Mahindra Logistics Ltd, the logistics and transport service unit of Mahindra Group, on Friday filed a draft red herring prospectus with the Securities and Exchange Board of India (SEBI) for an initial public offering.
Mahindra & Mahindra Ltd and private equity investor Kedaara Capital will each sell 9.66 million shares through the IPO, according to the prospectus. This represents a stake of nearly 27.5%. Mahindra Logistics is not selling any fresh shares.
After the issue, M&M’s stake in the logistics company will drop to about 59.45% from 73.19%. Kedaara’s stake will decline to 9.5% from about 23%.
The IPO is likely to raise about Rs 650-700 crore ($102-110 million), said a person privy with the development.
M&M had on Thursday informed stock exchanges about the planned offering.
Here’s a snapshot of Mahindra Logistics’ proposed IPO:
The public issue comprises an offer for sale of 19.33 million shares. Parent entity M&M will sell 9.66 million shares, as will Kedaara Capital and its affiliate Normany Holdings. The IPO will result in a 27.5% stake dilution.
Use of proceeds
The proceeds will go the selling shareholders. The company is not raising any funds through the IPO.
Kotak Mahindra Capital Co and Axis Capital are merchant bankers to the public issue.
Khaitan & Co is the law firm representing M&M and Mahindra Logistics. AZB & Partners is the Indian counsel and Baker & McKenzie, Wong & Leow are international counsel representing merchant bankers.
Platinum Partners is the Indian counsel representing the selling PE investors Normandy and Kedaara.
Mahindra Logistics was set up in 2007 and is among 151 Indian and overseas subsidiaries of Mahindra Group. It provides logistics solutions, warehousing facilities, freight forwarding and supply chain management services.
Mahindra Logistics is a third-party logistics (3PL) service provider. It takes care of M&M’s supply chain needs, including inbound and outbound logistics, inter-plant movement, warehousing, line-feed and value-added services.
It also provides people transport solutions, a specialised line of business which helps corporate clients move employees to and from the workplace.
Lords Freight, a step-down subsidiary of Mahindra Logistics, is a global freight forwarding company with capabilities in customs brokerage, transportation and warehousing.
The company counts Volkswagen India, Vodafone India, Thermax Ltd, JSW Steel Ltd, Ashok Leyland Ltd, Siemens Ltd, Bosch Ltd, BMW India, 3M India Ltd and Mercedes-Benz India as key clients in its supply chain management business.
In 2009, Mahindra Group identified logistics as a key focus area. Since then Mahindra Logistics has been part of the Mahindra Partners division, the $800 million quasi private equity division of the Mahindra Group.
M&M is India’s biggest tractor maker and one of the largest automakers. It also has a software services unit and has business interests in several sectors including financial services, renewable energy, retail and defence.
Mumbai-based Mahindra Logistics will join a clutch of logistics companies listed on the stock exchanges. Snowman Logistics, VRL Logistics, Allcargo Logistics, Sical Logistics and Aegis Logistics are among a dozen listed peers.
It is the first company in which homegrown private equity firm Kedaara invested. The PE firm had, in 2014, agreed to invest Rs 200 crore ($33.1 million then) for a 23% stake.
The company reported consolidated net profit of Rs 46.06 crore for 2016-17 on total revenue of Rs 2,676.22 crore, as per the DRHP.
Its total revenue for 2015-16 stood at Rs 2,077.12 crore as compared with Rs 1,939.55 crore the year before.
Its net profit for 2015-16 was Rs 35.96 crore as compared with Rs 38.52 crore.
The company’s supply chain management and people transportation businesses accounted for 88.94% and 11.06%, respectively, of its total revenue from operations for 2016-17.
Kedaara Capital was founded in 2011 by Manish Kejriwal, the former India head of Singapore state investment fund Temasek, and Sunish Sharma and Nishant Sharma, the former managing director and principal, respectively, at global private equity firm General Atlantic in India.
VCCircle was the first to report that Kedaara Capital was in talks to invest in Mahindra Logistics.
Kedaara Capital had raised $540 million through its debut fund in November 2013. It typically invests $25-75 million in each firm, but has also put in larger sums – $ 200 million or more – in select situations, according to its website.
The PE firm is on the road to raise its second fund and has received a commitment for up to $40 million from International Finance Corporation.
The PE firm has been actively seeking exits. In September last year, Kedaara struck its second exit from a fairly young portfolio firm when it sold part of its holding in automotive components maker Bill Forge Pvt. Ltd to Mahindra CIE Automotive Ltd.
Prior to this, Kedaara Capital had sold part of its holding in AU Financiers India Ltd to high-net-worth individuals, insurance companies and family offices, marking a quick partial exit.