Will Snowman Logistics give you 30% returns on listing day? : moneycontrol

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Snowman Logistics shares will list on Friday. It has fixed the issue price at higher end of the price band of Rs 44-47 apiece as majority of the bids were at the higher band.

After looking at great response to the issue, which got oversubscribed 60 times supported by QIBs, HNIs as well as retail, expectations for listing price are very high now.

According to sources, the grey market premium is around Rs 15-23 over the issue price of Rs 47, but experts' range for listing price is 5-45 percent.

Experts that moneycontrol.com spoke to are very bullish on the stock in the long term as it is the only listed company in cold chain industry having excellent fundamentals, but their debut price range for the stock is very high.

Prabhat Anantharaman of Nirmal Bang is having minimum listing premium expectations. He sees 5-10 percent listing gains on the stock on Friday due to strong response to the issue, while Astha Jain of Hem Securities expects the stock to list at 10-20 percent premium.

Two other experts are extremely optimistic about the opening price. Manish Bhatt of Prabhudas Lilladher sees opening premium of Rs 59-70, while SP Tulsian of sptulsian.com expects the stock to begin with Rs 70 apiece.

Strategy on debut day

According to Astha Jain, one can still buy the stock at 10 percent premium if one wants to. She advises investors, who got allotment in IPO or will buy at 10 percent premium on listing day, to hold the stock for medium to long term.

She sees 30-40 percent returns over the next one year as she expects strong results from the company.

Anantharaman too said the fundamentals are excellent and as the proxy to growth in Indian economy, the company has huge potential to grow strongly going ahead.

Meanwhile, Manish Bhatt advises buying the stock below Rs 59 or below the equilibrium price arrived in pre-opening session. He expects double the stock price in next one year.

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About issue and company

The 4.2 crore publis issue of Snowman, an integrated temperature-controlled logistics services provider, was opened for subscription on August 26-28.

The largest cold chain solutions provider raised Rs 197 crore through the issue, which will be used for setting up new temperature controlled and ambient warehouses, and long term working capital.

The company, which operates 23 temperature-controlled warehouses across 14 locations in India (including Kolkata, Mumbai, Delhi, Chennai and Bengaluru), proposes to set up another such 6 and 2 ambient warehouses at 6 cities at the cost of around Rs 140 crore.

It has a pan-India presence with warehousing capacity of 58,543 pallets and 3,000 ambient pallets, which is expected to increase to 85,000 pellets in current financial year (FY15) and further to 1 lakh pellets by FY16, said the company in its prospectus.

Brokerages believe its big expansion plan (of raising capacity to 1 lakh pallets by next financial year) is expected to boost the operating performance of the company over the next two years.

Promoter and largest shareholder Gateway Distriparks (GDL) reduced its shareholding to 40.4 percent from 54.04 percent. Other major shareholders include Mitsubishi Corporation, Mitsubishi Logistics Corporation, International Finance Corporation and Norwest Venture Partners VII-A Mauritius.

Revenue and profit growth of the company in last four financial years was very strong, up 40-50 percent on compounded annual growth rate (CAGR) basis. Total income from operations and reported profit after tax in FY14 grew by 35 percent to Rs 153.41 crore and 18 percent to Rs 22.48 crore while operating profit margin expanded to 24.7 percent from 22.4 percent year-on-year.