Zinka Logistics Solutions IPO opens for subscription: Should you subscribe to it?

The initial public offering (IPO) of Zinka Logistics Solutions (Blackbuck) kicked off for bidding on Wednesday, November 13. The company is selling its shares in the range of Rs 259-273 apiece, where investors can bid for a minimum of 54 equity shares and its multiples thereafter. Three-day bidding for the issue closes on Monday, November 18.

Founded in April 2015, Zinka Logistics Solution is a digital platform for truck operators. Its The BlackBuck App is a platform offering payments, telematics, a load marketplace, and vehicle financing services to empower truck operators to achieve their goals efficiently.

The Rs 1,114.72 crore-IPO of Zinka Logistics Solution includes fresh shares worth Rs 550 crore, while existing shareholders and promoters will offload 2,06,85,800 shares from their stake amounting to Rs 564.7 crore. The company has wiped out its entirely grey market premium (GMP) and is currently commanding a premium. The GMP stood at Rs 25 a day ago.

Blackbuck provides vehicle financing to customers in 48 districts across seven states in India. 963,345 truck operators in the country transacted on the platform, representing 27.52 per cent of India's total truck operators in FY24. BlackBuck shall command a total market capitalization of more than Rs 4,800 crore.

The company had processed a gross transaction value (GTV) of Rs 173,961.93 million in payments and the company had 356,050 active telematics devices on average monthly. As of March 31, 2024, the company has facilitated 4,035 loans totaling Rs 1,967.88 million.

For the financial year ended on March 31, 2024, Blackbuck reported a net loss of Rs 193.95 crore with a revenue of Rs 316.51 crore. The company reported a net loss of Rs 290.5 crore with a revenue of Rs 195.09 crore for the financial year ended on March 31, 2023.

The company has reserved 26,000 equity shares for the eligible employee qualified institutional bidders for the company, who may get a discount of Rs 25 per share. It has reserved 75 per cent of the net for the qualified institutional bidders (QIBs), while non-institutional investors (NIIs) will get 15 per cent of the offer. Retail investors have 10 per cent reservation in the net offer.

Axis Capital, Morgan Stanley India Company, JM Financial and IIFL Securities are the book running lead managers of the BlackBuck IPO, while Kfin Technologies is the registrar for the issue. Shares of the company shall be listed on both BSE and NSE on Thursday, November 21. Here's what a host of brokerage firms said about the IPO of Zinka Logistics Solution:

Arihant Capital Markets
Rating: Subscribe
Zinka Logistics Solutions, through its Blackbuck platform, is a key player in India’s digital trucking solutions market, addressing core needs of truck operators such as tolling, fueling, fleet tracking, and load matching. Its in-house, scalable technology is designed for ease of use and delivers real-time data, making remote fleet management simpler for operators, said Arihant Capital.

"Zinka’s effective user acquisition approach has driven strong growth, reaching major milestones by facilitating 413.34 million transactions and serving 80 per cent of India’s districts as of Fiscal 2024. At the upper band price, the EV/sales stands at 15.7 times. We have a 'subscribe for listing gain' rating for the issue," it said.

Anand Rathi Research
Rating: Subscribe for long term
Zinka Logistics Solutions is India’s largest digital platform for truck operators, with 963,345 truck operators in the country transacting on its platform in FY24, which comprises 27.52 per cent of India’s truck operators. On the valuation front, we believe that the company is fairly priced, said Anand Rathi Research.

It generates revenue from truck operators through commission income from the company’s payment’s offerings, subscription fees from a combination of telematics, payments and loads marketplace offerings and service fees from vehicle financing offerings. In terms of financial aspect, from being a loss making entity, the company turned profitable in Q1FY25, it said with a 'subscribe for long term' rating.

StoxBox
Rating: Subscribe
Zinka Logistics is poised to benefit from building trust and expanding its customer base through a robust sales and service strategy. Its strategic market expansion and continuous product development will further enhance its market presence and profitability, said StoxBox.

"Zinka Logistics also exhibited a steady recovery in its operational cash flow. Given the company’s strong market presence and industry tailwinds, it provides a medium- to long-term opportunity. We, therefore, recommend a 'subscribe' rating for the issue," it said.

Swastika Investmart
Rating: Avoid
Zinka Logistics is the largest digital platform for truck operators, benefiting from strong network effects. The company is financially challenged with ongoing losses and negative cash flow, though it has shown signs of recovery in the first quarter of the current year, said Swastika Investmart.

"Zinka has a low promoter holding, which may impact investor confidence. It becomes difficult to assess on a P/E basis due to negative earnings. Overall, investors may consider skipping this IPO for now," it said.

Marwadi Financial Services
Rating: Subscribe
Considering the FY24 Sales of Rs 2,969 crore, Zinka Logistics is going to list at a Mcap/sales of 16.2 times with a market cap of Rs 4,818 crore, whereas its peer namely CE Infosystems is trading at Mcap/sales of 28.6 times, said Marwadi Financial Services.

"We assign 'subscribe' rating to this IPO as the company has India’s largest digital platform for truck operators and an omnichannel distribution network driving sales. Also, it is available at reasonable valuation as compared to its peer," it added.

Canara Bank Securities
Rating: Subscribe for long term
Attributing the annualized FY25 earnings to the post-IPO fully diluted equity base results in a P/E of 37.19, which is reasonable for a tech company. However, based on FY24 earnings, the P/E remains negative, indicating the issue appears aggressively priced, said Canara Bank Securities.

"Given BlackBuck’s strong market position, scalable asset-light model, and high growth potential, it is recommended as a favorable investment in the logistics tech sector. However, the company should be monitored closely for regulatory changes and competitive pressures that could impact its profitability and market share," it added with a 'subscribe for long-term' rating.

SBI Securities
Rating: Avoid
Zinka Logistics is a play on the formalization of the trucking industry in India providing solutions such as payments, telematics and financing. Operating revenue has grown at a CAGR of 58 per cent over FY22-24 and the company has turned Ebitda positive. The issue is priced at an expensive valuation of 13.1 times FY25E annualized Mcap/sales and EV/EBITDA of 122.8 times, said SBI Securities.

"The company is able to scale up existing business and add new verticals like vehicle financing, load marketplace etc, then operating leverage can lead to increase in profitability over next 2-3 years. However, looking at the expensive valuation, we recommend investors to 'avoid' the issue," it said.

Adroit Financial Services
Rating: Subscribe
Some key parameters such as Ebitda margin and PAT margin turned positive, and they were at 14.77 per cent and 32.91 per cent for the June quarter of the current year respectively. The P/BV of the company as of June 30, 2024 is 14.6 times, said Adroit Financial Services, recommending a 'subscribe' tag to the IPO as for long-term investment, and considering its valuation.