IPO

Western Carriers (India) provides end-to-end, customized, multi-modal logistics solutions across the supply chain integrating road, railway, water and air logistics along with a customized suite of value-added services. The rail-focused logistics business of Rajendra Sethia, which commenced in 1972, was acquired in 2012 to evolve into the largest private, multi-modal, rail focused, 4PL asset-light logistics company in India in terms of container volumes handled and operated by private players in FY2023. The domestic and exim market shares, based upon container volumes handled, was 6% and 2%, respectively.

Key services are 3- and 4-PL supply chain and value-added services (Vas), warehousing and stock management, CHA and stevedoring, project logistics, rail transport, road transport as well as courier, air, water freight. End-to-end services solutions are offered at every stage in the logistics value chain. These include multi-modal logistics services through road, railway, ocean, coastal and river and air logistics services along with Vas such as warehousing and storage, labeling, product packaging, cargo handling, customs clearance, stevedoring, palletizing, fumigation, pre-shipment inspection and containerization.

Rail and road movements are combined through an asset-light business model. There are long-standing relationships with 3P service providers of vehicles, warehouses, railway flats, rakes and wagons, giving control over capacity and fleet, and the scheduling, routing, storing, and delivery of goods. Expansion of operational capabilities and network infrastructure will continue to assist in improving quality metrics and overall performance as well as allowing a variety of flexible, scalable solutions and services in response to customers' complex requirements. In short, purchasing and acquisition of equipment and capabilities will be to assist it in meeting specific customer requirements that cannot be adequately met through arrangements with 3P service providers.

Owned logistics infrastructure comprised commercial vehicles (CVs), heavy equipment, and shipping containers in addition to hired equipment and leased facilities. There were over 400 owned GPS-enabled heavy CVs, over 100 pieces of owned heavy equipment including 32 reach stackers and over 500 owned shipping containers.

Through arrangements with network partners and 3P service providers has the capability to offer jumbo rakes to transport 1,500-2,000 tons of cargo in one-go and mini rakes of 20 wagons. These offerings, combined with its fleet of leased and owned CVs enable seamless bridge road and rail movements.

Clients are in sectors such as metals, fast-moving consumer goods, pharmaceuticals, chemicals, engineering, oil and gas, and retail. There was a diverse base of 1,647 customers in FY 2024.

The clients includesTata Steel, Hindalco Industries, Jindal Stainless, JSW Steel Coated Products, Bharat Aluminium Company,and Vedanta, Hindustan Unilever, Hindustan Coca Cola Beverages, Tata Consumer Products, Gujarat Tea Processors and Packers (Wagh Bakri), CG Foods India, Cipla, Materials Chemicals and Performance Intermediaries (formerly, MCC PTA India Corp., a subsidiary of Mitsubishi Chemical Corporation), Haldia Petrochemicals and Gujarat Heavy Chemicals, Oil and Gas Brahmaputra Cracker and Polymer(BCPL), Sheela Foam (Sleepwell) and DHL Logistics.

Contracts with the top 20 customers, based on their contribution to revenue from operations in FY2024, typically have a tenure ranging from 11 months to three years.

One of the largest platinum associates was also the largest associate partner of an Indian rail container logistics provider, contributing a substantial 4% of the exim volume and6% of the domestic railway TEUs of the rail container logistics provider's total volume in FY2024.

As many as 16 warehouses, located across 12 states in India and spread over 714,171.28 square feet (66,348.68 square metres) were taken on lease as of beginning of September 2024. Further, over 55 major rake handling points, which are spread across various public ports in India, were being operated.

The Issue and objects

The offer consists of fresh issueof equity shares aggregating to Rs 400 crore and an offer for sale (OFS) of 54,00,000 equity shares of Rs 5 face value. Rajendra Sethia, the promoter of the company, is selling his entire stake.

Of the net proceeds from fresh issue, about Rs 163.50 crore will be used for prepayment or scheduled re-payment of a portion of certain outstanding borrowings and Rs 151.71 crore for funding of capital expenditure requirements such as purchase of CVs, 40-feet specialized containers; 20-feet normal shipping containers, and reach stackers.

The outstanding consolidated borrowings stood at Rs 352.731 crore as on 31 July 2024.

Strengths

Experience in delivering customized, end-to-end services and executing complex and customized projects

Comprehensive and integrated multi-modal, end-to-end logistics solutions. Moreover, the rail-focused multi-modal logistics business will enable capitalizing on the growth of the container rail multimodal (rail-and-road) market.

An extensive range of inbound and outbound logistics services

About 80% of the revenue in FY 2024 originated from customers who had been transacting with for over three years. The customer retention rate of the top 10 customers was 100%.

Asset-light and scalable business model

Weakness

Operating in a highly competitive and fragmented industry

Most of the revenue comes from a select, few industries. Metals accounted for 54.45%, 50.02% and 53.26% of revenue in FY2022, FY2023 and FY2024, respectively. FMCG, pharma and chemicals, O&G, utilities and others (building materials, textile, power, electric equipment, and retail) accounted for 19.46%, 7.04%, 4.76% and 15.48%, respectively, of the revenue in FY2024.

Largest and top 5, 10, and 20 customers accounted for 16.47% and 57.07%, 71.97%, and 80.78% of FY2024 revenue respectively, indicating significant customer concentration.

Any disruption or deficiencies in the logistics infrastructure, including those affecting freight and container traffic could impair the operations and adversely affect its business and results of operations.

Trade receivables were at Rs 525.487 crore end March 2014, translating into 31.17% of the revenue from operations in FY 2024.

Dependent on network partners, 3P service providers and vendors and suppliers in certain operations.

Change in terms of service or loss of relationship from government-controlled Indian rail container logistics provider, with whom there is a long-standing relationship, will impact the operations and profitability.

Trading in the equity shares of Western Conglomerate, in which CMD Rajendra Sethia and CEO Kanishka Sethi were directors, was suspended on Calcutta Stock Exchange during their directorship term.

Kanishka Sethia, one of the promoters, is involved in a criminal proceeding, with an FIR filed against him and others under Sections 420, 406 and 120B of the Indian Penal Code, 1860.

Narendra Sethia, one of the brothers of Rajendra Sethia, is deemed to be a part of the promoter Group and has not provided any information or confirmations, required under the SEBI ICDR Regulations, about himself or any of his related entities. An adjudication order has been issued, imposing a penalty, including some officers including Kanishka Sethia.

Received notices issued by the Ministry of Corporate Affairs, Government of India, for not appointing a cost auditor. Could be subjected to penalties or other regulatory actions.

Valuation

Consolidated sales (restated) were up by 3% to Rs 1685.77 crore in FY 2024 over FY 2023. The OPM expanded by 130 bps to 8.7%. Thus, the growth of OPstood higher at 20% to Rs 146.06 crore. Eventually, net profit increased 12% to Rs 80.35 crore, hit largely by higher interest and depreciation costs.

Thus, the FY2024 EPS on expanded equity was Rs 7.9. And the upper price band discounts the FY2024 EPS by about 21.8 times. The P/BV stands at 2.2 times and EV/sales stand at 1.2 times.

Bigger logistics players in terms of sales revenue such as TCI express, Blue Dart Express and VRL Logistics quote at a P/E of 33.2 times, 66.9 times and 61.4 times, respectively, of their FY2024 consolidated EPS. The two listed CTO logistics companies, i.e. Container Corporation (Concor) and Gateway Distriparks (GDL), were quoting at a P/E of 45.4 times and 18.9 times of its FY2024 EPS.

EV/sales are 1.2 times as compared to 0.7, 2.2, 3.8, 3.5, 3.8, 1.2, 3.5 and 6.2 times for Mahindra Logistics, VRL Logistics, Blue Dart Express, TCI Express, Delhivery, TVS Supplychain, GDL and Concor, respectively.

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