2.28 – 2.31
Issue Size (in crores) `451 - 468
Type
Fresh Issue & Offer
for sale
Promoters Sankeshwar Group
Listing (Stock Exchange) NSE, BSE
Offer Open Date 15th
Apr, 2015
Offer Close Date 17th
Apr, 2015
Website: www.vrlgroup.in
Analyst: Ronak Morjaria
Tel: +9122-666338959
Email: ronakd@way2wealth.com
VRL Logistics Ltd. is one of the leading surface logistics and parcel
delivery service provider in India with its presence spread across 28
states and 4 union territories with branch network of approximately
624 branches in India. Apart from its logistics business, its other
business segments include bus travel operation, wind power
generation and air charting service.
VRL Logistics Ltd. reported a net profit of `71.69 crore and total
revenues of `1,273.8 crore during 9M-FY15. The goods transportation
business segment contributed approximately 76% of total revenues and
bus transportation contributed approximately 20% during 9M-FY15. As
of 31st
December, 2015 the company’s Long Term Debt Equity ratio
stood at 1.09 times.
Objects of the issue: The primary objective of the fresh issue of
`117crores; is to utilize `67.4crores for purchasing new vehicles for
good transportation and `28crores for repaying certain part of the
existing debt. Apart from the primary objective, it expects to receive
the benefits of listing the equity shares on the stock exchanges. The
company will not receive any proceeds of the offer and all the
proceeds will go to the Selling Shareholders.
Investment Rationale
Large fleet of owned vehicles: VRL owns approximately 4,000
vehicles; which includes 3,546 goods transport vehicles and 455
buses. It majorly uses vehicles of Ashok Leyland (goods transport)
and Volvo (buses). Since the vehicles are owned by the company,
it reduces the hiring and operational costs significantly. Owning
the vehicles also ensures control of the value chain and service
quality. It helps the company build reputation with its customers
by ensuring timely delivery of the consignments. The company has
variety of goods transport vehicles, which helps them to serve a
diverse mix of consignments. Their vehicles also have
approximately 10% higher carrying capacity compared to others,
since they have an in-house vehicle body designing facility. The
trucks are under full utilization levels and buses operate at
approximately 70-75% utilization levels.
Hub-and-spoke operating model: VRL operates on a hub-and-
spoke model for carrying out its goods transport activities. With
the help of this model, the company is able to offer their
customers deliver their goods and parcels of different sizes &
weights at multiple locations with multiple pick-ups and delivery
points. The company also provides storage facility to its customers
and charges for the facility depending on product type, size,
weight and number of days it has to be held in their warehouse.
Cost benefit due to tie-ups and in-house maintenance facilities:
VRL utilizes approximately 1.7 to 1.8 lakh litres of diesel daily for
its goods transport and bus travel business. The company has tie-
up with Indian Oil Corporation (IOC) at 70 different locations
across India, where they are given a discount of `1 per litre of
diesel. They also have tie-ups for tyre repair and replacement,
which saves approximately 8-10% of the cost. The company also
has in-house Ashok Leyland servicing centre along with
arrangement of spare parts of AL and Volvo at is Hubballi centre
itself. This enables efficient and on time repairs and maintenance
of vehicles and replacement of spare parts.
VRL Logistics Ltd.
13th
April, 2015
IPO Analysis
Advise: Subscribe

2. IPO Analysis
WAY2WEALTH Brokers Private Ltd.,
-
Email: research@way2wealth.com website: www.way2wealth.com
No. 14, Frontline Granduer, Walton Road, Bangalore-560001
Way2wealth Research is also available on Bloomberg WTWL <GO>
Key Concerns
The Company is exposed to fluctuations in the prices of fuel and
the ability to pass on the cost due to increase in fuel prices to its
customers. On an average fuel accounts for approximately 28% -
30% of the total annual sales; thus inability to pass on such
increase might hit the margins and the bottomline.
The Company is also exposed to the risk of sufficient freight
volumes and passenger occupancy; since the company is exposed
to high fixed cost. Thus inability to generate sufficient volumes
and adequate passenger occupancy due to competition may
affect the turnover and profitability of the company.
Valuation and Investment Argument:
At the offer price bands, the issue is available at P/E of 17.4x –18.3x
its 9M-FY15 EPS (annualized) of `11.2. We believe the growth
prospects for India’s road transport to improve as the government
takes steps to increase investment in national highways. The
company’s internal strengths such as large fleet of owned
vehicles, wide distribution network & diversified customer base
will enable the company to ride this wave of opportunity
successfully. Hence we recommend Subscribe to this issue.

3. IPO Analysis
Email
No. 14, Frontline Granduer, Walton Road, Bangalore
Way2wealth R
WAY2WEALTH Brokers Private Ltd.,
-
ail: research@way2wealth.com website: www.way2wealth.com
No. 14, Frontline Granduer, Walton Road, Bangalore-560001
h Research is also available on Bloomberg WTWL
Source: Company, W2W Research
Source: Company, W2W Research
Source: Company, W2W Research
889
1,130
0
200
400
600
800
1000
1200
1400
1600
FY11 FY12
Sales(Rs.inCrores)
18.7
17.0
14.7
0
50
100
150
200
250
FY11 FY12 FY13
EBITDA(Rs.inCrores)
EBIDTA
5.8
6.8
3.4
0
10
20
30
40
50
60
70
80
90
FY11 FY12 FY13
PAT(Rs.inCrores)
PAT PAT (%)
om
560001
WL <GO>
1,325
1,494
1274
FY13 FY14 9M-FY15
14.7
13.8
16.8
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
FY14 9M-FY15
EBITDAMargins(%)
EBIDTA (%)
3.8
5.6
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
FY14 9M-FY15
PATMargin(%)
PAT (%)

4. IPO Analysis
WAY2WEALTH Brokers Private Ltd.,
-
Email: research@way2wealth.com website: www.way2wealth.com
No. 14, Frontline Granduer, Walton Road, Bangalore-560001
Way2wealth Research is also available on Bloomberg WTWL <GO>
Team
Analyst Designation Sector Email Telephone
Nilesh Doshi President (Research) nilesh.doshi@tssl.in +9122-6633 8950
Mahesh Bendre AVP Capital Goods, Auto, Auto Ancillary maheshbendre@way2wealth.com +9122-6146 8937
Shivani V. Vishwanathan Sr. Research Analyst FMCG, Auto shivani.mehra@tssl.in +9122-6663 8956
Nisha Harchekar Sr. Research Analyst Chemicals, Textiles nishaharchekar@way2wealth.com +9122-6146 2952
Ronak Morjaria Research Associate ronakd@way2wealth.com +9122-6633 8959
Vijay Gyanchandani Research Associate vijaygyanchandani@way2wealth.com +9122-6633 8272
Institutional Sales Designation Email Telephone
Ramanjaneyulu BV Institutional Head – Sales raman@way2wealth.com +9122-6146 2956
Sejal Jhunjhunwala Manager – Sales sejal@way2wealth.com +9122-6146 2913
Institutional Dealing Designation Email Telephone
Ajay Prabhudesai Assistant Vice President ajay.prabhudesai@tssl.in +9122-4027 8930
Mitul Doshi Senior Executive mitul.doshi@tssl.in +9122-4027 8932
Gautam Vyas Institutional Sales Trader gautam.vyas@tssl.in +9122-4027 8934

5. IPO Analysis
WAY2WEALTH Brokers Private Ltd.,
-
Email: research@way2wealth.com website: www.way2wealth.com
No. 14, Frontline Granduer, Walton Road, Bangalore-560001
Way2wealth Research is also available on Bloomberg WTWL <GO>
Disclaimer
Analyst Certification: I, Ronak Morjaria, the research analyst and author of this report, hereby certify that the views expressed in this research report
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