TVS Supply Chain Solutions, a part of TVS Mobility Group, is unlikely to see excitement on Street debut on August 23, given the lower-than-expected response to its public issue. A highly competitive industry, aggressive IPO pricing and losses reported in the past years are some of the other reasons that may also impact listing performance, experts said.
The public issue of the Chennai-based company was subscribed 2.78 times during August 10-14, with bids for 6.99 crore equity shares against an IPO size of 2.51 crore shares. Retail investors were at the forefront, buying 7.61 times the allotted quota, followed by high networth individuals and qualified institutional buyers who bid 2.35 times and 1.35 times, respectively, the portions set aside for them.
The final issue price has been set at Rs 197 per share and the market capitalisation stands at Rs 8,746 crore on the issue price.
"With the TVS Supply Chain Solutions IPO receiving a not-so-great subscription compared to the other strong primary issuances that hit the markets recently, we expect a tepid listing for the issue on Wednesday," Dhruv Mudaraddi, a research analyst at StoxBox, said.
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He expects the issue to open lower than the issuance price of Rs 197 per share due to rich valuation vis-a-vis other listed peers, average financial performance and increased competitive intensity in the industry.
Prashanth Tapse, research analyst, senior VP research at Mehta Equities, said the reason for muted demand for TVS Supply Chain offer was factors like aggressive IPO pricing in a subdued market scenario along with losses in the books in the past two years, which is a matter of concern for new investors.
Expensive valuation
TVS Supply Chain Solutions is available at a PE (price-to-earnings) of 209.43x on the FY23 basis, which is expensive compared to peers TCI Express (at 40.57x), Mahindra Logistics (42.15x), and Bluedart Express (46.38x), though in terms of topline, TVS is far bigger than peers.
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The supply chain solutions provider has recorded revenue growth at a CAGR of 21.5 percent during FY21-FY23 to touch Rs 10,235 crore for FY23.
Profit stood at Rs 41.8 crore in FY23 against a loss of Rs 45.8 crore in FY22 and a loss of Rs 76.34 crore in FY21, with a PAT margin at 0.41 percent (against -0.5 percent in FY22 and -1.1 percent in FY21).
With healthy performance in FY23, the company operated across over 25 countries, serving 8,778 global and 902 domestic clients during the year. It caters to diverse sectors such as automotive, industry, consumer products, technology, rail, utilities, and healthcare.
Having collaborations with 72 Fortune 500 firms, the top 10 customers generated nearly 39 percent of revenue for the company in FY23 while overseas sales contributed 70 percent to its business in the same period.
Astha Jain, senior research analyst at Hem Securities, too, expects a flat listing of TVS Supply Chain, while Anubhuti Mishra, equity research analyst at Swastika Investmart, feels the listing might not be attractive given the lower subscription than some recent IPOs.
"Although TVS Supply Chain Solutions is a leading supply chain management company, it operates in a highly competitive industry and has reported losses in the past two years. Additionally, the valuation of the IPO was also very high. All these factors could impact its listing," Mishra said.
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