Cargosol Logistics
Cargosol Logistics is coming out with an initial public offering (IPO) of 2700000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 28 per equity share.
The issue will open on September 28, 2022 and will close on September 30, 2022.
The shares will be listed on SME Platform of BSE.
The share is priced 2.80 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 Vinay B Karkera.
Profile of the company
The company is a complete 3 PL (third-party logistics) service provider, delivering end-to-end solutions in the logistics and supply chain domain involving multimodal transport operations (MTO), owning and operating container, sea and air freight, transportation, warehousing, custom clearance services and handling of project cargo. The company operates a fleet of 12 commercial vehicles which are owned by it and apart from this, it also hire third party transport operators in case of high demand and business feasibility. It also provides warehousing facilities with its customers and its warehouses are well connected to several manufacturing and consumption clusters located at Thane, Maharashtra. It also handle NVOCC (Non Vessel Owning Common Carrier) facility for the sectors like Indian Sub-continent, Middle East, Upper Gulf, South East Asia and part of Europe through its slot arrangements with feeder operator as well as with main line operators.
The company started the business of freight forwarding as a partnership firm under the leadership of its promoters in the year 2004 under the name and style of “Cargosol Logistics” and have, since then, it has consistently grown its presence, enhanced the scope of its services, and increased its capabilities and expertise with continuous learning and upgradation. It has over the years developed ourselves and increased the ambit of its services covering critical services which are required to execute end-to-end logistic needs. These include Multimodal Transportation, Contract Logistics, Regulatory Compliance, warehousing and related Value-Added Services. It is also engaged in handling of project cargo, which is a specialized activity requiring detailed planning and technical expertise. The comprehensive project handling service includes designing and execution of customized solutions tailored to meet specific customer requirements for the transport of high value specialized equipment’s such as power plants, windmills stations etc. from one location to another using multiple modes of transport. These assignments are generally handled on a turnkey contract basis.
The company is headquartered in Mumbai and has presence in major locations such as Kalamboli, Pune, New Delhi, Chennai and warehouse located at Thane. Its international logistics operations are supported by a network of logistic service partners and vendors with whom it enter into cooperation agency agreements that enables it to service client requirements across India and abroad. It delivers international logistic services by using air, sea and surface, as modes of transportation. It has a Multi-Modal Transport Operator’s License and an IATA Accreditation for servicing its customers’ requirements. Multi-Modal Transport Operator’s License 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 and industry-specific solutions for which it has entered into an agreement with OFS Cargo who have a valid Custom House Agent’s License.
Proceed is being used for:
Purchase of vehicle for commercial purpose.
Purchase of containers for expansion of the Non Vessel Owning Common Carrier (NVOCC) division.
Meeting working capital requirements.
General corporate purpose.
Meet issue expenses.
Industry overview
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. Logistics is an ever-evolving industry in India, stretching from long coasts to deserts, hilly terrains, and plains. As a result, evaluating the whole Country as one logistics ecosystem is near impossible. Different regions have their challenges with varying responses. Yet, if logistics performance is to be assessed for them all on a common platform, logistics infrastructure and its management had to be broken down into indicators that covered all aspects comprehensively. For LEADS 2021, the overall construct of indicators focused on Infrastructure, Services and Regulatory Environment, like in previous studies. The three constructs mapped the entire gamut of experiences a user has in the logistics value chain. These three broad constructs were broken down into 17 specific indicators (5 for infrastructure, 9 for services and 3 for regulatory), which granularly captured every component explicitly.
Efficient logistics is the bed rock for a growing economy like India. The reduction in logistics cost could be a key enabler in enhancing the competitiveness of all sectors of the economy. Improving supply chain efficiencies and reducing logistics costs are fundamental to India capitalizing on this strategic shift and meeting the well-defined aspiration to become a $5 trillion economy7 as set by the government. India's logistics cost is estimated to be about 14% of its GDP. For most of the developing countries the cost is in the same range. However, the logistics cost is considerably low for developed countries and it lies within the range of 8-10 percent. As India march on the economic development path, it needs to focus on addressing issues inhibiting reduction in logistics cost including suboptimal modal mix, fragmented regulatory/Institutional regime, warehousing and packaging losses, shortage of skilled manpower, sub optimal fleet size and lack of inter-modal terminals. Improvement in Logistics is the cornerstone of the Government’s push towards achieving Aatma Nirbhar Bharat. Various initiatives are being taken by the Central and State/UT governments to improve logistics ecosystem across the country. Infrastructure development initiatives like Sagarmala, Bharatmala, Dedicated Freight Corridors (DFCs) amongst others are under different stages of implementation. Besides, regulatory and process related reforms like paperless EXIM trade process through E-Sanchit, faceless assessment through Turant Customs and introduction of mandatory electronic toll collection system (FASTag) have contributed to increasing the efficiency of the logistics sector.
Pros and strengths
Integrated, end-to-end logistics services and solutions: The company’s integrated, end-to-end logistics services focus on creating solutions that address the requirements of its clients. Its range of services involves multimodal transport operations (MTO), owning and operating container, sea and air freight, transportation, warehousing, custom clearance services and handling of project cargo. Use of integrated, end-to-end solutions from a single 3PL logistics service provider such as it results in enhanced cost efficiencies for its clients, which encourages them to use its services. It offers a wide range of solutions including transportation, warehousing and other value added services. It provides its clients with value added services such as packaging, quality checks and custom clearance. Its business development and solutions are dedicated to, and specialize in, designing customized integrated logistics solutions for its clients, which has helped improve service levels, cost, quality, scalability and visibility of its clients’ supply chain.
Storage capabilities: The company has established its warehouse which can be used by its customers to help them store their products. The warehouse is equipped with all the necessary requirements for proper handling, safety and security of the cargo like end to end surveillance, material handling equipments like MHE / HPT / Forklift / Reach Trucks, trained manpower, packaging facility and Epoxy Flooring with storing high load capacity. Warehousing facility services allows the customer to keep their goods in its warehouse which can be delivered based on the requirement of the customers or for storing of the goods which are waiting for clearance or approval. It does handle all kinds of goods with efficiency, ensuring safety and privacy. It also conduct regular quality control checks on entry and exit of goods.
Diverse customer base across many sectors: The company’s customer base spans many sectors, including retail, pharmaceutical, telecom, automotive and heavy engineering, food and agro, FMCG, paint and dairy. Its large client-base across various industry verticals has enabled it to cross-leverage the know-how and best practices that it has acquired from its experience with a set of clients across a wider spectrum of clients. It has a diversified customer base in each of the sectors it serves, including Indian corporate groups and multinational companies. It is well positioned in the logistics industry in India, given its experience and infrastructure suited to serve a wide range of sectors. Over the years, it 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. Due to this, its customers have also steadily increased the volume of business they undertake with it over time.
Risks and concerns
Deal in transport of hazardous goods: The company excels in handling complete logistics for dangerous and hazardous cargo. The transportation and storing of these cargos have human and environmental concerns as well as require it to comply with rules and regulations. These goods may include cargo like flammable liquids, flammable solids, toxic substances, corrosives and miscellaneous dangerous goods. It takes utmost care and precautions during storage and transportation of hazardous goods, as any mishandling of hazardous substance could have serious effect on the human life, equipment, environment and its business operations. In case of any accident or mishap involving hazardous goods they can cause personal injury as well as loss of life and destruction of property and equipment, environmental damage which may result in suspension of operation and imposition of civil and criminal liabilities upon it. In case of happening of any such event there could be an adverse effect on the company and its financial position.
Depend on network of overseas agents for cargo handling, transportation, warehousing: The company depends on its network of overseas agents for cargo handling, transportation, warehousing and timely delivery at the destination and load port for export cargo and import cargo respectively. For this purpose, it enters into agency agreements and co-operation agreements in the normal course of business with overseas agents. As per these agreements the overseas agents act as the nonexclusive agent of the company in that location and it acts as the non-exclusive agent of that company in India. These agreements help the company to expand its network to different geographies around the world but also increase its dependency on these overseas agents appointed by it. Any deficiency in the service levels of its overseas agents or termination of any such agency agreement can directly impact its business in those geographies and have an adverse effect on its business operations and financial results.
Dependence on third-party vendors: The company’s ability to service its customers depends on the availability and costs of leased storage space, vehicles used for transport, equipment and adequate work force of independent contractors for operations. It uses trucks and reefer trucks used in its temperature-controlled business, owned by third parties. Further, it oftens engage independent contractors for its skilled and unskilled labour needs and, in the event that such contractors are not available, this may have a material and adverse effect on its operations. It cannot assure it will be able to obtain access to preferred third-party vendors for its warehousing space, equipment, vehicles or independent contractors, or at attractive rates or that these vendors will have adequate available capacity to meet its needs or be able to meet its requirements in a timely manner.
Outlook
Incorporated in 2003, Cargosol Logistics is a complete 3 PL (third-party logistics) service provider, delivering end-to-end solutions in the logistics and supply chain domain involving multimodal transport operations (MTO), owning and operating container, sea and air freight, transportation, warehousing, custom clearance services and handling of project cargo. The company also provide warehousing facilities to the customers and the warehouses are well connected to several manufacturing and consumption clusters located in Thane, Maharashtra. The company also handle NVOCC (Non-Vessel Owning Common Carrier) facility for the sectors like Indian Sub-continent, Middle East, Upper Gulf, South East Asia and part of Europe through its slot arrangements with feeder operator as well as with mainline operators. The company has tapped markets across the countries by establishing a strong and symbiotic relationship through its network with international companies through its subsidiary, associate and group companies. It has also entered into cooperation agency agreements with many parties across the globe in countries like Finland, Greece, China etc. On the concern side, the company allocates a significant part of the cash flows from its business operations for capital expenditures for developing the infrastructure for new facilities and for maintaining its existing facilities. When setting up new facilities, it may encounter cost overruns or delays for various reasons, including, but not limited to, delays in construction, delays in receiving governmental, statutory and other regulatory approvals and permits and delays in, or non-delivery of equipment by suppliers.
The company is coming out with a maiden IPO of 2700000 equity shares of Rs 10 each. The issue has been offered at a fixed price of Rs 28 per equity share. The aggregate size of the offer is Rs 7.56 crore. On performance front, total income for the financial year 2021-22 stood at Rs 20072.25 lakh whereas in Financial Year 2020-21 the same stood at Rs 10359.99 lakh representing an increase of 93.75%.The company reported Restated profit after tax for the financial year 2021-22 of Rs 620.86 lakh in comparison to Rs 196.50 lakh in the financial year 2020-21. Meanwhile, the company intends to continue to acquire large revenue clients and provide them with integrated, end-to-end solutions to address all their logistics requirements. This gives its clients flexibility and scalability in their operations along with cost efficiencies. It intends to continue to acquire technology systems to increase productivity, improve operating efficiencies, and strengthen its competitive position.
