Please refer to important disclosures at the end of this report
1
Incorporated in 2006,
Future Supply Chain Solutions Ltd (FSCSL) is one of the
largest third-party logistics service providers in India. FSCSL offers
services in three
key areas i.e. (1) Contract Logistics (warehousing, distribution and value-
added
service), (2) Express Logistics (point-to-point, less-than truck-
load, time definite
transportation services), and (3) Temperature Controlled Logistics (cold-
chain
warehousing, transportation solutions and distribution of perishable products).
Positives: (a) Diverse customer base across sectors
like retail, fashion & apparel,
automotive & engineering, food & beverage, FMCG, e-
electronics & technology, home & furniture and ATMs; (b) Improvement in
operational efficiencies, technological implementation and process enhancements;
(c) Asset-light model leading to higher operating leverage; and (d)
Experienced
management with logistics and retail sector specific knowledge.
Investment concerns: (a) For 1HFY2018, FSCSL reported revenue of `408cr
, out of
which 70% was from Future Group; (b) The company’s external business repor
ted
~2% negative CAGR over FY2015-17.
Outlook & Valuation: In terms of valuations, the pre-
issue P/E works out to 39.9x its
1HFY2018 annualized earnings (at the upper end of the issue price band), which is
lower compared to its peers like Mahindra Logistics. However, Mahindra Logistics
has lower promoter group business (internal business), which is ~54% v/s.
~70%
of FSCSL. Further, Mahindra Logistics had reported non-
promoter revenue CAGR
of ~46% v/s. de-growth of FSCSL over FY15-17.
Despite the above favorable
factors and lower valuations compared to Mahindra
Logistics, we however, believe that all the positives are fully factored in the
company’s current valuations, which does not provide any
further upside for
investors. Hence, we recommend Neutral rating on the issue.
Key Financials
Y/E March (` cr)
FY2015
FY2016
FY2017 1HFY18
Net Sales
408
520
561 357
% chg
-
27.4
7.9 -
Net Profit
25
29
46 33
% chg
-
18.6
55.5 -
OPM (%)
15.6
13.5
13.2 15.7
EPS (Rs)
6.2
7.3
11.4 8.3
P/E (x)
107.2
90.4
58.1 -
P/BV (x)
1.2
1.1
0.9 -
RoE (%)
11.4
11.9
15.6 -
RoCE (%)
15.7
15.0
14.8 -
EV/Sales (x)
0.8
0.7
0.5 -
EV/EBITDA (x)
5.1
4.9
4.0 -
Angel Research; Note: Valuation ratios based on pre-issue outstanding shares and at upper end
of the price band
NEUTRAL
Issue Open: Dec 6, 2017
Issue Close: Dec 8, 2017
QIBs 50% of issue
Non-Institutional 15% of issue
Retail 35% of issue
Promoters 52.5%
Others 47.5%
Fresh issue: Nil
Issue Details
Face Value:
`10
Present Eq. Paid up Capital:
`40.1
cr
Offer for Sale: 0.98cr Shares
Post Issue Shareholding Pattern
Post Eq. Paid up Capital:
`40.1
cr
Issue size (amount): *
`646
cr -**650cr
Price Band:
`660
-664
Lot Size: 22 shares and in multiple
thereafter
Post-issue implied mkt. cap: *
`2,644
cr
- **
`2,660
cr
Promoters holding Pre-Issue: 57.4%
Promoters holding Post-Issue: 52.5%
*Calculated on lower price band
** Calculated on upper price band
Book Building
Amarjeet S Maurya
+022 39357600, Extn: 6831
amarjeet.maur[email protected]angelbroking.com
Future Supply Chain Solutions Ltd
IPO Note | Financials
Dec 04, 2017
Future Supply Chain Solutions Limited | IPO Note
Dec 04, 2017
2
Company background
Incorporated in 2006, Future Supply Chain Solutions Ltd (FSCSL) is one of the
largest third-party logistics service providers in India. The company’s services
include automated and IT-enabled warehousing, distribution and other logistic
solutions.
They offer contract logistics like warehousing and distribution services as well as
other value-added services including kitting and bundling, unit cartonisation and
packaging solutions, express logistics such as point-to-point, less-than truck-load &
time-definite transportation services and temperature-controlled logistics
comprising of cold-chain warehousing, transportation solutions, and long-haul
distribution services for perishable products.
They serve customers in various sectors including retail, fashion & apparel,
automotive & engineering, food & beverages, fast-moving consumer goods, e-
commerce, healthcare, electronics & technology, home & furniture and ATMs.
Issue details
FSCSL is raising `646-650cr through offer for sale of equity shares in the price
band of `660-664. Public offer of up to 9,784,570 equity shares of face value `10
each through an offer for sale of up to 7,827,656 equity shares by Griffin Partners
Limited and up to 1,956,914 equity shares by Future Enterprises Limited (Promoter
Selling Shareholder).
Exhibit 1: Pre and Post-IPO shareholding pattern
No of shares (Pre-
issue)
%
No of shares (Post-
issue)
%
Promoters 22,972,831 57.4% 21,015,917 52.5%
Others
17,083,407
42.6%
19,040,321 47.5%
40,056,238 100.0% 40,056,238 100.0%
Source: Source: RHP, Note: Calculated on upper price band
Objects of the offer
The objects of the Offer for the Company are to:
Achieve the benefits of listing the equity shares on the Stock Exchanges
Sale of equity shares by the selling shareholders
Enhance stability and brand image and provide liquidity to its existing
shareholders
Future Supply Chain Solutions Limited | IPO Note
Dec 04, 2017
3
Investment Rationale
Diverse customer base across sectors
FSCSL serves diverse sectors like retail, fashion & apparel, automotive &
engineering, food & beverages, FMCG, e-commerce, healthcare, electronics &
technology, home & furniture and ATMs. FSCSL has a diversified customer base in
each of the sectors it serves, including Indian corporate groups and multinational
companies apart from the Promoter and certain Group Companies.
Exhibit 2: Revenue break-up in Fiscal 2017
Sector Percentage of revenue from operations (%)
Fashion & Apparel 23.6
Automotive & Engineering 22.3
Food & Beverage 15.3
FMCG 7.3
E-Commerce 6.7
Healthcare 6.1
Electronics & Technology 6.0
Home & Furniture 5.6
ATMs 4.3
Others 2.7
Total 100
Source: Company, Angel Research
Longstanding relationship with Future Group Entities
The Future Group Entities are key customers of FSCSL and provide significant scale
in operations. The scale of logistics services for the Future Group Entities enables
FSCSL to capture economies of scale and drives automation and standardization
of processes to optimize the service offerings, thereby, further strengthening the
company’s relationship with these entities.
Exhibit 3: Revenue contribution by Promoter & Group Companies
Source: Company, Angel Research
0%
10%
20%
30%
40%
50%
60%
70%
80%
FY2015
FY2016
FY2017
1HFY18
% of total sales
Future Supply Chain Solutions Limited | IPO Note
Dec 04, 2017
4
Experienced management with logistics and retail sector specific knowledge
The management team of FSCSL is experienced in the Indian logistics and retail
industry. The quality of the company’s management team has been critical in
achieving business results. All members of the senior management have
substantial experience. The company’s chairman, Rakesh Biyani, has over 25 years
of experience in the retail, fashion, supply chain and logistics sectors. Further,
Managing Director and Chief Executive Officer, Mayur Toshniwal, has around 25
years of experience in the fast moving consumer goods and retail sector.
Experience in these industries is the key to drive business growth and provides
thought leadership in the supply chain space on making operations more efficient
and productive, including the use of technology.
Future Supply Chain Solutions Limited | IPO Note
Dec 04, 2017
5
Outlook and Valuation
In terms of valuations, the pre-issue P/E works out to 39.9x its 1HFY2018
annualized earnings (at the upper end of the issue price band), which is lower
compared to its peers like Mahindra Logistics. However, Mahindra Logistics has
lower promoter group business (internal business), which is ~54% v/s. ~70% of
FSCSL. Further, Mahindra Logistics had reported non-promoter revenue CAGR of
~46% v/s. de-growth of FSCSL over FY15-17.
Despite the above favorable factors and lower valuations compared to Mahindra
Logistics, we however, believe that all the positives are fully factored in the
company’s current valuations, which does not provide any further upside for
investors. Hence, we recommend Neutral rating on the issue.
Key Risks
Slowdown in the parent’s business and overall economy could impact the
company’s earnings
Consolidation by mid-sized players in the sector
Future Supply Chain Solutions Limited | IPO Note
Dec 04, 2017
6
Income Statement
Y/E March (` cr) FY2015 FY2016
FY2017
1HFY18
Total operating income 408 520
561
357
% chg -
27.4
7.9
-
Total Expenditure
344
450
487
301
Personnel 44 54
57
33
Others Expenses 300 396
430
268
EBITDA
64
70
74
56
% chg -
9.9
6.2
-
(% of Net Sales)
15.6
13.5
13.2
15.7
Depreciation& Amortization 20 21
19
10
EBIT
44
49
55
46
% chg -
11.6
11.9
-
(% of Net Sales)
10.8
9.5
9.8
12.9
Interest & other Charges 10 13
13
4
Other Income 3 9
16
8
(% of PBT)
7.5
19.3
27.2
15.8
Share in profit of Associates - -
-
-
Recurring PBT
37
45
58
49
% chg -
22.0
30.5
-
Tax 12 15
12
16
(% of PBT)
32.6
34.0
21.4
32.6
PAT (reported)
25
29
46
33
Extraordinary Items (0) -
-
-
ADJ. PAT
25
29
46
33
% chg -
18.6
55.5
-
(% of Net Sales)
6.1
5.7
8.2
9.3
Basic EPS (Rs)
6.2
7.3
11.4
8.3
Fully Diluted EPS (Rs)
6.2
7.3
11.4
8.3
% chg -
18.6
55.5
-
Source: RHP, SH - Share Holder
Future Supply Chain Solutions Limited | IPO Note
Dec 04, 2017
7
Exhibit 4: Balance Sheet
Y/E March (` cr) FY2015
FY2016
FY2017 1HFY18
SOURCES OF FUNDS
Equity Share Capital 39
39
39 39
Reserves& Surplus 179
208
254 287
Shareholders Funds
218
247
293
326
Minority Interest -
-
-
Total Loans 63
80
81 80
Deferred Tax Liability 10
13
11 11
Total Liabilities
291
341
385
417
APPLICATION OF FUNDS
Net Block
130
138
130
208
Capital Work-in-Progress 21
2
70 0
Investments 0
0
0
10
Current Assets
237
343
310
357
Sundry Debtors 182
221
217 250
Cash 3
2
47 64
Loans & Advances 30
86
23 28
Other Assets 23
34
24 14
Current liabilities 98
145
126 159
Net Current Assets
139
199
184
198
Deferred Tax Asset
1
2
1
-
Total Assets
291
341
385
417
Source: RHP
Future Supply Chain Solutions Limited | IPO Note
Dec 04, 2017
8
Exhibit 5: Cash Flow Statement
Y/E March (` cr) FY2015 FY2016 FY2017
1HFY18
Profit before tax 37 45 58
49
Depreciation 20 21 19
10
Change in Working Capital (16) (74) 31
(3)
Interest / Dividend (Net) 8 5 (2)
4
Direct taxes paid (5) (13) (13)
(15)
Others 1 1 0
(5)
Cash Flow from Operations 44 (15) 93
40
(Inc.)/ Dec. in Fixed Assets (20) (11) (78)
(25)
(Inc.)/ Dec. in Investments
2
8
14
3
Cash Flow from Investing (18) (3) (64)
(22)
Issue of Equity - - -
-
Inc./(Dec.) in loans (11)
31
29
3
Interest / Dividend (Net) (10) (13) (13)
(4)
Others (5)
0
0
0
Cash Flow from Financing (26)
17
17
(1)
Inc./(Dec.) in Cash (0) (1)
45
17
Opening Cash balances
2
2
1
47
Closing Cash balances
2
1
47
64
Source: Company, Angel Research
Future Supply Chain Solutions Limited | IPO Note
Dec 04, 2017
9
Exhibit 6: Key Ratios
Y/E March FY2015
FY2016 FY2017
Valuation Ratio (x)
P/E (on FDEPS)
107.2
90.4
58.1
P/CEPS
60.2
53.1
41.0
P/BV
1.2
1.1
0.9
EV/Sales
0.8
0.7
0.5
EV/EBITDA
5.1
4.9
4.0
EV / Total Assets
1.1
1.0
0.8
Per Share Data (Rs)
EPS (Basic)
6.2
7.3
11.4
EPS (fully diluted)
6.2
7.3
11.4
Cash EPS
11.0
12.5
16.2
DPS
0.0
0.0
0.0
Book Value
543.7
617.2
731.0
Returns (%)
ROCE
15.7
15.0
14.8
Angel ROIC (Pre-tax)
15.9
15.1
16.9
ROE
11.4
11.9
15.6
Turnover ratios (x)
Asset Turnover (Gross Block)
2.7
3.3
3.3
Receivables (days)
163
155
141
Payables (days)
73
76
64
Working capital cycle (ex-cash) (days)
90
79
77
Source: Company, Angel Research
Future Supply Chain Solutions Limited | IPO Note
Dec 04, 2017
10
Research Team Tel: 022
-
39357800 E
-
mail: research@angelbroking.
com Website:
www.angelbroking.com
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