GConnect Logitech and Supply Chain coming with IPO to raise Rs 5.60 crore

GConnect Logitech and Supply Chain 

• GConnect Logitech and Supply Chain is coming out with an initial public offering (IPO) of 1401000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 40 per equity share. 
• The issue will open for subscription on March 26, 2024 and will close on March 28, 2024.
• The shares will be listed on BSE SME Platform.
• The share is priced at 4.00 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Fedex Securities.
• Compliance Officer for the issue is Ankita Malde.

Profile of the company

The company is engaged in the business of providing surface logistics services viz. goods transport services. The company offers its services to other logistic companies, including surface logistic companies and to direct customers. The range of services offered by the company includes bulk load, Full Truck Load (FTL) service and dedicated load. Under bulk load, the company offers bulk transportation service to large sized Companies through their transport contractors, Full Truck Load (FTL) service to retailers and traders, wherein the company provides point to point services to the customers in which the goods are loaded from the premises of the customer and are delivered to the delivery point as specified by them (i.e. factory/warehouse). The company also provide dedicated load service, which includes multiple pick-ups and drops. The company mainly serves transport contractors and industrial customers, who have requirement to transport bulk quantities of their goods from one place to another within India.

The company carry its logistics business with the primary focus being the state of Gujarat. The company primarily serves transport contractors and also direct customer, thus serving a varied end customers from a broad range of industries such as metals, fabrics, Fast Moving Consumer Goods (FMCG), auto components, chemicals and pharmaceuticals. It does not enter into any contract with its customers. The company operates under an asset light model, thus engaging with third parties for providing the company with the assets necessary for its operations such as vehicles (customized and containerized). 

Proceed is being used for:

• Purchase of Vehicles and Body Building.
• Finance the Website Development and App Designing.
• General Corporate Purpose.

Industry overview

Logistics is essential for the economy of a country. It pertains to the general method of controlling how resources are obtained, housed and delivered to their ultimate location. Determining the efficiency and accessibility of potential distributors and suppliers is part of logistics management. It is a differentiating sector that can largely affect any country’s exports, thereby adding a significant competitive edge, with the underlying assumption of a robust logistics sector. The logistics industry comprises all supply chain activities, mainly transportation, inventory management, flow of information and customer service. It determines the success of not only the country’s supply chain but also influences it on a global scale. The effectiveness of logistics helps to determine the degree of ability that enterprises can keep up with demand. The Indian logistics sector is on a big growth tide. The warehousing, industrial, and logistics (WIL) sectors are projected to be crucial for attaining India's vision of being a $5 trillion economy by FY25. The warehouse and logistics industry has benefited the most from the COVID-19 epidemic, increasing its share from 2% in 2020 to 20% in 2021. Because of the growing shift from discretionary to essential internet buying during the COVID-19 epidemic, the e-commerce industry became more appealing and attractive.

The expansion of this industry is likely to be aided by a robust economy, government efforts to improve infrastructure, and a favourable business environment. Increasing consumerism and a huge consumer base are fostering the growth of retail and e-commerce in India. The Indian retail sector's market size is predicted to increase at a CAGR of 9% between 2019 and 2030, totalling more than $ 1.8 trillion. Large international funds and corporations have invested in warehousing developers and operators to grow their reach and geographical footprint, which are the sector's key differentiators. The Government of India has taken many initiatives to strengthen the sector's infrastructure, including the establishment of dedicated freight corridors and the extension of road and rail networks, to improve connectivity and decrease travel times. Another critical governmental intervention has been the sector's digital transformation, projects such as Digital India, Bharat Net, and the National Logistics Portal would aid in the industry's digitization. Furthermore, the government has announced the establishment of logistics parks and warehouses across the country to provide appropriate storage facilities for enterprises. The recently implemented National Logistics Policy intends to reduce India's logistics costs from the double digits of GDP to the single digits by 2030.

Pros and strengths

Well-defined organizational structure: The company has experienced management team empowered to take timely decision which makes the operations of the company’s business smoother and ensures efficiency in all aspects of its operations. Its senior management has pioneered its growth and fostered a culture of innovation, entrepreneurship and teamwork within its organization. A motivated and empowered employee base is key to its competitive advantage. It recruits talented employees, facilitating their integration into its organization culture and encouraging the development of their skills and expertise for becoming the next generation leaders. Its experience, knowledge and human resources will enable it to drive the business in a successful and profitable manner.

Longstanding and Diverse customer base: The company serves a large and diverse mix of end market customers across several industry sectors. It serves diverse sectors of the market viz. metals, fabrics, Fast Moving Consumer Goods (FMCG), auto components, chemicals and pharmaceuticals. It constantly tries to address customer’s needs by providing a tailor-made solution according to their requirements. Its existing customer relationships help it to get continuous business from its customers. This has helped it to maintain a long-term working relationship with its customers and improve its customer retention strategy.

Existing Supplier Relationship: The company’s existing supplier – fleet owner relationship protects the business with terms of supply and pricing of the services, the quality of services offered etc. The company, being a small size organization, rely on personal relationships with its suppliers & fleet owners. Further it also leverages the past experience of its management in maintaining effective supplier relationship ensuring uninterrupted supply chain management. As on October 30, 2023, the company has tie-ups with 4 fleet management company and have engaged 23 vehicles of different sizes and carrying capacity as per the requirement of customers. As on September 30, 2023, it is associated with over 4 number of fleet management company.

Risks and concerns

Depends on third party carriers and inland transportation companies to transport client’s cargo: The company currently does not own any vehicles and it therefore operate on an asset light model which provides it the flexibility to serve its customers. However, as a result of this strategy it relies on small and medium sized truck owners to meet the demand of its customers, for the movement of its client’s cargo. Consequently, its ability to provide services for its customers could be adversely impacted by availability and the financial condition of transportation companies, their decision to operate in a particular geography or at a particular scale and consequent shortages in available cargo capacity, changes in their policies and practices such as scheduling, pricing, payment terms and frequency of service or increases in the cost of fuel, taxes and labour, and other factors not within its control. Thus, it is heavily dependent on these transportation companies for its business. Material interruptions in service or stoppages in transportation, whether caused by strike, work stoppage, lock-out, slowdown or otherwise, could adversely impact its business, results of operations and financial condition.

Dependence on third-party vendors: The company is heavily dependent on third party vendors, small and medium sized truck owners. The company’s top 10 vendors contributed to Rs 106.35 lakh and Rs 59.30 lakh which represent 79.78 % and 80.78 % for total purchases for the six months period ended September 30, 2023 and for the financial year ended March 31, 2023. Its ability to service its customers depends on the availability and costs of vehicles used for transport. It uses trucks owned by third party transportation companies. It cannot assure that it will be able to obtain access to preferred third-party vendors for its vehicles 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.

Dependent on customers’ business performance: As a surface logistics services and solutions provider, the company is primarily engaged in providing services to other large logistics services provider, whose businesses cater to variety of industries and also to direct customers to serve their logistics and supply chain needs. It is therefore dependent on its customers’ business performance and developments in their markets and industries. If its customers’ business in a geographic market served by it is on decline, such decline will likely lead to a corresponding decrease in demand for its logistics and freight forwarding services. In addition, since it serves as a third-party logistics provider for its customers, adverse changes in their outsourcing decisions could materially and adversely affect its business, financial condition and results of operations. If its customers change their supply chain strategy and decide to reduce their outsourcing of logistics operations or if they decide to outsource their requirements to other competitors, it will have a direct negative impact on its integrated logistics business.

Outlook

Incorporated in 2022, GConnect Logitech and Supply Chain excel in intelligent transport solutions, serving as a trusted global logistics provider. The company's service offerings include bulk loads, Full Truck Loads (FTL) service, and dedicated loads. Bulk load service forms part of the core services provided by it. It provides bulk transportation services to its customers, in which the goods are loaded on to its vehicles at the premises of the customer and then delivered to the destination as specified by the customer. It provides these services for customers located in the state of Gujarat through a fleet of hired trucks. It also offers Full Truck Load Services (FTL Services) to its customers. FTL Services is logistic management of freight that requires the entire space on a fleet. This is a point-to-point movement which involves freight movement from customers’ designated location to their delivery point or destination. It also offers its customers dedicated load services, where a vehicle or fleet is assigned dedicatedly for a customer to provide them with multiple pickups and drops, local and home deliveries, reverse logistic, freight handling, and freight network designing etc. On the concern side, increased competition from unorganised third-party logistics or transport providers could force the company to lower its prices, thereby reducing its profit margins or market share. Besides, it extends credit to certain customers, with non-prepaid customers typically receiving credit terms of up to 60-100 days. It may not be able to recover all of the outstanding amounts in part or in full or some of the outstanding amounts at all. It has and may continue to have high levels of outstanding receivables.

The company is coming out with an IPO of 1401000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 40 per equity share to mobilize Rs 5.60 crore. On performance front, the company’s total revenue amounted to Rs 101.04 lakh for the financial year ended March 31, 2023 which is on account of revenue from operations. The company’s profit after tax for the financial year ended March 31, 2023 is Rs 10.86 lakh which is about 10.75% of the total revenue. Meanwhile, the company is planning to give technology as one of its top priorities so that it can offer customers cutting-edge technological solutions. It accordingly, proposes to create a technology stack of applications that encompass all supply chain processes including order management, warehouse management, transportation management, financial transactions such as billing and remittance, tracking and supply chain analytics, and that integrate with its customers’ systems.