Zinka Logistics Solutions IPO: An analysis of the offer

by | Nov 12, 2024 | 0 comments

Zinka Logistics Solutions IPO, opening for subscription between 13 and 18 November, one of the much-awaited offerings of the month, intends to raise funds for the ambitious growth plan. These investors who wish to invest in the most significant digital logistics platform for truck operators need to consider the following ten points:

Top 10 Solutions to Keep in Mind

1) IPO Dates and Keypoints

Zinka Logistics Solutions’ IPO will open for subscription between November 13 to November 18. Institutional investors will get access to the anchor book a day before the IPO opens for a public subscription that is, on 12th November.

This anchor book would help create initial interest in the IPO, thereby stabilizing the offering before putting it out to the public.

2) Price Band and Investment Range

The price at which the IPO is to be offered floats within a range of Rs 259-273 per share. Considering the offer, interested investors should know that the minimum investment is based on lot size. Thus, if for the IPO of Zinka, one lot of IPO consists of 54 shares, the latter will amount to a minimum investment of Rs 14,742 for the upper price band. Retail investors can invest in a total of 13 lots, meaning they can invest up to Rs 1,91,646 in this IPO within the Rs 2 lakh limit that has been placed on all such investments.

3) IPO Details and Size and Structure

The company has set its target at Rs 1,114.72 crore. The amount was planned to be raised as a fresh issue worth Rs 550 crore, and an offer-for-sale (OFS) would raise the remaining Rs 564.72 crore. The OFS will include current shareholders, prominent investors and promoters selling shares. They include the founders, Rajesh Kumar Naidu Yabaji and Chanakya Hridaya Ramasubraman, Balasubramaniam, and some key investors like Quickroutes International, Accel India, International Finance Corporation, et cetera. Zinka has given 26,000 shares to employees at a discount by offering stock at a lower price of Rs 25 per share when the final issue price is at the time.

4) IPO objectives

The amount collected would nearly be used for Zinka’s growth initiative. Rs 200 crores would be for marketing and sales expansion and Rs 75 crores for product development on its tech platform to make it feature-rich and rich in user experience. An additional sum of Rs 140 crore has been kept available to build up the capital base of Blackbuck Finserve, the NBFC subsidiary of Zinka. The rest of the amount is being kept for general corporate purposes such as cover for operational and administrative cost.

5) Lot Size and Investment Distribution

The lot size is 54, enabling the investors to purchase shares in lots. The minimum investment permissible in this IPO is Rs 14,742, while the maximum will be restricted to Rs 1,91,646. Zinka has categorized IPO shares into three segments- 75% of shares are being allotted to QIBs, while 15% of the IPO shares are being offered to non-institutional buyers. 10% are being offered to the retail investors.

6) Company Background

BlackBuck, otherwise known as Zinka Logistics Solutions, has India’s largest digital trucking operator platform and boasts of having taken a significant market share with a 27.52 per cent share of truck operators. The BlackBuck app helps trucking operators manage payments of tolls and fuel, telematics for tracking fleet operations, and financing options. The integration of partnerships with FASTag providers and major oil marketing companies empowers the platform to ensure a safe and efficient experience at the tolling and fueling station.

Notably, as of now, there aren’t any directly listed competitors in the stock market that precisely replicate BlackBuck’s business model. Therefore, it enjoys a niche and potentially first-mover advantage in its space.

7) Financial Summary

Zinka has had a great turnaround in terms of financial performance. It has reduced the net loss to Rs 167 crore for FY24 as against Rs 236.8 crore for the previous year. EBIDTA’s loss too narrowed to Rs 158.4 crore from Rs 232.5 crore. Revenue upled at a mammoth 69% year-on-year at Rs 297 crore, spurred by the growth in commission income, subscription fees, and service charges from an expanding active truck operator base.

During FY25 Q1, Zinka registered a net profit of Rs 32.4 crore compared with a loss of Rs 33.3 crore in the same quarter last year on account of exceptional gains. GTV in FY24 saw a growth of 42.66% at Rs 17,396.2 crore, while in Q1 FY25, GTV growth was 37.4%.

8) Shareholding Pattern

The shareholding of the company is distributed across promoters, who collectively hold 34.32% of Zinka and public shareholders, who hold 65.68%. The major institutional investors include Accel, International Finance Corporation, Sands Capital, etc. This major institutional help is an indicator of huge confidence reposed in the business model and growth prospects of the firm.

9) Risks and Challenges

Despite all its positive growth, the Zinka face many challenges in the following areas:

  • Cash Flow:

The company witnessed negative operating cash flows in the preceding periods.

  • Dependency on Partners:

For many of the products, Zinka depends on third parties such as FASTags and funding for vehicles. Any disruption in these partnerships could affect business.

  • Revenue Concentration:

Most of the revenues of Zinka accrue from its payments and telematics services, which account for 94.53% of FY24 revenues. This could be a risky business if demand ebbs and flows in these segments.

  • Customer Retention:

Truck operators are the lifeline to attract and retain in the growth of the platform; in case of a lack of engagement, will hurt business performance.

  • Industry Sensitivity:

Since Zinka is based in the road transport industry, so its business becomes sensitive to fluctuations in freight volumes and fuel prices.

  • High Attrition:

Zinka has seen significant attrition rates; the attrition rate in Q1FY25 stood at 37.32%, while in FY24, it was sustained at 41.08%, which may affect operational efficiency.

10) IPO Listing and Grey Market Premium

IPO allotment will be finalized by 19 November, while the shares are expected in demat accounts on Nov 21. Trading on BSE and NSE will start from 22 Nov. GMP suggests a 9-10% premium over the upper price band, which has turned optimistic for early investors as well.
Zinka Logistics Solutions presents a unique investment opportunity since the company pioneers digital transformation in India’s logistics industry. The company’s robust platform, established partnerships, and significant market share amongst truck operators bode well for long-term growth. Nevertheless, even though the firm has significantly managed to reduce losses and increase revenues, caution should be taken with the strong dependency on specific revenue streams and dependence on partnerships along with susceptibility to the inherent volatility of transportation sectors.

In most strategic expansions on product offerings, capital, and market footprint, Zinka deserves commendation. The institutional investments and a solid business model in a relatively uncompetitive space offer comforting growth prospects.

The IPO is for investors, an opportunity that will have them entering a nascent digital logistics sector. However, while making investment decisions, investors must rightly weigh the growth potential of Zinka against the risks-thereby dependence on partners and cash flow sensitivity being muted. As Zinka Logistics Solutions enjoys a promising market position and carries the positive grey market premium attached to it, this IPO may prove an attractive addition to diversified portfolios with an aim at gaining exposure to India’s evolving logistics and digital infrastructure.

One should always do due diligence, analyze the risks, and assess the overall market trends before investing in an IPO.

0 Comments

Submit a Comment

Your email address will not be published. Required fields are marked *

seven − 4 =

Related Articles