In ancient times, world economies operated within closed boundaries, secluded from the rest of the world. But as time progressed, various countries realized that faster growth can be achieved by opening its boundaries to the world for trade. The idea was that each country will produce what it has expertise in, and import/trade rest of goods from other countries, thus making efficient utilization of resources. On similar lines, India, under the Finance Minister Manmohan Singh, liberalized its economy in the year 1991. India was now open for the world and foreign investors were welcomed. With increasing trades across countries grew the demand for transport and logistics. Seven Islands Shipping Limited, a company present in this domain, is coming up with its IPO. So let us discuss in detail the company’s business prospects.
About the company
As of December 2020, Seven Islands Shipping Limited was the third largest seaborne logistics company in India by deadweight tonnage. The company holds a significant market share in Indian time charters of crude oil imports. All the company’s 20 vessels are registered and flagged in India. The company is present in liquid products trade where liquid products like white oils, black oils, and liquid chemicals are transported. The company began its operations back in 2003 and had 20 liquid cargo vessels with a total deadweight capacity of 1105682 MT. Over the past 18 years, the company has acquired 40 vessels and sold 20 vessels.
Also check: IPO GMP
Seven Islands Shipping Limited IPO Details
Following are the details of the IPO:
- The company has not yet come up with the IPO subscription dates.
- The company has not yet come up with the IPO price issue range.
Objectives of the IPO
Following are the objectives of the company to come up with an IPO:
- The company will receive gross proceeds of ₹400 crore from the IPO’s fresh issue part.
- The company will use a part of the proceeds to acquire one VLCC vessel and one MR vessel in the secondary market.
- The company will also use a part of the proceeds for general corporate purposes.
- Simultaneously, the company believes that by listing its equity shares on the exchanges, the company will be able to enhance its corporate image and brand name.
Following are the strengths in the company’s business:
- According to its prospectus, the company has a proven ability to acquire vessels at optimal price and deploy them.
- The company has maintained and will continue to maintain longstanding relationships with leading Indian oil and gas public sector undertakings. For FY20, the company generated 89% of its revenues from PSUs.
- The company claims to have a quality-in-house management of operations and cost competitive vessel management.
- The company has a sizeable and diverse India flagged and owned operating fleet.
Following are the key risks in the company’s business:
- The Covid-19 pandemic closed the world for trade. In instances like these, the company’s business could be severely affected.
- There are certain legal proceedings against the company’s promoters. Any adverse decision in this regards could disrupt the company’s business.
- The liquid seaborne logistics industry is volatile and sensitive to changes in general economic conditions.
- The company derives a significant portion of their revenues from PSUs, which poses a concentration risk.
- Fluctuations in global seaborne transport may cause freight rates to shift unpredictably.
- Defects in vessels acquired in the secondary market may not be apparent prior to purchase.
- The company’s business is capital expenditure intensive as a lot of capital is required to acquire vessels.
Fundamentals of the company
Following are the fundamentals of the company:
- The company’s revenue from operations grew from ₹470 crores in FY19 to ₹742 crores for the period ended December 2020.
- The company’s profit after tax increased from ₹38.8 crores in FY19 to ₹119 crores for the period ended December 2020.
- The company’s earnings per share stood at ₹20.88 as of December 2020.
- The company’s total borrowings stood at ₹812 crore for the period ended December 2020.
- The company’s net asset value per share stood at ₹160.74 for the period ended December 2020.
The company’s peer group includes the Shipping Corporation of India, the Greta Eastern Shipping Company Limited, VRL Logistics Limited, and Transport Corporation of India Limited, Blue Dart Express Limited, and TCI Express Limited. Seven Islands Shipping Company Limited’s return on average net worth stands at 10.6%, which is higher than most of its peers.
Following were the details of the company’s IPO. It plays a major role in global trade. But investors should make a decision regarding investing in the company’s IPO only after it comes up with the IPO price range and valuations. Investors should also look at the current market conditions at the time of the IPO and do their own due diligence before putting in their hard-earned money!