Cargotrans Maritime coming with an IPO to raise upto Rs 4.86 crore

Cargotrans Maritime

• Cargotrans Maritime is coming out with an initial public offering (IPO) of 1080000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 45 per equity share.
  
• The issue will open on September 27, 2022 and will close on September 29, 2022.
  
• The shares will be listed on SME Platform of BSE.
  
• The share is priced 4.50 times higher to its face value of Rs 10.
  
• Book running lead manager to the issue is Hem Securities.
  
• Compliance Officer for the issue is Chhayaben Mulani.
  

Profile of the company

The company is an international logistics solutions provider with core business of providing sea logistics services including ocean freight forwarding (FCL and LCL), transportation, custom clearance, warehousing and other value added services to the clients. It started the business of freight forwarding in 2012 and has, since then, consistently grown its presence, enhanced the scope of services and increased its capabilities and expertise. In October, 2019, the company acquired 100% stake in Cargotrans Maritime Agencies (CMAPL) and Cargotrans Maritime Forwarding (CMFPL) to enter into the segment of custom house agent service and coastal transportation (i.e. transport of goods through sea within India). It has a Multi-Modal Transport Operator’s License, which enable it to issue a single negotiable multimodal transport document covering multiple modes of transport and position itself as an independent player in this field thus strengthening its revenue model. It also undertake work related to regulatory compliance services such as customs clearance, through CMAPL, which owns a valid Custom House Agent’s License.

The registered office of the Company is situated at Gandhidham, Gujarat and it has two branch offices at Ahmedabad & Rajkot and two port offices at Mundra and Pipavav. As on date of Prospectus, the company operates at 4 sea ports of Gujarat i.e. Mundra, Hazira, Kandla and Pipavav. Currently, it operate a fleet of 9 owned commercial trailers for moving containers and apart from this it also hire third party transport operators to meet the shipping demand of its customers. Its customers operate in various sectors, including food processing, agro-based, commodities, plastics, minerals, ceramics, trading, packaging, textiles etc.  The company is led by experienced Promoters with significant experience in the logistics industry. Its Promoters and Directors, Edwin Alexander, Manju Edwin and B Chandershekhar Rao possess an experience of around 20 years, 10 years and 25 years respectively in the logistics industry. Under their leadership, it has witnessed multi-fold growth in terms of revenue and profitability. Its management is assisted by a team of qualified and experienced personnel’s who have helped the company to anticipate and capitalize on customers’ requirements, manage and grow its operations and leverage and deepen customer relationships.

Proceed is being used for:

• Meeting working capital requirements.
  
• General corporate purpose.
  
• Meeting issue expenses.
  

Industry overview

Ports play an important role in the overall economic development of a country. India is one of the fastest-growing and large economies in the world, with a GDP growth rate of 6.1% as of 2018-19. Approximately 95% of India’s merchandise trade is done through sea ports. India is one of the biggest peninsulas in the world with a coastline of 7,516.6 kms and 200 major and non-major ports. Indian ports are categorised into two parts: Major ports (under central Government administration) and Non-Major ports (under state Government administration). The ports in India serve as a backbone for EXIM, international trade, coastal shipping and cruise shipping. As India opened its economy towards liberalisation, privatisation and globalisation in the year 1991, government policies were formed to develop export potential and improve trade and commerce. India has 12 major and 205 notified minor and intermediate ports. Under the National Perspective Plan for Sagarmala, six new mega ports will be developed in the country. The Indian ports and shipping industry play a vital role in sustaining growth in the country’s trade and commerce. India is the sixteenth-largest maritime country in the world with a coastline of about 7,517 kms. The Indian Government plays an important role in supporting the ports sector. It has allowed Foreign Direct Investment (FDI) of up to 100% under the automatic route for port and harbour construction and maintenance projects.

India’s logistics sector comprises over 10,000 types of products and has a market size of Rs 11 lakh crore. It is expected to grow to a market of Rs 15 lakh crore by 2022. Currently, commercial activities in India generate about 4.6 billion tonnes of freight annually, which results in over three trillion tonne-km of transportation demand at a cost of Rs 9.5 lakh crore. This demand for freight transport has been rising as the population has grown and standards of living have improved, leading consumers and business to demand and consume more goods. Between 2015 and 2020, India’s GDP grew by 32 percent to 217 lakh crore -making India the sixth largest economy in the world. In the same decade, India’s population also increased by 5 percent, while freight demand increased by percent. With rising income levels, higher exports, a rapidly growing e-commerce sector, a growing retail sales market, and a projected GDP growth of seven to eight percent in the next five years, the demand for goods movement is also expected to increase at 7 percent Compound Annual Growth Rate (CAGR).

Pros and strengths

Wide range of logistics services and solutions: The company, being a multimodal transport operator, is capable of offering a wide range of logistics services with focus on creating solutions that address the requirements of its clients. Its range of services involves ocean freight forwarding, custom clearances, warehousing, transportation and other value added services, which assist its clients to improve their service levels, reduce cost and ensure better quality, scalability and visibility of their supply chain. This along with a combination of its logistics and transportation network and diversified service portfolio, has made it possible for it to attract and retain clients across industry segments. This integrated approach allows it to exploit network and infrastructure synergies, reduces its dependence on any single business line and also reduces the effect of cyclicality in its customers’ businesses on its operations.

Long standing relationship with customers: Over the years, the company has built strong customer relations, demonstrating the value proposition it provide and positioning it for expected further growth. Its service quality, reach and efficiency in business processes have led to customer stickiness. It generally do not enter into long term agreements with its customers, however, it has developed long-standing relationships with these customers some of whom have been with it for over four years. For instance, companies such as Gokul Agro Resources, Dyna Glycols, Rajkamal Agro Industries, Vimal Engineering, Kuriamal & Sons have been its customers for the last four fiscals. Maintaining strong relationships with its key customers is essential to its business strategy and to the growth of its business. Owing to its strong customer relationships and service, it has been able to retain a number of its customers for a long period of time ensuring uninterrupted supplies of its logistics services to them.

Strong relationship with constituents of logistics value chain: The company has long standing relationship with its strategic partners and third party service providers from whom it outsource certain services, such as carriage, transportation, equipment leasing and warehousing. For instance, over the years, it has established a strong relationship with Wan Hai Lines India, Maersk Line India, Cosco Shipping Lines India, Hapag Lloyd India, Ami Global Logistics etc. at regional level. Its relationship with shipping companies enables it to procure space onboard on commercially feasible terms. Its relationship with strategic partners and third party service providers help it in effective and efficient logistics operations and timely delivery of consignments. This network also helps it to negotiate favorable commercial terms and operational advantageous for its clients during high demand and peak load times. It also enables it to outsource certain asset intensive service at low costs from third party service providers on account of its long standing relationships and as a result of its large volume visibility, paving the way for better negotiation and competitive price offerings.

Risks and concerns

Does not have custom house agent license: The company does not have any Custom House Agent license in the company’s name. I use the services of other CHA licence holders, mainly of its Wholly Owned Subsidiary Company, Cargotrans Maritime Agencies, for the clearance of cargo at entry or departure of Custom House Stations. The Custom Broking license is issued by the government authorities for fixed period of time and the license holders are required to fulfil certain condition for renewal of the license. In case of any action being taken by the government authorities against Cargotrans Maritime Agencies or non-renewal of the license by them, may delay the custom clearance process or require it to arrange for any alternate solution for getting cargo custom cleared. Any delay in the service or refusal of services by other Custom House Agency may affect delivery of its goods and it may have to compensate its customers for the loss, if any. Any such event may affect its result of operations and future prospects of its business.

Geographical concentration: The company carries all its business operations from the offices located in the state of Gujarat. Further, many of its customers are situated in the Gujarat. Due to the geographical concentration of its business operations in Gujarat, its operations are susceptible to local, regional and environmental factors, such as social and civil unrest, regional conflicts, civil disturbances, economic and weather conditions, natural disasters, demographic and population changes, and other unforeseen events and circumstances. Such disruptions could result in the damage or destruction of a significant portion of its working abilities, significant delays in the logistics operations, loss of key managerial personnel, and/or otherwise adversely affect its business, financial condition and results of operations. Further, in case if it enters into new markets and geographical areas, it is likely to compete with not only national players, but also the local players, who might have an established local presence, and are more familiar with local business practices and have stronger relationships with local customers, relevant government authorities, suppliers or are in a stronger financial position than it, all of which may give them a competitive advantage over it.

Face competition: The company operates in a highly competitive industry, dominated by a large number of unorganized players. While the logistics industry in India is generally fragmented, it may face competition from a number of international and domestic third-party logistics service providers, especially as the trend toward larger-scale logistics providers in India continues. Many segments within the logistics industry are highly commoditized and have low barriers to entry or exit, leading to a market with a very high degree of fragmentation. Some of its competitors may have significantly greater financial and marketing resources and operate larger networks than it does. In the regions of India in which it may operate, it may face competition from certain regional logistics services providers and the unorganized sector, some of which have market presence in their respective areas of operation. It may also face competition from new entrants into the logistics service industry.

Outlook

Cargotrans Maritime offers top notch Custom Clearance, Freight Forwarding, Warehousing & Transport Services to its customers worldwide. Logistics in itself follows a complicated framework which makes it difficult for anyone and everyone to survive in this industry. It is not just anyone and definitely not as common as everyone. Its ideologies are independent, its practices are sophisticated and its quality is pure. It combines its services with the customer requirements to custom design specific solutions for its clients. The company has served a diverse mix of customers dealing in various products such as food processing, agro-based, commodities, plastics, minerals, ceramics, trading, packaging, textiles etc. Its widespread client-base across various industry verticals has enabled it to leverage the know-how that it has acquired from its experience with a set of clients across a wider spectrum of clients. On the concern side, some of the company’s customers’ businesses are subject to seasonality, which in turn, affects its business.  Besides, the company requires several statutory and regulatory permits, licenses and approvals to operate its Business. It needs to make compliance and applications at appropriate stages of its business to continue its operations.

The company is coming out with a maiden IPO of 1080000 equity shares of Rs 10 each at a fixed price of Rs 45 per share to mobilize around Rs 4.86 crore. On performance front, total income for the financial year 2021-22 stood at Rs 8,959.92 lakh whereas in Financial Year 2020-21 the same stood at Rs 4,941.10 lakh representing an increase of 81.33%. The company reported Restated profit after tax for the financial year 2021-22 of Rs 236.28 lakh in comparison to Rs 115.01 lakh in the financial year 2020-21. Meanwhile, the company intends to continue to implement strict cost control measures in order to achieve the lowest cost base and enhance the overall competitiveness. These cost control measures include, strengthening client management throughout the company’s operations, maximizing the benefits of economies of scale and enhancing operational management to improve efficiency and lower administrative expenses. It intends to continue to improve its operational efficiency and customer service quality. The company intends to focus on adhering to the quality standards of the services. It aims to continue to strengthen its relationship with its customers by providing range of services and the quality thereof which will eventually help it in increasing its share of business amongst its existing customers as well as increase its customer base.