Zinka Logistics Solutions IPO: Here are 10 key things to know before subscribing to the issue

Zinka Logistics Solutions IPO

Zinka Logistics Solutions, the largest digital platform for truck operators, will be the fifth initial public offering in the current month, after Sagility India, Swiggy, ACME Solar Holdings, and Niva Bupa Health Insurance Company.

Here are 10 key things to know before subscribing to the issue:

1) IPO Date

The public issue will open for subscription for all kind of investors on November 13 and close on November 18, while the anchor book for institutional investors will be opened for a day on November 12.

2) Price Band

The price band for the initial share sale has been fixed at Rs 259-273 per equity share.

3) Zinka Logistics Solutions IPO Size

The Bengaluru-based company targets to raise 1,114.72 crore through its initial public offering which comprises a Rs 550-crore fresh issue, and Rs 564.72-crore offer-for-sale at the upper price band.

Promoters Rajesh Kumar Naidu Yabaji, Chanakya Hridaya, and Ramasubramanian Balasubramaniam as well as investors Quickroutes International, Accel India, International Finance Corporation, Internet Fund III, Peak XV Partners Investments, VEF AB (publ), and Sands Capital will be the selling shareholders in the offe-for-sale.

The company has reserved 26,000 equity shares for its employees. They will get these shares at a discount of Rs 25 per equity share to the final issue price.

4) Objectives of Issue

The Flipkart-backed logistics startup will spend Rs 200 crore out of the net fresh issue proceeds for sales and marketing costs, and Rs 75 crore for product development. Furthermore, it will invest Rs 140 crore in Blackbuck Finserve, the NBFC subsidiary, for financing the augmentation of its capital base to meet its future capital requirements. And the remainder IPO funds will be utilised for general corporate purposes.

The funds raised via offer-for-sale component will be received by the selling shareholders i.e. promoters and investors.

5) Lot Size

Investors can bid for a minimum of 54 equity shares and in multiples of 54 shares thereafter. Retail investors can invest a minimum of Rs 14,742 for one lot of 54 shares and their maximum investment would be Rs 1,91,646 for 13 lots of 702 shares as they can not exceed investment limit of Rs 2 lakh in the IPO.

Zinka has reserved 75 percent of its IPO size for qualified institutional buyers, 10 percent for retail investors and the remainder 15 percent shares for non-institutional investors.

6) Company Profile

Zinka claimed to the India’s largest digital platform for truck operators (in terms of number of users), with 9,63,345 truck operators in the country transacting on its platform in FY24, which comprises 27.52 percent of India’s truck operators, as per the Redseer report). Its BlackBuck application helps truck operators digitally manage payments for tolling and fueling, monitor drivers and fleets using telematics, find loads on company's marketplace and get access to financing for the purchase of used vehicles.

The company partners with FASTag banks and multiple oil marketing companies (OMCs) to offer efficient and secure tolling and fueling solutions, generating revenue through commission margins based on transaction values.

There are no like-to-like listed companies in India or abroad that engage in a business similar to that of Zinka.

7) Financial Performance

Zinka has narrowed its net loss from continuing operations to Rs 167 crore for the fiscal 2024, from Rs 236.8 crore in the previous year. Even on the operating front, loss at EBITDA level (earnings before interest, tax, depreciation and amortisation) minimised to Rs 158.4 crore compared to Rs 232.5 crore during the same period. However, revenue growth remained strong, rising 69 percent on-year to Rs 297 crore in the fiscal 2024 driven by increase in its average monthly transacting truck operators, which led to rise in commission income, subscription fees, and service fees.

In the three months period ended June 2024, it has recorded profit at Rs 32.4 crore against loss of Rs 33.3 crore in the same period previous fiscal, aided largely by exceptional gains of Rs 25.6 crore. Revenue from operations grew sharply by 55 percent to Rs 92.2 crore during the same period, while EBITDA stood at Rs 8.4 crore during April-June quarter of 2024 against EBITDA loss of Rs 30.6 crore in the corresponding period of last fiscal.

The gross transaction value (GTV) of payments on its platform in the fiscal 2024 increased significantly by 42.66 percent on-year to Rs 17,396.2 crore and the same in the June 2024 quarter grew by 37.4 percent to Rs 5,356.2 crore compared to same period previous fiscal.

8) Shareholding Pattern

Promoters including Rajesh Kumar Naidu Yabaji, Chanakya Hridaya, and Ramasubramanian Balasubramaniam hold 34.32 percent stake in the BlackBuck operator, and the remainder 65.68 percent shares are owned by public shareholders.

Accel, Quickroutes International (earlier known as Flipkart Logistics), International Finance Corporation, Sands Capital, GSAM Holdings, Peak XV Partners, Cayman, IFC Emerging Asia Fund, Tribe Capital and Internet Fund are the key institutional investors in the company.

Rajesh Kumar Naidu Yabaji is the Chairman, Managing Director and Chief Executive Officer of BlackBuck, while Chanakya Hridaya is the Executive Director and Chief Operating Officer. Ramasubramanian Balasubramaniam holds the Executive Director and Head – New Initiatives position in the company.

9) Risks and Concerns

>> The company witnessed negative operating cash flows in the past.

>> Depends on its business partners in payments (FASTags, OMC) and vehicle financing offerings. The loss of any such partners may adversely affect its business.

>> Its revenues are significantly dependent on payments and telematics offerings, which contributed 94.53 percent to revenue in FY24.

>> Any fluctuation or negative trend in its commission income/subscription fees could materially affect the business.

>> An inability to attract new truck operators or retain existing truck operators could adversely affect the business

>> Fluctuations in the road transportation industry and fuel prices may impact freight volumes and truck capacity, which in turn could adversely affect its business.

>> Faced high attrition among its employees in the past (37.32 percent in Q1FY25 and 41.08 percent in FY24).

10) Zinka Logistics Solutions IPO GMP

The company will finalise the basis of allotment of IPO shares by November 19 and equity shares will be credited to demat accounts of successful investors by November 21. Investors can start trading in Zinka shares on the BSE and NSE, effective November 22.

According to the market observers, Zinka Logistics Solutions IPO shares traded at around 9-10 percent premium over the upper price band in the grey market. an unofficial market for trading in IPO shares till the listing.

The book running lead managers handling the public issue are Axis Capital, Morgan Stanley India Company, JM Financial, and IIFL Capital Services.

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