Ritco Logistics Limited

Started in 2001, Delhi based Ritco Logistics Limited is a company engaged in the business of providing goods transport service along with warehousing facilities. The company provides a range of services including Contract Logistics, Less than Truck Load (LTL) and Fleet Rental Services. The company primarily serves to industrial customers who need to transport bulk quantities of their goods within India. The major portion of the revenue comes from Contract Logistics. In 2017-18, Contract Logistics services contributed 78.73% of total revenue. The company has built a widespread transportation network of 30 branches in 14 States and 1 Union Territory across India. It owns a fleet of 256 heavy commercial trucks of different sizes and carrying capacities. The company has 342 full-time employees on its payroll. As per financial performance, Ritco Logistics has posted total income/net profits of Rs 314.16 cr. / Rs. 1.44 cr. (FY16), Rs 328.96 cr. / Rs. 3.82 cr. (FY17) and Rs 343.91 cr. / Rs. 10.28 cr. (FY18). For upto H1 of FY19, company has posted net profit 6.21 cr. with total income of 208.60 cr. So the company has shown growth, but in FY18 and FY19 there is high jump in bottom line which is surprising. Trade receivable are 93.89 Cr for FY18 which is around 27% of FY18 total earnings and same was around 20% for FY17 total earnings, which is very high. For last three fiscals, it has posted an average EPS of Rs 3.42 and an average RoNW of 14.81%. Issue is priced at a P/BV of 2.62 on the basis of NAV of Rs. 27.81 as on 30.09.18. If we consider latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 14 and as per FY18 earnings P/E is around 17. So issue fully priced as per FY19 future earnings.  As per DRHP company has shown Mahindra Logistics Limited, VRL Logistics Limited, TCI Limited, GATI Limited and AVG Logistics Limited as listed peer and these stocks is trading at P/E of 58.07, 28.13, 20.09, 25.79 and 7.26. Companies like MLL, VRL and TCI are very big in size, so it won't be ideal comparison. AVG Logistics is similar company to Ritco and its trading at very lower P/E than Ritco. On BRLM's front, for Pantomath Capital Advisors Private Limited this is the 76th IPO in last three fiscals and from last 10 IPOs, all opened above issue price with 1% to 8% premium on the day of listing. As of now, from last 10 IPOs, 3 are trading below issue price and remaining above issue price. ( As on 22.01.19 ) Company has shown good results in last three fiscals, RoNW is 21.44% and issue looks fully priced with respect to current earnings. But higher trade receivables raises concerns. Also complete Logistics industry has under performed with respect to Market in last one year. Performance of BRLM is good. So we give AVOID rating to this SME IPO.

• 1 Mr. Sanjeev Kumar Elwadhi
• 2 Mr. Man Mohan Pal Singh Chadha