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Continental Warehousing

Continental Warehousing files for IPO; Abraaj to exit, Warburg to trim stake

01 October, 2016

Mumbai logistics company Continental Warehousing Corporation (Nhava Sheva) Ltd has filed its draft red herring prospectus (DRHP) with capital markets regulator SEBI to float its initial public offering (IPO).

The proposed issue includes a fresh issue to raise capital besides an offer for sale by two of its three existing private equity investors.

VCCircle had reported on 19 July that the firm has hired bankers for its IPO and one of its PE investor is looking to part-exit.

This adds up to around a dozen odd firms that are waiting in the queue for SEBI’s approval to go public. This week, around half dozen firms filed their DRHPs. Additionally, around 16 firms are sitting with a green signal to float their IPO.

In the logistics sector, Snowman Logistics and VRS Logistics floated their IPOs in the last two years. Another industry peer Seaways Shipping & Logistics is also in the queue for its IPO.

Here’s a snapshot of the IPO

Issue: Fresh issue to raise Rs 419 crore and an offer for sale of 10 million shares by Warburg Pincus and 3.67 million shares by Abraaj Capital.

Bankers: Edelweiss Capital, Axis Capital, Ambit, ICICI Securities

Use of proceeds

Over half of the money raised through fresh issue will be used to retire debt (Rs 210 crore) with rest intended to be used for purchasing equipment (Rs 63.5 crore) and construction of warehouses at Ahmedabad and Panipat (Rs 63.9 crore).

Company

Continental Warehousing is an integrated multimodal logistics company, owning and operating cargo handling and storage facilities and providing express logistics and third-party logistics services.

In the cargo handling business, it owns and operates container freight stations (CFSs), inland container depots (ICDs) and private freight terminals (PFTs) across India. It currently has 10 facilities comprising four CFSs and three ICDs which are co-located with three PFTs. Two of its ICDs are expected to commence operations during the quarter ending 31 December, 2016.

The first CFS at Madhavaram in Chennai, which it took on lease, was commissioned in January 2005. It also has three other operational CFSs located at Navi Mumbai near the JN port, Red Hills in Chennai near the Chennai port, and Tuticorin near the V. O. Chidambaranar port. During FY2014-15, these three ports accounted for 6.6 million TEUs or 82.7% of all container traffic handled at major ports in India.

It owns and operates co-located ICDs and PFTs at Thimmapur near Hyderabad, and in Panipat and Ahmedabad. The firm also has warehouses at Indore, Kakinada and Visakhapatnam.

The company is also currently in the process of setting up co-located ICD and PFT facilities at Chennai and Bengaluru, both of which are expected to be commissioned by March 2018.

Continental’s customers include shipping lines, customs house agents, importers, exporters and other logistics service providers. For the financial years 2016 and 2015, the total container volume handled at its four CFSs was 194,293 TEUs and 165,791 TEUs, respectively. In the same period, co-located ICD and PFT facility at Thimmapur handled total container volumes of 12,060 TEUs and 10,610 TEUs and break bulk cargo of 862,485 tons and 598,780 tons, respectively.

Its subsidiary Delex Cargo India Pvt. Ltd (Delex) provides end to end domestic solutions including third party logistic solutions and warehouse management services, domestic distribution, express logistics, last mile delivery services, clearing and forwarding services and cargo handling services.

The firm is promoted by N Adikesavulu Reddy (founder and chairman) and N Amrutesh Reddy.

Financials

The company’s growth has been patchy with revenues rising sharply in FY2012-13 only to barely inch up the following year, followed by just under 10% growth in FY2014-15 but reported a 4% decline in revenues to Rs 702 crore for FY2015-16. Its net profit has declined for two straight years after rising over 20% in FY2013-14. The net profit last year (Rs 51.5 crore) was almost the same that it recorded in FY2011-12.

Investors

The firm counts Warburg Pincus, Abraaj Capital and IFC as investors. Abraaj, which got exposure to the firm after it acquired another PE firm Aureos in 2012, is looking to exit completely in the IPO. Warburg Pincus, the single largest shareholder with 40.4% stake, will sell a third of its holding.

Aureos (Abraaj) had part-exited from Continental Warehousing when Warburg Pincus invested in 2011.

In the past, Continental Warehousing had also raised private equity funding from IL&FS Investment Managers Ltd (IIML) and ePlanet Venture in 2006 and 2009, respectively. They have already exited.

IFC, which is the most recent investor, having put $60 million last December through a mix of equity ($25 million) and debt ($35 million), will stay put.

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Continental Warehousing files for IPO; Abraaj to exit, Warburg to trim stake

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