The debut of cold chain company Snowman Logistics on Friday at a whopping 70 per cent premium to its listing price, has given a leg up to other logistics stocks as well. Gati and Concor gained 1-3 per cent on Friday.
IPOs seem to be the flavour of the season. With many IPOs in recent times delivering strong returns, investors are beginning to bet on every issue that is coming their way; whether good or bad.
Amusement park operator Wonderla Holidays, which came up with an IPO earlier in May this year, has gained 152 per cent since listing. Other successful IPOs that came up last year include Just Dial (218 per cent gains), Repco Home Finance (155 per cent) and V-Mart Retail (166 per cent).
Snowman has sound fundamentals. But after the phenomenal gain on its debut, the stock now trades at 48 times 2014-15 earnings, assuming an earnings growth of 17 per cent for this fiscal.
Gati trades at 34 times its consolidated trailing earnings, while Concor trades at 20 times trailing earnings. In comparison, Snowman’s valuation seems far expensive after the run up.
Logistics segment
Logistics segment does hold promise, with the economy reviving. Industries such as dairy and dairy products, poultry and meat, seafood, ready-to-eat, confectioneries, healthcare and pharmaceuticals, industrial products and fruit and vegetables, which are major users of cold chain facilities, will also get a boost from better consumer spending.
Snowman Logistics has raised close to Rs 197 crore through the IPO, which was over subscribed 60 times. Gateway Distriparks, the logistics player, is the largest shareholder with 40.4 per cent stake in the company post the issue.
Snowman Logistics is an integrated temperature-controlled logistics services provider with 23 temperature-controlled warehouses located across the country and a fleet of 370 vehicles for transportation of products. A chunk of the issue proceeds will go towards adding temperature-controlled warehouses and ambient warehouses.
Snowman does not have direct listed peers. Logistics companies such as Gati and Concor have cold storage logistics businesses, forming part of the main business.
Cold chain industry has strong business prospects driven by growth in end-user industries and organized retail. The industry is now moving towards high premium-end products and holds strong potential.
Some of the main players are Snowman, RK Foodlands, Coldex, Devbhomi, Kausar India, Fresh and Healthy Enterprises and Bulaki Deep Freeze. The Government of India has also awarded infrastructure status to this industry.