Company Name VRL LOGISTICS LTD FUNDAMENTAL REPORT ATS Wealth Managers Pvt Ltd. Page 1
Company Overview VRL Logistics Limited provides goods and passenger transportation services in India. It offers various goods transportation services, including general parcel and VRL priority, courier, less than truck load, and full truckload services through its transportation network in 28 states and 4 Union Territories. Recommendation : BUY Target 380-400 Time Frame 3-4 months Potential upside 15%-20% CMP as on 24/07/2017 323 52 Week High/Low 377/225 Market Cap (Cr) 2920.25 Equity Capital (Cr) 91.24 Face Value 10 Promoters &Promoters 69.57 Group Holding (%) Public Holding (%) 30.43 Grand Total 100 Investment Rationale Market Leader in Transportation business Logistic business to boost with GST Implementation Largest fleet operations with robust Pan India network Strong demand driven by Monsoon Falling fuel cost makes VRL more cost Competitive Financial Summary: FY-13 FY-14 FY-15 FY-16 FY-17 Revenue 1314.49 1481.4 1656.23 1706.44 1790.29 EBITDA 205.04 216.57 280.53 274.62 227.48 PAT 45.7 57.18 91.31 102.31 70.47 EPS 5.77 7.19 10.66 11.26 7.72 Outlook: Overall outlook for the company is bullish. VRL is well placed in Indian Logistic Segment with established brand name in goods transportation network across India. Revenue improved with the CAGR at 6.38% for FY 13 to FY 17. We believe VRL logistics could grow in long term on the back of revival in improved consumer demand, GST Implementation, agriculture sector. ATS Wealth Managers Pvt Ltd. Page 2
Company Profile VRL was founded in the year 1976 by DR. Vijay Sankeshwar from Gadag, a small town in North Karnataka with a single truck having a vision that was way ahead of time. From this beginning VRL today has grown into a nationally renowned logistics and transport company which is also currently the largest fleet owner of commercial vehicles in India with a fleet of 4360 Vehicles (Including 419 Passenger Transport Vehicles & 3941 Goods Transport Vehicles amongst others). Product Portfolio of VRL Logistics: Logistics General Parcel & VRL Priority Courier Service Business Full Truckload Service Other Capabilities VRL Travels AC/NON AC Sleeper Coach AC/NON AC Semi Sleeper Seater VRL Air Charting Tourism Sector Event Management Advitisement Agencies VIP Flights Other Services Logistics: Logistics Service includes General Parcel & Priority services, Courier Service and Full truck load services. It recorded a growth of 5.02% from Rs. 1,35,794.66 Lakhs to Rs. 1,42,615.26 Lakhs during FY 2016-17 which is a result of growth in realization per ton through the freight volume. Travel: VRL is one of the front runners in the Indian Passenger Travel Industry amongst the private sector players. Passenger Travel revenue increased by 2.71% from Rs. 31,760.97 Lakhs to Rs. 32,620.63 Lakhs during FY 2016-17 Air Charting: In 2008, VRL Logistics Ltd. entered into the Indian Air Chartering Industry. By keeping in mind the emerging market demand and serve VVIPs, VIPs & Corporate India. Air Charting recorded Revenue of Rs. 1,603.43 Lakhs from Rs. 1,117.78 Lakhs. Other Services: VRL permits the usage of its branding and have tie-ups with M&M, Bosch, Maruti, Michelin, HP, United India Insurance, National India Insurance, etc. 2000 1000 1493.78 Revenue (in Cr) 1671.2 1722.52 1803.09 Revenue Contribution (%) 1 2 18 Goods Transportation Passanger Transportation 0 Jan-14 Jan-15 Jan-16 Jan-17 79 Wind Power Air Charter & Others ATS Wealth Managers Pvt Ltd. Page 3
Rank Name % OS Position(Cr) 1. ICICI PRUDENTIAL BUSINESS 3.1% 0.3M CYCLE FUND SERIES 1 2. GOLDMAN SACHS INDIA 2.4% 0.2M LIMITED 3. FRANKLIN INDIA SMALLER 1.9% 0.2M COMPANIES FUND 4. MORGAN STANLEY 1.8% 0.2M MAURITIUS COMPANY LIMITED 5. IDFC EQUITY FUND 1.8% 0.2M 6. ABU DHABI INVESTMENT AUTHORITY - BEHAVE 1.4% 0.1M Share Holding Compare (%holding) Dec-16 March-17 Change (%) Promoters 69.57% 69.57% 0.00% FIIs 11.55% 11.32% -2.03% Mutual 8.42% 8.45% +0.35% Funds Other DIIs 0.00% 0.00% 0.00% Non Institution al Investor 10.36% 10.58% +2.12% Date Feb-2017 Feb-2016 Key Events Event Declared Interim Dividend of 4 per share Declared Interim Dividend of 5 per share Management History Key personal Designation & Experience Auditors Dr. Vijay Sankeshwar Mr. Anand Sankeshwar He is Chairman and Managing Director and Promoter of the Company, actively involved in the day-to-day affairs. He holds a Bachelor s Degree in commerce from Karnataka University, Dharwad. He is Managing Director and Promoter, and is actively involved in the day-to-day affairs of the Company, as a Whole Time Director. He holds a Bachelor s Degree in commerce from Karnataka University, Dharwad. Dr. Prabhakar Kore Dr. Prabhakar Kore is a non-executive Independent Director of the Company, he is a member of the Parliament, and graduate from Karnataka University M/s Walker, Chandiok & Co, LLP Chartered Accountants Mumbai ATS Wealth Managers Pvt Ltd. Page 4
Key Ratios: Key Financial Ratios FY-13 FY-14 FY-15 FY-16 FY-17 Debt-Equity Ratio 2.12 1.18 0.82 0.32 0.23 Current Ratio 0.48 0.4 0.51 0.72 0.8 Turnover Ratio Fixed Assets 2.57 2.32 2.31 1.96 1.82 Inventory 136.87 110.86 111.44 93.96 98.42 Debtors 23.74 23.4 18.37 18.52 15.4 Total Asset Turnover Ratio 137.33 152.74 175.34 182.54 201.08 Interest Cover Ratio EBIDTM (%) 15.46 14.49 16.78 15.94 12.61 EBITM (%) 9.25 8.69 11.54 10.72 7.17 ROCE (%) 6.88 8.73 14 13.98 9.93 RONW (%) 25.54 18.65 25.61 19.92 13.02 Payout (%) 105.28 59.83 37.5 44.59 51.78 Price/Book Value(P/BV) 0 0 0 6.59 5.25 EV/EBITDA 0 0 0 12.85 12.97 Market Cap/ Sales 1.66 1.74 1.79 2 2.26 2.5 2 1.5 1 0.5 0 Debt-Equity Ratio 2.12 1.18 0.82 0.32 0.23 FY-13 FY-14 FY-15 FY-16 FY-17 ATS Wealth Managers Pvt Ltd. Page 5
Industry overview: Indian Logistics sector is considered as back bone of the Economy, providing efficient and cost effective flow of goods. Logistics infrastructure has gained a lot of attention both from business industry as well as policy makers. Challenges faced by Logistics Sector in India: The most essential challenges faced by Industry are insufficient integration of transport networks, warehousing & distribution facilities. Regulations imposed by national, regional and local authorities differ from city to city, creating hindrance across national networks. Trained manpower is essential for third party logistic sector. However lack of adequate training institutions has led to a shortfall in skilled management and client service personnel. Future Prospects: The logistics firms are moving from a traditional setup to the integration of IT and technology to their operations to reduce the costs incurred as well as to meet the service demands. It is estimated that the Indian logistics industry will continue to show robust growth of 10-15% annually, leading the pace of growth of the economy at large. The global economic outlook and India s outlook is expected to improve as India Inc begins to tackle the economic downturn. With the implementation of GST, companies, which are currently forced to set up many small warehouses across multiple cities can set up just a few, big warehouses region wise and can follow the hub-and-spoke model for freight movement from the warehouses to the different manufacturing plants, wholesale outlets, retail outlets and the various POS. This growth is backed by the boom in the e-commerce sector and expansionary policies of the FMCG firms. This has increased the service geography of the logistics firms but they also have to meet the demands of quick delivery and tight service level agreements. The industry has moved from being just a service provider to the position which provides end to end supply chain solutions to their customers. Thus, all this has paved the way for further growth of Logistics and Warehousing industry in the coming years. Government Initiatives Government Investments on Highway and Infrastructure: Government of India has taken major step in developing highways and infrastructure. Highways, which are the backbone to goods transportation, got a major boost. Government will be investing Rs. 3,96,135 Crs in creating and upgrading infrastructure. Many schemes later, has improved. Road freight, carrying 60 percent of all goods transport in India, got a major leg up. ATS Wealth Managers Pvt Ltd. Page 6
Dedicated freight corridor: For merely recognizing freight as a crucial and indispensable component of Indian economic activity we have already won a small battle. If and when implemented the freight corridor will deliver an ecologically and economically sensitive edge in the business of freight that we need. Goods and Services Tax: The implementation of Goods and Services Tax was a major boost for logistic business. There will be a free movement of goods across different states. This will ensure a major shift and consolidation in warehousing locations, transportation costs and will also impact the trends of certain commercial vehicle classes. Make in India: India is now attracting some big manufacturing investments through Make in India initiative. Over the next five years Economy will add more than $ 20 billion to the Indian logistics sector, mainly because 20 out of 25 sectors in Make in India have high logistic dependence. As a result, global investors have realized the merit in investing in Indian logistics businesses, logistics Infrastructure and logistics networks. ATS Wealth Managers Pvt Ltd. Page 7
Investment Rationale Market Leader in Transportation business: VRL is the well established brand in the country. It is the leading name in the private bus operation industry. VRL is the market leader in transportation segment with ownership of 4,360 commercial vehicles, out of which 3,941 is Goods Transportation Vehicles & 419 Passenger Transportation Vehicles. VRL has a strong presence in Southern and Western markets, where 80% of business Revenue Company will earn from these markets. Total revenue of the company increased to 4.68% from Rs. 1722.52 Cr to Rs. 1803.09 Cr. Given the sheer size, we feel growth opportunities for organized player like VRL is huge. Logistic business to boost with GST Implementation: With the amendment of Goods and Service tax GST on July 1 st 2017 logistic business is expected to boost in near future. GST will gradually shift customers from unorganized sector to organized service providers. VRL will benefit from GST as it is market leader in organized service providers. GST would also provide a big boost for the movement of LTL cargo and VRL, being the industry leader in the LTL space is expected to benefit from GST implementation. This would also ensure a major shift in warehousing locations, transportation costs and will also impact the trends of certain commercial vehicle classes. We believe there would be a marked shift in the operating model of surface transporters in the country. Largest fleet operations with robust Pan India network: VRL operates through the network of 931 branches and franchisees across India to cater the value of customers. It serves as strategic transshipment hub for the company s operation. Company serves end market products with the vast network across several Industries such as FMCG, food, textile, apparel, furniture, appliances, Pharma products, rubber, plastics, metal products and machinery. The company s hub-and-spoke operating model helps to serve a diverse mix of end-consumers in various industry verticals. With an apt combination of less than truckload (LTL) and full truck load (FTL), VRL strives to maximize operating revenue per vehicle or parcel. Strong demand driven by Monsoon: Better monsoon would further drive growth as VRL is more exposed to rural areas and the company primarily caters to the requirement of small and mid-sized customers who are not serviced by large players due to their small cargoes. Also VRL s widespread network of collection and delivery points enables it to service a larger number of customers across different geographies. Above average monsoon and aggressive focus on bus operation segment helps VRL to grow on back of revival in automotive, textile, agriculture sector and improved consumer demand. ATS Wealth Managers Pvt Ltd. Page 8
Falling fuel cost makes VRL more cost competitive: Crude oil prices have declined significantly and are hovering at around $45/barrel due to ample global supplies and weak demand. Reduction in Fuel price will be a big boost for VRL revenue. Company has tie up with Indian Oil Corporation for supply and purchase fuel at a lower cost as compared to the market. Besides, the company has its own 2 petrol pumps located at Varur and Chitradurga in the State of Karnataka which ensures quality fuel supply and reduced fuel costs. This efforts made by the company ensures a timely and a competitive rate fuel which not only helps in lowering the cost of the company but also in maintaining the quality of a vehicle. VRL Logistics has established a body building plant for trucks which focuses to keeps the overall weight of truck less resulting into fuel saving or higher material load. Company gives higher stress on preventive maintenance and source original parts directly from manufacturer or supplier. This help truck to run uninterruptedly and overall cost of parts also comes lower for company. Conclusion and Recommendations: With the implementation of GST we expect good days for the entire domestic road freight transport industry. VRL Logistic being an organized player will stand to benefit and the smaller and unorganized players would need to step up and meet the compliance requirements which appears very difficult as they would need to implement and sustain good practices in the long run. Though the initial days could be chaotic we expect that the stabilization of the GST regime will usher in a new era for our industry. On the passenger bus operations front, we expect that the legislative changes will gradually make way for organized players to sustain and the present day unhealthy competition to wane in the coming days. Risks and Concerns Risk of Accidents or damage or theft of Cargo Competition from existing and from new players Inability to pass on increase in fuel cost to customers ATS Wealth Managers Pvt Ltd. Page 9
Financials Standalone Balance Sheet (Rs.cr) Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 12mths 12mths 12mths 12mths 12mths SHAREHOLDER'S FUNDS Equity Share Capital 70.7 85.54 85.54 91.24 91.24 Preference Share Capital 110.47 0 0 0 0 Total Share Capital 181.17 85.54 85.54 91.24 91.24 Total Reserves and Surplus 108.23 221.01 270.65 422.29 449.99 Total Shareholders Funds 289.4 306.55 356.19 513.54 541.23 NON-CURRENT LIABILITIES Long Term Borrowings 285.16 252.88 191.8 115.69 59.55 Deferred Tax Liabilities [Net] 77.6 83.36 88.75 90.37 89.61 Other Long Term Liabilities 8.66 8.87 8.51 8.21 14.15 Long Term Provisions 2.91 2.64 5.9 3.59 5.03 Total Non-Current Liabilities 374.34 347.75 294.96 217.87 168.34 CURRENT LIABILITIES Short Term Borrowings 93.84 109.43 99.67 49.71 63.15 Trade Payables 5.02 9.31 4.47 5.29 4.43 Other Current Liabilities 165.51 182.53 189.28 148.57 115.02 Short Term Provisions 37.08 22.37 8.53 8.61 4.51 Total Debt 379 362.31 291.47 165.4 122.7 Total Current Liabilities 301.45 323.63 301.96 212.18 187.11 Total Capital And Liabilities 965.18 977.93 953.11 943.59 896.68 ASSETS NON-CURRENT ASSETS Tangible Assets 710.09 739.36 705.15 715.89 692.68 Intangible Assets 0.2 0.97 1.71 1.67 1.2 Capital Work-In-Progress 14.03 14.04 9.07 16.23 1.77 Fixed Assets 724.32 754.37 715.93 733.79 695.65 Long Term Loans And Advances 96.66 91 81.99 56.19 0 Other Non-Current Assets 0.72 2.52 2.53 0 50.99 Total Non-Current Assets 821.78 848 800.55 790.04 746.7 CURRENT ASSETS Inventories 9.68 13.48 15 18.33 18.32 Trade Receivables 85.39 79.96 90.18 73.02 75.42 Cash And Cash Equivalents 15.44 15.09 16.61 19.59 12.25 Short Term Loans And Advances 18.55 19.81 25.87 40.55 0 Other Current Assets 14.34 1.6 4.9 2.05 43.99 Total Current Assets 143.4 129.93 152.55 153.55 149.98 Total Assets 965.18 977.93 953.11 943.59 896.68 ATS Wealth Managers Pvt Ltd. Page 10
Profit & Loss Account Standalone Profit & Loss account (Rs. In crs) Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 INCOME Revenue From Operations [Gross] 1314.49 1481.4 1656.23 1706.44 1790.29 Revenue From Operations [Net] 1314.49 1481.4 1656.23 1706.44 1790.29 Other Operating Revenues 11.01 12.38 14.97 16.08 12.8 Total Operating Revenues 1325.5 1493.78 1671.2 1722.52 1803.09 Other Income 9.83 9.99 7.66 6.91 9.3 Total Revenue 1335.32 1503.78 1678.86 1729.43 1812.38 EXPENSES Operating And Direct Expenses 962.65 1091.17 1179.38 1184.97 1297.2 Employee Benefit Expenses 148.26 174.46 197.99 245.5 266.08 Other Expenses 19.37 21.58 20.96 24.34 21.62 EBIDTA/Operating profits 205.04 216.57 280.53 274.62 227.48 Depreciation And Amortization Expenses 82.34 86.62 87.66 89.95 98.18 EBIT 122.7 129.95 192.87 184.67 129.3 Finance Costs 59.12 59.91 58.6 30.69 24 Profit/Loss Before Tax 63.59 70.04 134.27 153.99 105.3 Exceptional Items 0 6.64 3.72 0 0 Profit/Loss Before Tax 63.59 76.68 137.99 153.99 105.3 Current Tax 9.53 13.74 40.97 49.81 33.64 Deferred Tax 8.35 5.76 5.94 1.62 1.19 Total Tax Expenses 17.89 19.5 46.68 51.67 34.83 Profit/Loss For The Period 45.7 57.18 91.31 102.31 70.47 EARNINGS PER SHARE Basic EPS (Rs.) 5.77 7.19 10.66 11.26 7.72 ATS Wealth Managers Pvt Ltd. Page 11
Stock Performance Chart Research by: Krishna BS Equity Research Analyst ATS Wealth Managers Pvt Ltd. Email: krishnab@adityatrading.com Disclaimer: This report is only for the information of our customers. Recommendations, opinions or suggestions are given with the understanding that readers acting on this information assume all risks involved. The information provided herein is not to be constructed as an offer to buy or sell securities of any kind. ATS and/or its group companies do not as assume any responsibility or liability resulting from the use of such information. ATS Wealth Managers Pvt Ltd. Page 12