Paradeep Parivahan Ltd. IPO: Key Details

Paradeep Parivahan

• Paradeep Parivahan is coming out with an initial public offering (IPO) of 45,78,000 equity shares in a price band Rs 93-98 per equity share.
• The issue will open on March 17, 2025 and will close on March 19, 2025.
• The shares will be listed on SME Platform of BSE.
• The face value of the share is Rs 10 and is priced 9.30 times of its face value on the lower side and 9.80 times on the higher side.
• Book running lead manager to the issue is Share India Capital Services.
• Compliance Officer for the issue is Alka Bothra. 

Profile of the company

Paradeep Parivahan is located within Paradip Port and specializes primarily in logistics. It has established itself as excavators, cargo handlers, service providers, and importers and exporters of bulk cargo within ports. It boasts a significant fleet of its own equipment, including Volvo V loaders introduced as early as 1989 in Paradip. At that time, the logistics sector in the city was sluggish due to limited capacity. However, by 2000, the capacity had increased tenfold. It introduced advanced tools and mechanisms in Paradip Port to enhance productivity significantly. This enhancement in productivity directly translates into cost savings for importers and exporters, as it streamlines operations and reduces overheads through its specialized equipment and expertise.

As its operations expanded, it seized opportunities such as partnering with IFFCO, a major player in the market, for heavy machinery services and raw material processing within their plant. Its vision extends beyond mere business operations; it aspires to become a leading entity known for its dedication to addressing domestic energy and industrial raw material shortages. It strives to achieve this through the application of advanced technologies and safe, profitable solutions. It is continually enhancing the company's technological standards by incorporating high-end Heavy Earth Moving Equipment, ensuring it meets the needs of numerous Indian clients engaged in long-term contracts through its Stevedoring and Clearing Services Arm. 

Proceed is being used for:

• Meeting working capital requirements
• General corporate purposes

Industry Overview 

Logistics Industry is crucial to both enterprises and the economy. In today's interconnected world, shipping and logistics are at the heart of the economy, acting as vital gateways for international trade and business. A nation with a strong and effective logistics sector offers an efficient forward and reverse flow of goods and services, which eventually translates to fast-paced growth. The Indian logistics industry includes all inbound and outbound components of the manufacturing and service supply chains. Transport and logistics refer to the procedures involved in the manufacture, storage, inventory, delivery, and distribution of specific commodities or services. The logistics sector in India was predicted to account for 14.4% of GDP in 2022. It is the primary source of income for more than 22 million people. The overall logistics sector in India includes 37 export promotion councils, 40 Participating Government Agencies (PGAs), 20 government agencies, 10,000 goods, and 500 certifications. Between the financial years 2015-16 to 2019-20, India invested approximately $10.2 trillion in the development of infrastructure. The freight movement in India is significantly prejudiced towards road transportation, which transports 66% of goods (in ton-kilometres). This is followed by rail (31%), shipping (3%), and air (1%).

The uneven distribution of modes of transport has resulted in low operational efficiency, causing the GOI to launch a number of logistics-specific programmes, including GatiShakti and the National Logistics Policy. These initiatives seek to improve India's logistics sector by making it more environmentally friendly, agile, transparent, and integrated. The logistics management regimen is capable of overcoming infrastructural disadvantages in the short term while providing cutting-edge competitiveness in the long term. Physical transporters that execute their business processes manually and offline can use various technologies such as AI, Big data, and IoT to improve their service and compete in an international market by delivering real-time and end-to-end connections.

To realise the full potential of the sector, stakeholders such as service providers, customers, and the government of India must work and complement one another. The sector is experiencing significant infrastructural expansion, a stronger emphasis on digitalization, and a larger emphasis on sustainable logistics. The launch of numerous start-ups, as well as the Government's digital initiatives such as 'Make in India,' Unified Logistics Platform (ULIP), and others, are assisting in bringing greater transparency to the logistics sector. The digitization of work processes to enable paperless processing of paperwork and clearances, as well as improved shipment tracking, aids in increasing the pace of goods movement and lowering logistics costs.

Pros and strengths

Robust fleet and infrastructure: The company boasts a well-maintained and efficient fleet of trucks, contributing to reliable and timely delivery services. Strong logistics infrastructure facilitates smooth operations and enables the handling of large cargo volumes

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, cargo handling, port operations, intra-port 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 various industry segments.

Strategic partnerships: The company is doing strategic collaborations with third-party transportation service providers, expanding service capabilities and ensuring flexibility in meeting customer demands. 

Risks and concerns

Maximum revenue comes from limited customers: The company’s top 10 customers contributed 98.58% and 97.09% of its revenues from operations for the period ended September 30, 2024 and for FY ended March 31, 2024; respectively. Such concentration of its business on few clients may have an adverse effect on its results of operations and result in a significant reduction in the revenue from operations which could also adversely affect its business if it does not achieve its expected margins or suffer losses, from such clients. It cannot assure that it shall generate the same quantum of business, or any business at all, and the loss of business from one or more of them may adversely affect its revenues and results of operations.

Substantial working capital requirements: The company operates in the infrastructure sector, and a significant portion of its current assets does not qualify for bank financing. To secure projects, the company must furnish performance bank guarantees, necessitating the provision of a cash margin. Additionally, clients retain a percentage of the contract value as Retention Money upon project completion. There is high inventory and other current assets days in the company. All these factors contribute to a substantial need for working capital. Any delays in securing the necessary funds could negatively affect its financial performance.

Stiff competition: The company faces competition from competitors operating both within its domestic market and internationally. The effectiveness of its competitive strategy will directly influence its ability to maintain and grow its market share, revenue, and overall business performance. If it fails to compete effectively, whether due to challenges in pricing, service quality, innovation, or other competitive factors. It could have a negative impact on its business operations and financial results. Therefore, navigating this competitive landscape effectively is critical to its long-term success and sustainability. 

Outlook

Paradeep Parivahan is a port service provider specialising in logistics, ship husbandry, and stevedoring. They are located in the Paradip Port, Odisha. With over two decades in the industry, the company has deep knowledge of port operations and cargo handling. The company is operating in major ports and industrial regions across eastern India. On the concern side, the company’s top 10 customers contribute majority of its revenues from operations for the period ended March 31, 2024. Any loss of business from one or more of them may adversely affect its revenues and profitability. Moreover, the company’s business demands substantial working capital, and any delays in securing the necessary funds could negatively affect its financial performance.

The company is coming out with a maiden IPO of 45,78,000 equity shares of Rs 10 each. The issue has been offered in a price band of Rs 93-98 per equity share. The aggregate size of the offer is around Rs 42.58 crore to Rs 44.86 crore based on lower and upper price band respectively. On performance front, the company’s total income for the period ended March 31, 2024, stood at Rs 21,162.03 lakh whereas in Financial Year 2022-23 it stood at Rs 20,280.84 lakh representing an increase of 4.34%. Moreover, the company’s restated profit after tax increased significantly by Rs 846.62 lakh from Rs 655.53 lakh for the FY23 to Rs 1,502.16 lakh in FY24.

The company’s team on the ground has always been sensitized that client interest comes first which eventually leads to a higher & positive output. The growth of the company starts with the idea of its promoter namely Khalid Khan, who has an industry experience of around 23 years. His knowledge and guidance have been instrumental for the growth and development of the company. Further, his knowledge in functions like operations, sales & marketing in the logistics and transportation industry has helped it in establishing and expanding its business. Under the leadership of its promoter and the support of its employees it has evolved itself into a company which is providing freight & forwarding solutions to the customer along with project and heavy-lift logistics solutions involve movements of odd and oversized cargo.