Gateway Distriparks, the intermodal logistics service provider, launched its rights issue for subscription on July 30.
The Rights Entitlement will also start trading on the exchanges on July 30 and the issue will close on August 13.
The company that runs container freight stations and inland container depots, has announced a rights entitlement ratio of 4:27, which means that shareholders will be entitled to 4 shares for every 27 existing shares held by shareholders.
The company plans to raise Rs 116 crore through its rights issue. The fresh capital raise is primarily for repayment of debt and once this is done, the debt of the company will be significantly reduced to twice its EBITDA.
"Accordingly, the proposed rights issue will help deleverage our balance sheet," Prem Kishan Gupta, Chairman & Managing Director said.
The issue price has been fixed at Rs 72, which is 18 percent discount to closing price on July 20 when the company announced rights issue details.
The issue price is definitely rightly and decently priced by the company, and also the company has genuinely been reducing its debts, experts feel but they are not suggesting investors to participate in the issue given its weak financials and low return on equity.
"Comparing its closing price (Rs 88.75) as on July 22 and its issue price (Rs 72), we can say that the issue is rightly placed. Though, this stock has comparatively low P/E, we wouldn't suggest subscribing to this issue as its growth seems lagging in comparison to its competitors," Gaurav Garg, Head of Research at CapitalVia Global Research told Moneycontrol.
Also read - Gateway Distriparks rights issue to open on July 30; here's all you need to know
Gateway Distriparks has posted net profit of Rs 103.92 crore for the year ended March 2020 as against Rs 365.2 crore for the year ended March 2019.
"The return on capital employed (RoCE) of this stock is 7.31 percent which is comparatively less than its peers like Container Corporation of India (16.62 percent), Allcargo Logistics (12.73 percent) and Mahindra Logistics (17.74 percent). Also, its EPS (1.03) is less when compared to other peers like Container Corporation of India Ltd (5.21) and Allcargo Logistics Ltd (2.12)," Gaurav Garg said.
Prashanth Tapse, AVP Research at Mehta Equities also told the same to Moneycontrol, "The right offer is priced decently discounted at 20 percent to current price. But we are bit cautious on Gateway Distriparks' business prospects on the back of low promoter holding 30 percent and low return on equity of 7.72 percent for last 3 years."
He said considering basic parameters, they advised existing shareholder/investors to sell Rights Entitlement (RE) shares offered by Gateway Distriparks is the ratio of 4:27. "Hence selling Rights Entitlement shares credited shareholders will get an opportunity to gain some value of eligible RE shares."
Tapse feels availing right issue shares just because the offer is at discount to market price is not the only parameter to consider.
"Investors should also look at factors such as growth prospects and the reason behind the company's decision to come out with a rights issue and future aspects as well. Like a blessing comes along with a risk attached, there are few advantages and disadvantages of right issue like Value of each share may get diluted and also this would result in a drop in RoE numbers after the issue," he reasoned.
Gateway Distriparks operates four container freight stations located at Navi Mumbai, Chennai, and Krishnapatnam and two container freight stations at Kochi and Visakhapatnam, through its subsidiaries, Gateway Distriparks (Kerala) and Gateway East India, respectively.
As of June 30, 2020, it also owns a fleet of 193 trailers for transportation between maritime ports and the CFSs.
In addition, its subsidiary, Gateway Rail Freight (GRFL), provides container rail transportation service between the maritime ports at Nhava Sheva, Mundra, and Pipavav and the four inland container depots owned and operated by it at Gurugram, Ludhiana, Faridabad, and Viramgam, and additionally operates a domestic terminal at Navi Mumbai.
As of June 30, 2020, GRFL operates a fleet of 31 train-sets along with 338 trailers which facilitate last-mile pick-up and delivery of cargo.
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