Western Carriers IPO: A Comprehensive Overview
The initial public offering (IPO) of Western Carriers has generated significant buzz in the financial markets, with a subscription rate of 13.88 times by the fourth day of the bidding process. This strong demand has primarily come from retail and non-institutional investors (NIIs), with their respective portions being oversubscribed nearly 19 times and 21 times. However, the quota reserved for qualified institutional buyers (QIBs) saw a more subdued response, being booked at just 14%.
IPO Details
The Western Carriers IPO consists of a fresh equity sale amounting to ₹400 crore, alongside an offer for sale (OFS) of up to 54 lakh shares by promoter Rajendra Sethia. The price band for the IPO has been set between ₹163 and ₹172 per share, with investors able to bid for a minimum of 87 shares in one lot.
Grey Market Premium
In the unlisted market, Western Carriers’ shares were trading at a grey market premium of ₹50 per equity share, down from ₹58 the previous day. This indicates a 29% premium over the upper band of the issue price, suggesting a positive sentiment among investors.
Analyst Insights
While the IPO has attracted considerable interest, analysts have advised caution. They recommend that only high-risk investors consider subscribing to the issue due to the company’s long payment cycle and various operational risks. Swastika Investmart has issued a "may apply" rating for long-term investors with a high-risk tolerance, citing the company’s financial challenges and limited market interest.
Choice Broking analysts noted that at the higher price band, Western Carriers is demanding an enterprise value-to-sales (EV/Sales) multiple of 1x, which is significantly lower than the peer average of 2.4x. This pricing could make the IPO attractive, especially given the company’s position in the private logistics sector and the improving outlook for rail logistics following the partial or full commencement of Dedicated Freight Corridors (DFCs).
Utilization of Proceeds
The proceeds from the fresh issue will be allocated for various purposes, including repaying borrowings and funding capital expenditures for the purchase of commercial vehicles, containers, and reach stackers. The remainder will be used for general corporate purposes.
Western Carriers boasts a pan-India presence with over 50 branch offices and four zonal offices across 23 states. The company operates 16 warehouses in 12 states and manages over 55 major public rake handling points throughout India. This extensive network allows Western Carriers to provide both first-mile and last-mile connectivity to customers, including those in remote areas.
Clientele and Financial Performance
As of March 31, 2024, Western Carriers had a diverse customer base of 1,647 clients across various industries, including metals, FMCG, pharmaceuticals, chemicals, and oil & gas. Notable clients include Tata Steel, Hindalco Industries, Hindustan Unilever (HUL), and DHL.
In terms of financial performance, the company reported a 4% increase in consolidated revenue from operations, reaching ₹1,686 crore for FY24. Profit after tax also rose by 12% to ₹80.3 crore during the same period. For Fiscal 2024, Western Carriers reported revenue of ₹1,685 crore and a PAT of ₹80 crore.
Conclusion
The IPO of Western Carriers presents a compelling opportunity for investors, particularly those with a high-risk appetite. While the strong subscription rates from retail and NIIs indicate robust interest, the cautious stance from analysts highlights the need for careful consideration. As the company continues to expand its operations and improve its market position, it remains to be seen how it will navigate the challenges ahead.
JM Financial and Kotak Mahindra Capital Company are serving as the book-running lead managers for the IPO, which will be listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).
(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own and do not represent the views of The Economic Times.)