Comparison: Future Supply Chain Solutions IPO vs Mahindra Logistics

Future Supply Chain Solutions Limited IPO consists of offer of up to 9,784,570 equity shares of face value of Rs. 10 each  comprising an offer for sale of up to 7,827,656 equity shares by Griffin Partners Limited and up to 1,956,914 equity shares by the promoter and holding company, Future Enterprises Limited. The offer would constitute up to 24.43% of its post-offer paid-up equity share capital.

Incorporated on March 8, 2006, Future Supply Chain Solutions Limited (FSC) is promoted by Future Enterprises Limited, which in turn is promoted by Mr. Kishore Biyani. Future Enterprises Limited (“FEL”) is the holding company of FSC.

Though Future Supply Chain Solutions Limited is not strictly comparable with Mahindra Logistics which is also a 3rd party Logistics player r with significant focus on Automotive sector, these two companies are the only 3rd party Logistics layers in the country and are extending their reach to several sectors. A comparison with listed industrial peer Mahindra Logistics (Based on IPO price)  is below:

Comparison of Future Supply Chain Solutions(FSC) & Mahindra Logistics(MAHLOG)-  Rs. crore
Particulars FSC (Fy17) MAHLOG (Fy17) FSC (HY17-18) MAHLOG
(HY 17-18)
Revenue from Operations 561.18 2,666.50 357.42 1688
Revenue Growth (%)- 1 Yr 7.95% 29.20%
EBITDA 74.28 75.25 56.18 50.22
EBIDTA Margin 13.24% 2.82% 15.72% 2.98%
Profit Before Tax 58.19 67.8 49.44 45.21
Net Profit 45.75 60 33.33 28.71
Net Profit as % to Revenue 8.15% 2.25% 9.33% 1.70%
Face Value 10 10 10 10
Share Capital 39.14 68 39.14 71.14
Reserve 253.67 294.7 286.92
Net worth 292.81 326.05 383.35
NAV Per Equity share (Rs.) 74.81 51.1 83.31
RoNW (%) 15.63% 13.10% 10.22% 7.49%
EPS (Rs.) 11.69 6.7 8.52 4.04
IPO Price 664 429
Price/ Earning (PE) FY17 56.80 64.03
PE -HY17-18 Annualized 38.97 53.15
Price/ Book Value (P/BV) 7.97 8.40
Cagr  Sales (Fy15-17) 17.28% 11.36%
Cagr NP (Fy15-17) 36.21% 14.38%
Market Cap 2599 3052
Market Cap/Sales(fy17) 4.63 1.14
% of turnover from non promoter companies 37.5 46.04% 30.3 49
About Future Supply Chain Solutions Limited:

Future Supply Chain Solutions Limited offers  its customers services in three key areas:

  • Contract Logistics: warehousing, distribution and other value-added services
  • Express Logistics: point-to-point, less-than truck-load, time-definite transportation services; and 
  • Temperature-Controlled Logistics: cold-chain warehousing, transportation solutions and distribution of perishable products.

Future Supply Chain Solutions Limited revenue earnings from its services related to contract logistics, express logistics and temperature-controlled logistics represented 69.8%, 21.7% and 6.2% of its revenue from operations in Fiscal 2017
Future Supply Chain Solutions Limited business

About Mahindra Logistics:

Mahindra Logistics is part of Mahindra Group (M&M), one of India’s leading corporate groups. Incorporated in 2008, Mahindra Logistics operates in 2 distinct business segments of Supply Chain Management (“SCM”) and People Transport Solutions(“PTS”). SCM accounts for a major share of its business.Under Supply Chain Management (“SCM”) business, Mahindra Logistics offers customized and end-to-end Logistics Solutions and Services including Transportation and Distribution, Warehousing, In-factory logistics and Value added services to their clients. Under PTS (People Transport Solutions) Business, Mahindra Logistics provides technology-enabled people transportation solutions and services across India to over 100 domestic and multinational companies operating in the IT, ITeS, Business Process Outsourcing, Financial Services, Consulting and Manufacturing industries. Its Company’s  subsidiary, 2X2 Logistics, provides logistics and transportation services to OEMs to carry finished automobiles from the manufacturing locations to stockyards or directly to the distributors through specially designed vehicles. Its other subsidiary, Lords, provides international freight forwarding services for exports and imports, customs brokerage operations, project cargo services and charters. The SCM and PTS businesses contributed 89.89% and 10.11%, respectively, to its  total revenue from operations in the three month period ended June 30, 2017 and 88.94% and 11.06%, respectively in Fiscal 2017.

  • Future Supply Chain Solutions Limited (FSC) Revenues at Rs. 561 crore are significantly lower than Mahindra Logistics (MAHLOG)  Rs. 2666 crore  . This is primarily due to MAHLOG operating predominantly in Automotive sector and   FSC focus on organized retail.
  • As evident from the picture below, Automotive sector is a bigger market for 3rd party logistics. However significant growth rate is foreseen  in Organized Retail.
  • 3rd party Logistics growth  
  • Future Supply Chain Solutions Limited enjoys superior margins ( EBIDTA margin 13.24%, Net Profit margin 3.25%- for FY17) than Mahindra Logistics (EBIDTA margin 13.24%, Net profit Margin-2.25%- for FY17)
  • Future Supply Chain Solutions Limited has churned out significant growth in Revenues and Profits in the HY 2017-18 vis a vis  Mahindra Logistics which too has shown positive growth.
  • Future Supply Chain Solutions Limited has more dependence on promoter group companies and its share of revenues from non promoter companies stands at 32.5% compared to 46% for Mahindra Logistics. Further while  non promoter related business has been growing at a good pace and accounts of 49% of SCM business in  with HY FY-18, in case of Future Supply Chain Solutions Limited the share of non promoter has declined over the last few years.  
  • It also appears that while Mahindra Logistics is following a fully asset light model, Future Supply Chain Solutions Limited may be following a mix of asset light in some areas and investments in other areas and this could also be  the reason for FSC better margins. 
  • Prospects for 3rd party Logistics appear bright and both these companies have strong group backing. Decision of Government to  give Infra status to select sectors of Logistics industry should help these companies to attract  investments and grow at faster rate.
  • A detailed IPO review shall be done in a forthcoming note. Nonetheless despite the IPO price, Future Supply Chain Solutions Limited IPO may turn out to be rewarding in medium to long term. 

Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. I may have vested interest in every stock I discuss and my views may be biased. Please do your own due diligence as stock market investments have high degree of inherent risk.

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