ICRA assigns grade 2 to Asian Logistics IPO

ICRA has come out with its report on IPO grading on Asian Logistics

ICRA has assigned an IPO Grade 2, indicating below average fundamentals, to the proposed Initial Public Offering (IPO) of Asian Logistics Limited (ALL). ICRA assigns IPO grading on a scale of IPO Grade 5 through IPO Grade 1, with Grade 5 indicating strong fundamentals and Grade 1 indicating poor fundamentals.

Asian Logistics Limited (ALL) is proposing to come out with an Initial Public Offering (IPO) of 3,061,000 shares, amounting to 25.06% of the post issue paid capital of the company. ALL plans to utilise the IPO proceeds for expansion of its fleet, through purchase of medium and heavy commercial vehicles, set up transport yards at Ahmedabad and Vijayawada and general corporate purposes.

The IPO grade assigned by ICRA reflects the experience of the promoters and track record of the company in the road transport business; the healthy growth in business in past few years driven by established relations with customers and attached carriers; diversified customer base across industry segments; the likely benefits of the proposed IPO viz. augmentation of scale and entry into LTL segment; and the moderate profitability indicators.

However, the grading is constrained by the modest scale of operations of the company with regional concentration; the highly competitive and fragmented nature of the industry; and vulnerability of the profitability to movement of freight rates in relation to fluctuations in fuel prices and other truck expenses, as well as hire charges of attached carriers. The grade also factors in the weak liquidity position of the company with sharp increase in receivables in the last fiscal; the risks associated with the proposed fleet expansion, where capacity utilisation will remain critical and the likely erosion of return indicators on account of the asset-heavy business model.

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To read the full report click on the attachment