DRS Dilip Roadlines IPO opens today for subscription and we have compiled a set of 25 parameters to better understand the strength of the Telangana-based logistics player. The company operates under the brand name of Agarwal Packers & Movers. Here is a snapshot of Agarwal Packers & Movers IPO Review, please scroll down for the total score.
DRS Dilip Roadlines IPO Review: Business Basics
Are the company’s annual revenues more than INR50 crore?
Yes, DRS Dilip Roadlines had revenues of INR142.6 crore in FY2018.
Are the company’s annual profits after tax in excess of INR5 crore?
No, DRS Dilip Roadlines’ net earnings stood at INR3.45 crore in FY2018.
Has the company got a strong and recognizable brand?
Yes, the company has a well-known brand in Agarwal Packers & Movers, although the brand power is somewhat diluted as several unorganized and small players continue to use similar names. The brand ‘Agarwal Packers and Movers’ is not owned by DRS Dilip Roadlines and is also used by the relatives of promoters. This includes brothers Ramesh Agarwal and Rajender Agarwal which operate a bigger group under Agarwal Packers and Mover Ltd.
Is there a strong moat in place in the form of entry barriers, market reach etc?
No, DRS Dilip Roadlines operates in a low-margin business. Although it has a fleet-size of 327 trucks, there is always risk of new entrants which can start operations with a much smaller fleet.
Is the company free of big client risks in terms of impact on revenues?
Yes. The company generates 35% of revenues from household services. The biggest chunk of 62% comes from commercial services but the prospectus has not detailed its biggest customers.
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Do exports contribute a sizeable chunk to annual revenues, giving the company an edge over its competitors?
Is there a strong connect between the company and retail consumers?
Yes. As mentioned above, the company gets 35% of its revenues from retail customers.
Agarwal Packers & Movers IPO Review: Management analysis
Is the company’s top management experienced enough to lead operations through difficult times?
Yes, DRS Dilip Roadlines has well-experienced management which has steered business operations through a variety of operating conditions so far.
Are the management members/promoters paying themselves fairly without jeopardizing shareholders’ interests?
Yes, we didn’t find excessive remuneration for management.
Do the promoters have sizeable equity left in the company after the IPO?
Yes, the promoters and promoter group will own 72.11% of post-Issue equity share capital.
Is the current management trustworthy? Are there instances of putting shareholders’ interests at risk for personal gains?
Yes, the disclosures in the prospectus do not hint otherwise.
Are the litigations or criminal proceedings against the company insignificant in nature and doesn’t involve big numbers?
Yes. There is no litigation against the company. Given the size and operations of the company, there are some court cases it has filed and some against its group companies. Nevertheless, these cases don’t involve large amounts relative to the company.
Are the company management’s shares free from any pledge with banks or financial institutions?
Yes. As on the date of the prospectus, no promoter shares are pledged.
Are there external investors such as private equity or venture capital firms on board?
No, the company is essentially owned by the promoters and promoter group.
Agarwal Packers and Movers IPO Review: Financial performance
Have the company revenues grown at a CAGR of at least 10% in the last three years?
No. Revenues have actually declined in the last three years.
Have the company’s net profits grown at a CAGR of at least 25% in the last three years?
Has the Average Return on Equity (ROE) in the last three years been more than 15%?
Yes. The company’s average Return On Net Worth (RONW) in the last three years has been 19.01%.
Has the company maintained positive operating cashflows in the last three years?
Has the company witnessed a declining trend in debt/equity (D/E) in the last three years?
Are the company’s working capital requirements less than 20% of its annual sales?
Yes. The company stated negative working capital for FY2018.
Is the Debt/Equity ratio less than 1?
No, the company’s D/E ratio as of 31 March 2018 stood at 4.73.
DRS Dilip Roadlines IPO Review: IPO objectives and valuations
Are the IPO objectives in line with the broad corporate guidelines? Debt reduction is fine, funding fancy furniture with IPO funds is not.
Yes, the funds will be primarily used towards repayment of loans and setting up additional Warehouse.
Is the company offering some discount on Price/Earnings (P/E) ratio compared to its peers?
No. The company has stated there is no peer comparable to its business model, size and financials. However, larger players like Allcargo Logistics and Gateway Distriparks are available at lower PE ratio.
Is the company offering some discount on Price/Book Value (P/BV) ratio compared to its peers?
No, P/BV is on the higher side when compared with its competitors like Allcargo Logistics and Gateway Distriparks.
Are the contingent liabilities less than 10% of latest annual revenues?
No. Contingent liabilities including service tax and income tax stood at INR20.9 crore in FY2018, translating to 14.6% of annual revenues.
Disclaimer – The objective behind DRS Dilip Roadlines IPO Analysis is to offer an unbiased view of the company’s operations, offer details, strengths, weaknesses, financial performance and valuation. The IPO rating framework helps investors in taking a call if Agarwal Packers & Movers IPO is worth investing or not. Nevertheless, this is not an IPO recommendation to subscribe or avoid and the decision to invest should be based on individual investor’s risk profile.