Subscribe to VRL Logistics IPO, says KRChoksey

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VRL Logistics IPO note by KRChoksey

VRL is one of the leading pan-India surface logistics and parcel delivery service providers. It owns and operates the largest fleet of commercial vehicles in the private sector in India. It also provides general parcel and priority parcel delivery, courier and full-truckload services through widespread transportation network in 28 States and four Union Territories across India. Its operational infrastructure for the goods transportation business as of December 31, 2014 comprised 624 branches (comprising 604 leased branches and 20 owned branches) and 346 agencies across India, and of such 624 branches, 48 (41 leased branches and seven owned branches) served as strategic transhipment hubs for operations. Its differentiated service offerings, large integrated hub-and-spoke transportation network, extensive operational and maintenance infrastructure and in-house technology systems have enabled them to develop their brand across India.

VRL’s has invested significant manpower resources in the in-house technology systems which enables them to improve their service quality and consistency and increase operating efficiency. Its centralized information technology network and accounting system connects all branches, agencies, transhipment hubs and other offices enabling seamless real time monitoring of operations and consignments bookings and delivery status with stringent financial controls. It has in house facility which customized vehicle body designing and maintenance of vehicle which helps to increase the life of vehicles, spare parts and components.

VRL is one of the pan-India surface logistics services provider and also one of the leaders in parcel delivery services across India. They have differentiated service offerings, large integrated hub-and-spoke transportation network and extensive operational infrastructure, including advanced technology systems, which enables to establish a leadership position in the surface logistics industry with a strong brand across India. It is also an established brand name in the transportation industry in India with over 38 years of operations and their ability to compete effectively is dependent on providing consistent service quality and timely services at competitive prices, thereby strengthening their brand over the years.

Valuation & Outlook

VRL Logistics at upper band (Rs 205) post equity dilution will trade at EV/ EBITDA 9.0x which we is discounted to peers. Considering cheap valuations and strong foothold in Southern India, we recommend "Subscribe", says KRChoksey research report.