Multi Baggers

Sical Logistics

A part of the Coffee Day Group, Sical Logistics has established strong capabilities in Port, Surface, Offshore & Integrated Logistics domains and is well placed to capitalise on the opportunities from turnaround in the Infrastructure & Logistics space.

Background

Sical Logistics Ltd. was acquired by Cafe Coffee Day Group in FY11 and is one of the leading Integrated Logistics providers. The company has its presence in all major Ports of India with core expertise handling bulk and container cargo. A brief Snapshot of the company's business is given as under :-

Port Operations - Handling of dry & liquid cargo at various ports. Services include custom house agency, shipping agency & Stevedoring.

Container Terminals - Handling of Containers at Tuticorin container terminal with a JV Partner

CFS/ ICD - Container Freight Stations at Chennai, Vizag, Tuticorin and ICD at Melpakkam.

Trucking & Warehousing - Bulk (Dry & Liquid) Cargo, Project Logistics, ODC, Metals, Fertilizers and packaged goods - transported across India.

Bulk Terminal - Exclusive Berth at Chennai Port to handle large vassels; Iron Ore Terminal at Ennore Port; Deep Dreft Berth for handling Iron ore under implementation at New Mangalore Port.

Container Trains - Pan India Container Rail Operations - for the movement of Edible Oil, Glasses, Pipes, Scrap, Cereals, Granite, Marble, Tiles and a range of other products.

The company has Pan India presence for road & rail logistics. The company has Terminals/ Container berths at Chennai, Mangalore, Vizag & Tutocorin ports with licence to do Stevedoring operations at almost all major ports across India. The company has established a fleet of 1000+ vehicles transporting bulk & liquid cargo across India. The company has Licence to operate 7 rakes & 2 terminals near Chennai & Bengaluru.

Conclusion and Investment Rationale

Sical Logistics, earlier a part of the SPIC Group was taken over by Coffee Day Group in December 2010 who subsequently came out with an open offer to the shareholders at a price of Rs.79.50 per share.

The operations of the company suffered greatly over the past 3 years (which incidentally coincided with the period post acquisition by the new promoters)  primarily on account of the following reasons :-

1. The slowdown in India's economy and drop in the GDP Growth from 7.5-8 percent to 4.5-5 percent was a major factor for company's lacklustre performance for the past few years.

2. The company post acquisition was involved in cleaning up & rationalisation of its assets.

3. The company suffered an account of the investments it made into its subsidiary companies into Iron Ore Handling Terminal at Ennore which couldnot start operations due to ban on mining of Iron Ore in Karnataka.

The Coffee Day Group has infused fresh funds into the company over the last couple of years - in FY 12, the promoters took a preferential allotment of Equity Shares at a price of Rs.76 per share thereby infusing Rs.226 crores towards Equity Capital into the company. The promoters also gave Rs.67 crores towards unsecured loan to the company. The promoters holding currently stands at 75 percent.

The execution capabilities of the promoters and their ability to scale up businesses in evident from the way the promoters of Sical Logistics have done to their Coffee Retail Chain business - Cafe Coffee Day. Cafe Coffee Day has today emerged as the largest Coffee Retail Chain in the country with a network of over 1500 Cafes in 200 cities and hungry for more. The group holds a significant stake in Mindtree Ltd. too.

Sical Logistics is a direct play on growth in Indian economy. The company has over the past few years created & rationalised extensive Infrastructure facilities to be ready to capitalise on the revival in the Indian economy as and when it happens. We believe that the company has over the past few years created Infrastructure capabilities which will enable it to capitalise on the opportunities in the Coal Handling, Iron Ore Handling & other activities related to Integrated Logistics. The company has in the past few years, utilised the weak economic environment to consolidate, ramp up capacities through increased capex and is well set to exploit opportunities arising out of turnaround in the economy. Increased production of Coal to enhance power production in the country; restart of Iron Ore mining and for that matter mining of other commodities; and implementation of GST would be triggers that will directly benefit the company.  The stock may not look cheap or deep value on financial parameters currently, however given the size of opportunity available in the space in which the company operates, pedigree of the new promoters and their capabilities to scale up business, we believe the stock merits investment at the current market price and on declines.

For full details, Click on the attachment.