Asset-light business model which allows flexibility and scalability in operations and high capital efficiency: Mahindra Logistics operates business primarily on basis of an 'asset-light' business mode, which allows variety of flexible, scalable, solutions and services based on client’s requirements and handle complexities that are unique to the Indian logistics industry.
Technology is integral to company business and operations.Customized, technology driven logistics solutions: Its technology systems have enabled the company to control and command operations, undertake real-time tracking of vehicles, provide end-to-end visibility of operations and make timely corrective interventions.
Integrated, end-to-end logistics services and solutions: The Company’s integrated, end-to-end logistics services focus on creating solutions that address the requirements of clients across its SCM and PTS businesses. Entities within the Mahindra Group together constituted largest client group and contributed 53.96 percent, 63.24 percent and 70.14 percent to total revenue from operations in FY17, FY16 and FY15, respectively.
Presence across diverse industry verticals with long-standing client relationships: The company provides SCM services to clients across various industry sectors. It’s large client-base of over 300 clients across various industry verticals has enabled them to cross-leverage the know-how and best practices that the company have acquired from its experience with a set of clients across a wider spectrum of clients. Over the years, the company has expanded relationship by providing services in new geographies, and by adding services such as in-factory logistics. Between Fiscals 2017 and 2015, the Client Retention Rate for company’s top 25 non-Mahindra Group clients in SCM business remained at 92.0%.
Depends on a limited number of clients: The Company depends on a limited number of clients, which exposes to high risk of client concentration.
Highly fragmented and competitive industry: The Company operates in a highly fragmented and competitive industry and increased competition may lead to a reduction in its revenues, reduced profit margins or a loss of market share.
Dependency on parent company: The business and operations of the company depend significantly on its parent and promoter, Mahindra & Mahindra and the other Mahindra Group entities. Business is highly dependent on technology: The Company’s business is highly dependent on technology and any disruption or failure of technology systems may affect its operations.
Considering at an upper price band of Rs.429 , the stock is trading at P/E of 66.25 multiple on EPS of Rs. 6.48 and at a lower price band of Rs. 425 P/E multiple is 65.63. As the company is not making fresh issue of capital, networth of the company would have no impact and at an upper price band of Rs.429, Book value and P/B ratio is of Rs.49.54 and 8.66.
Mahindra Logistics, which is India’s largest 3PL solutions provider, follows an ‘asset-light’ business model, which has enabled the company to gain scalability of services as well as have flexibility to develop and offer customized logistics solutions across a diverse set of industries. The company also plans to focus on increasing business from Non-Mahindra Group clients, leveraging the changing industry with the implementation of GST regime with greater focus on warehousing and diversifying into other industry verticals. However, the issue looks little pricey. An investor with long term investment horizon may opt the issue.
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