Shares of Navkar Corporation listed on BSE and NSE today on a weak note but surged subsequently as secondary market continued to rally. Shares of the Raigad-based logistics company listed at INR152 per share on NSE, marking a slight discount to the issue price of INR155 per share. However, shares moved into green territory pretty soon and touched a high of INR169.45 apiece before closing the day at INR166.85 apiece. This marks first day return of 7.7% on the issue price. The performance was not very different on BSE.
Navkar Corporation’s INR600-crore initial public offering (IPO), that concluded last month, received a subscription of 2.9 times despite under-subscription in the Non Institutional Investor (NII) category. As part of the IPO, the container freight station (CFS) company had raised INR180 crore by placing 1.16 crore shares with a clutch of anchor investors. Navkar Corporation attracted some prominent names including Abudhabi Investment Authority, Morgan Stanley Investment Mauritius, and Nomura as anchor investors.
Out of the INR600 crore, Navkar Corporation received INR510 crore while the remaining went to existing shareholders which participated in the IPO. The company plans to use IPO proceeds towards capacity enhancement of the Somathane container freight station (CFS), development of the non-notified areas of CFSs and establishment of a logistics park at Valsad in Gujarat. INR314.56 crorewill go towards the new logistics park at Valsad, near Vapi. Nearly INR144.53crore will be used to expand capacity of Somathane CFS facility while another INR54.25 crore will be used to develop certain non-notified areas near its three CFSs in Panvel for additional parking facilities and drive-ways which is expected to increase its container handling capacity.
Positive listing of the Navkar Corporation reinforces our analysis that investors are rewarding high growth and high margin plays, even at stretched valuations. Navkar Corporation’s high valuation is on account of strong net margin which, even after reducing in FY 2015, stood at 22.1%. Net profit margin in excess of 20% is a rarity in logistics sectors and companies achieving such feats are rewarded by investors.
The company operates through its three CFS units located in close proximity to the Jawaharlal Nehru Port – India’s largest container port. As of December 2014, Navkar Corporation’s aggregate installed handling capacity stood at 310,000 TEUs (twenty-foot equivalent units) per annum. Navkar Corporation works with shipping lines, logistical service providers and customs house agents, importers and exporters. Apart from the clients mentioned above, it counts Hyundai Merchant Marine and Evergreen Shipping Agency among its prominent customers.