@Multibagger,
I don’t understand this…if retail subscription is 42x…you should at least get 100 shares. no? r u sure u didn’t get it?
Multibagger and Aksh, I don’t think you should be disappointed. There was a huge demand for the stock and the supply was limited and therefore the over subscription and the 70% premium listing. If you want allotment in such an IPO then a) You need to apply with as many accounts as possible b) You need to apply for the minimum lot size
If you think one can make a lot of money with IPOs, then that is not easy because a) Applying with multiple demat accounts is not ethical b) If you applied for the minimum lot size (costs about 14K) and you got lucky and get allotment then any listing gain on this 14K is not substantial and will not make any meaningful difference to your life.
I think, in retail lottery system was used for allocation and no matter how much you applied for, every selected application has been allotted 1 lot. The ratio comes to 1:18
AppliedapplicationsAlloted
30019746810914
60014713814
9008621477
12005049279
15002710150
1800157387
21006375353
2400109360
270048827
3000124969
330038922
360044325
390040122
420012680701
50 percent in every application rates …it was a lottery…
its 5 percent and not 50 percent
@CommonStocks,
I don’t apply for IPOs and don’t think one can make meaningful money this way so no disappointments whatsoever :)…
Nevertheless the Q was to clear my understanding which was that…one is allotted shares in proportion of subscription in case of over subscription of the issue with idea of making shareholding broadbased so that every application at least gets some shares.
@Sonu
I agree with you it must have been lottery… thanks for the information. Where did you get this info?
@Commonstocks
The last IPO applied was about 3 years back. Things have changed since then. I am not in favour of using multiple demat accounts. One does not make substantial value investing through IPOs. Anyways I will keep track of the stock and not buy it at the prevailing price.
Thanks for your comments. Good luck
Radhakishen Damani bought 2.37 million shares of a cold storage company through his fund, Derive Investments, at price of Rs 78.90, according to NSE data on bulk deals.
Thanks for the info
@All
Why would an experienced value investor like Damani get into Snowman @ 1.70 x Fair price. Assuming that IPO was fairly priced at Rs. 47
Is this with a short term horizon or long term horizon?
I think RK Damani doesn’t go for short term opportunities. He is extremely bullish on Logistics sector since at least a year. Last year he bought 2 known Logistic firms.
About valuation, I think Damani must have considered Snowman’s high growth potential compared to all peers in Logistics. If he really thought for short term here, then short term downside risk is higher due to higher valuation.
He is smart at understanding Risk Reward ratio for longer period. Snowman’s unique cold storage business model should have prompted him to pay higher price for forward PE f15.
Kunal
Snowman Logistic commenced their business as a trader of frozen marine
products in 1998. After this business company commenced cold storage
operations at 4 (four) locations.
Operations of company classified in to –
- Temperature Controlled Services
- Ambient distribution
Snowman
Logistics Limited is an integrated temperature controlled logistics
services provider with 23 temperature controlled warehouses across 14
locations in India including Serampore (near Kolkata), Taloja (near
Mumbai), Palwal (near Delhi), Mevalurkuppam (near Chennai) and Bengaluru
capable of warehousing 58,543 pallets and 3,000 ambient pallets as of
31st March 2014. Snowman operates 370 reefer vehicles for primary and
secondary transportation as of 31st March 2014. The product segments
company caters are Dairy products including butter and cheese,
Ice-cream, Poultry and meat, Sea food, Ready-to-eat/ ready-to-cook food
products, Confectioneries including chocolate and baked products, Fruits
and vegetables, Healthcare and pharmaceutical products; and Industrial
products such as x-ray, and photo-imaging, films. Gateway Distriparks
Ltd (GDL) is a promoter of the Snowman Logistic and other shareholders
are including Mitsubishi Corporation, Mitsubishi Logistics Corporation,
Nichirei Logistics Group Inc., International Finance Corporation and
Norwest Venture Partners VII–A Mauritius.Company proposes to set up 6
temperature controlled warehouses and 2 ambient warehouses at 6 cities
by issue capital. Company provides services which includes warehousing,
distribution, transportation.
Snowman Logistics Ltd - New.pdf (1.0 MB)
(For detail kindly check presentation of
company).
SnowmanLogisticsLimited.pdf (1.3 MB)
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RK Damani has also built the hugely successful D-Mart when other retailers are struggling…Whenever i goto any of the two D-marts in my city…I see its fully packed to even move about freely on any day of the week…Since he is already into the retail business , he may be looking at the future potential of cold storage…as lot of food is wasted due to poor or no storage options…As per the valuations, only time will tell if it continues to trade at a premium.
CONFERENCE CALL - from Capital Markets
Rail business to see single digit volume growth in FY17
Gateway Distriparks held a conference call on April 27, 2016. In the conference call the company was represented by Prem Kishan Gupta, Chairman & MD; R. Kumar, Dy. CEO (Gateway Distriparks); Ishaan Gupta, Director (Gateway Distriparks); Sachin Bhanushali, CEO (Gateway Rail Freight) and A. M. Sundar, CFO (Snowman Logistics).
Key takeaways of the call
CFS business
-
Throughput of CFS business stood at 85367 TEUs, a fall of 6.6%yoy and 1.4%qoq. For FY2015-16 the throughput was down by 6.7%yoy to 361207 TEUs.
-
For the quarter ended March 2016, while the throughput of Mumbai CFS (both 1&2) was down by 3.2%yoy that of Chennai (both 1&2) was down by 9.2%yoy, Vizag was down by 12%yoy and Kochi was down by 19.2%yoy.
-
The international trade during the year has been flat and export volumes have shown a significant decline during the year. The demand from China, South East Asia and the Middle East has sharply dropped. In addition, devaluation of Brazilian and Russian currencies has reduced the comparative advantage of India’s exports.
-
The CFS business of the company suffered a setback during the year due to the temporary suspension of business at the second CFS at both JNPT (NhavaSheva) and Chennai. These two CFS are now back on track and are expected to regain volumes during the current year.
-
EBITDA per TEU for FY2016 stood lower at Rs 3586/TEU compared to Rs 4117/TEU. EBITDA per TEU for the quarter ended March 2016 stood lower at Rs 3218/TEU compared to Rs 3591/TEU in sequential previous quarter ended December 2015.
-
The drop in EBITDA per TEUs for the quarter is on account of Punjab Conware. No inflow of volume for 15 day in case of Punjab Conware and some time afterwards the business moved out has not come back. It will get corrected from May 2016.
-
Chennai CFS– Expects the volumes to back to normal as signaled by volume improvement in February 2016 and March 2016. Expect to retain 8-9% market share.
-
Krishnapatnam CFS: The construction activity is under progress and expects to start operations during the current financial year.
-
Capex spent in FY16-17 in case of CFS business will be only on ongoing Krishnapatnam CFS projects where the company has capex pending to be incurred of Rs 50 crore out of total project cost of Rs 83 crore. The company expects to spend the balance in current fiscal.
-
The company expects to get back to Q3FY16 levels during Q1FY17.
Rail Business
-
Throughput of rail business at 50675 TEUs was marginally down by 14.6%yoy and 0.9%qoq. For 2015-16 the throughput of rail business was down by sharp 18.8%yoy to 203187 TEUs.
-
Overall volumes of rail business have been subdued during the year due to a drop in exports. The rail business has also suffered a bit due to unprecedented heavy rains during July - August leading to major disruption in operations on Mundra and Pipavav routes.
-
The construction at Viramgam which act as second hub is underway. Expect the construction to be over by August 2016 and operation to commence by Q3FY17. Its contribution to profitability will be visible only after 6 month of operations.
-
EBITDA per TEU for FY2016 stood higher at Rs 7220/TEU compared to Rs 6906/TEU in corresponding previous year. EBITDA per TEU for the quarter ended March 2016 stood lower at Rs 5928/TEU compared to Rs 7610/TEU in sequential previous quarter ended December 2015.
-
Drop in EBITDA per TEUs is largely due to EXIM imbalance as well as change in mix of double staking/forth feet containers. Empty repositioning has increased between Mundra, Pipavav and JNPT. The cost of empty reposition will usually about Rs 75 lakh per month but that shoot up to Rs 1.35 crore every month in Q4FY16. The company has also lost about 15% of its forty feet containers volumes from Ludhiana/Punjab.
-
The company currently operated 23 rakes of which 21 are owned and 2 leased. It will lease another two. The company operates one service daily from three of its terminals to Mundra and Pipavav and one in three day service to JNPT.
-
Capex in case of rail business part of the project cost in case of Viramgam is already spent and balance will be incurred this fiscal. So the capex will be about Rs 30 crore in FY17.
-
The company expects the volume growth for rail business in FY16-17 is largely to be in single digit given EXIM trade visibility. The company pins hopes on increased volumes from existing terminals as well increased contribution from Viramgam.
-
The Rail business financials reflect full tax provisioning during the year.
Snowman
-
Snowman continues to be the market leader in the cold chain industry and is currently consolidating its position by changing the product mix in favor of high value products and by changing the transportation model from leased to owned vehicles to bring value to its core business of cold storage.
-
Snowman has also added capacity to Bangalore, Mumbai and Jaipur during the year. The Kochi facility will be commissioned during the year and with this, the total capacity of the company will cross the milestone of 1 lakh pallets.
-
Of the total STO of Rs 242 crore about Rs 124 is from warehousing; Rs 99 crore from distribution and Rs 17.9 crore from food services. In case of EBITDA about Rs 49 crore is from warehousing, Rs 1.44 crore from distribution and Rs 0.45 crore from food service.
-
The focus going forward will be on warehousing which accounts for 50% of revenue and 97% of EBITDA. The company is going to serve only high margin clients in case of distribution and to reduce exposure in case of food service.
-
Going-forward snowman margin will get boost with increased contribution from warehouse, improvement in occupancy, stabilization of capacity added in second half of FY16 as well as increased focus on high margin frozen products. In addition the company is also pruning costs to support margin improvement.
-
Snowmen the capex will be around Rs 30-40 crore.
Snowman logistics
Only listed and organised player in a 15000 crores value coldchain sector. Huge unorganised sector dominance of 94% in the market which speaks a lot of untapped potential in capturing the market share. That too with GST on the anvil it will be good news for this organized player. Serves in a niche field of logistics and with high growth in upwards of 15% in organised retail food industry and its ability to reduce the food wastage with cold storage facilities( the very reason why govt is giving IT exemption) THE COLD CHAIN POTENTIAL The prices of vegetables, fruit, milk, eggs, meat and fish have been rising faster despite India being the second largest producer of fruit and vegetables globally. Around Rs. 300 billion can be saved annually by developing an integrated supply chain (including cold chain).
Snowman caters to multiple sectors like poultry, FMCG, quick service restaurants, pharmaceutical, tyres and films. This multi-sectoral customer base has helped strengthen Snowman’s business model in a number of ways. One, this has helped the Company reduce an excessive dependence on the fortunes of any one sector; no industry accounted for more than 20% of the Company’s revenues in 2014-15. Two, the downstream industries addressed by Snowman represent robust economic proxies of a fast-growing nation. Three, Snowman has enhanced efficiencies in each these logistics-intensive customer segments. Four, Snowman has leveraged the learnings from one customer space in another, strengthening its overall solutions complement. To summarize the sector looks very promising and being the only listed and organized player it has lot of potential.
Now lets look into its financials as per the AR 2015, the first one after its ipo( 2016 AR is not out).
Return ratios are not high ( sub 10) coz of capital intensive nature of business( capex as percentage of sales is above 40%) . But the sales and earnings growth over the three yr and five year period are in upwards of 30, that indicates the high growth nature of the cold chain sector. Debt equity ratio is 0.22 and the management indicates the ease of debt raising in the future coz of this( capital intensive nature- reinforced).
Promoter holding is low (40%) . Gateway disparks is the promoter. Management remuneration is 4.8% of PAT ( slightly on the higher side).
Dupoint analysis of ROE( 7.74%) indicates the average to good NPM(12%), low Asset turnover(0.43) - implying capital intensive nature and Financial leverage ( 1.34). Though RoA was only 5%, the have used the leveraging part to increase their returns.
So going forward, How are they going to increase their RoE- primarily by increasing the Asset turnover after all their capex(They have already achieved 1 lakh pallets) and by deleveraging. Also they have turned their focus on higher margin products and efficient capacity utilization (as per the management words they start marketing spaces the day they begin building a new warehouse, to achieve optimum capacity utilisation generally within a few months of commencing operations and have acheived 75% capacity utilisation in 3-6 months of warehouse commisioning).
As per the cash flow statement , though the operating cash flow is good because of high capex outflows and ipo proceeds ,there is net NEGATIVE FREE CASH FLOWS.
One point to note is they have Deferred tax of 13 crores which significantly adds up on earnings( PBT of 14 crores + net tax credit 10 crores) under section 35 AD of income tax. I think the capital intensive nature gets partially offset by this tax rebate from the govt.
To sum up, Being initial days of coldchain logistics and capital intensive nature of business, the financials may not reveal the true potential of this business. Maybe once they attain a critical mass it may become a superstar in India growth story.
DISCLOSURE : I am a novice in stock analysis and I have got no roots in financial education. The above analysis is purely based on knowledge gained from open forum from fellow investors and I have all rights to be wrong in my analysis. The intention of this post to know the faults in my analysis which will help me in becoming a better investor. Also I thank Mr.Jatin Khemani of stalwart advisors for his blogpost on India’s Consolidation Wave.
At this juncture I dont have any position in the Company discussed. Am waiting for your comments. Thanks in Advance.
2 Likes
Bad debt of snowman logistics spiralled to 4.56 cr from 98 lakhs as can be seen from their AR 1516 under the schedule of OTHER EXPENSES in pg 73. There is also a component called other charges under the Security & other charges section in page 73 which has increased from 2.23 cr to 3.65 cr . Failed to understand how and under what circumstances bad debt multiplied 4.5x . Also can anybody shed light on the “other charges” component of expenses. Also a significant amount of cash 19.75 cr cash is tied up in Long term loans and advances of which of course 19.11 cr is given as security deposit. An amount of 8 cr is tied up in short term loans and advances of which 4.57 cr is given as advance to suppliers and 2 cr shown as prepaid expenses. Would be great if anybody can bring in his expertise to explain this significant allotment of cash in long term loans and advances and short term loans and advances with respect to SNOWMAN LOGISTICS. Disclosure: Invested recently ( tracking amount).
High depreciation cost is yet another red flag for me.
Debt can be restructured but depreciation cost can’t be reduced easily.
It’s hard to become profitable if deprecition cost is of the order of EBITA. Wheather it is the sector leader or not hardly matters, if the sector itself turns out to be like telecom.
Disc: hold small tracking position
1 Like
It is heading south Q-o-Q. Industry prospectus are supportive. Looks like management issue ?
Company has reported a minor profit in this quarter compared to losses in the previous qtrs.
Seems like things are improving.
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Did anyone read Annual report?
With the share price seeing a free fall, I tried to understand what can we expect in near future. However, couldn’t find anything in AR. “Management, Discussion & Analysis” section doesn’t provide encouraging picture either.
Disc: Invested since a long time. Doubled investment last week.
Had a quick glance at the numbers. The depreciation cost seems to be equal to the EBITDA. Are these levels of depreciation allowed under the companies act? Pardon my naivety but what effect will it have on the financials as despite the losses the company is generating cash.