Zinka Logistics Solution offers a digital platform, the BlackBuck app, for truck operators. Truck operators use the BlackBuck app for their diverse business needs. It offers payments, telematics, a freight marketplace, and vehicle financing services to help truck operators manage their business and grow their income.

In the fiscal year 2024, 963,345 truck operators in the country conducted their business through the platform, representing 27.52% of all Indian truck operators.

Truck operators manage their truck-level tolling and fueling operations through the BlackBuck App. Gross transaction value (GTV) in payments was Rs 5,356.20 crore and Rs 17,396.19 crore in the three months ended June 30, 2024, and Fiscal 2024, respectively. However, GTV payments do not represent the revenue of the company. Commission income is earned as an agreed percentage of the total GTV payments in a particular year.

Truck operators use telematics services, such as vehicle tracking and fuel sensors, to manage their drivers and fleets. Average monthly active telematics devices was 390,088 and 356,050 in the three months ended June 30, 2024 and Fiscal 2024, respectively.

Truck operators use the loads marketplace product to search for loads to fill their empty capacities or secure better prices. Load postings in Q1 FY25 and Fiscal 2024 were 7.1 lakh and 21.2 lakh, respectively. This enabled 133,369 and 256,685 truck operators to secure loads during the same periods.

Truck operators obtain financing for used commercial vehicles via the BlackBuck platform. As of June 30, 2024, 5,109 loans, totaling Rs 252.75 crore, were successfully disbursed.

Revenue is mainly generated from (1) commission margins on toll transactions through FASTag Bank Partners and (2) commission margins on fueling transactions with OMCs. Additional revenue comes from activation fees for FASTags, platform subscription fees for tolling services, and service fees for fueling services like fuel card distribution, recharge, customer support, alerts, and transaction history.

In Q1 FY25, Commission income contributed 41% to total revenue, subscription fees 38%, service fees 19% and others 2%.

In the three months ended June 30, 2024, and Fiscal 2024, monthly transacting truck operators were active for more than 16.26 days and 16.18 days, respectively, in a month and on an average spent 41.54 minutes and 39.56 minutes, respectively, daily, on the BlackBuck App.

Unique truck operators who transacted at least once in a month totaled 687,994 in Q1 FY25.

Follows an Omni-channel customer onboarding and servicing strategy tailored to the demographics of its customer base. Supports a digitally enabled network of 9,374 touchpoints for onboarding and servicing activities as of June 30, 2024.

Intends to deepen distribution and continue to focus on growing customer base by attracting new transacting truck operators.

Plans to offer new products to existing customers and develop newer offerings by leveraging data and insight into the day-to-day operations of truck operators.

Offer and its objects

The IPO comprises a fresh issue of equity shares worth up to Rs 550 crore and an offer for sale of 2,06,85,800 equity shares, aggregating up to Rs 564.72 crore, by existing shareholders such as Rajesh Kumar Naidu Yabaji, Chanakya Hridaya, Ramasubramanian Balasubramaniam, and Quickroutes International.

The price band for the IPO is Rs 259 to Rs 273 per equity share of face value Re 1 each.

The objectives of the fresh issue include Rs 200 crore for sales and marketing costs, Rs 140 crore for investment in Blackbuck Finserve to meet its future capital requirements, Rs 75 crore for funding of expenditure related to product development and the remaining amount for general corporate purposes.

The promoters are Rajesh Kumar Naidu Yabaji, Chanakya Hridaya, and Ramasubramanian Balasubramaniam. The promoters and promoter group hold an aggregate of 5,36,58,544 equity shares, aggregating to 34.32% of the pre-offer issued and paid-up equity share capital. Their post IPO shareholding is expected to be around 27.84%.

The issue, through the book-building process, will open on 13 November 2024 and will close on 18 November 2024.

Strengths

Largest distributor of FASTags for truck operators in FY24, with a 32.92% market share in GTV payments for tolling. In FY2024, GTV totaled Rs 14,793.67 crore, growing 47.82% YoY.

The business model is focused on truck operators, with customized offerings and a targeted distribution strategy designed to meet the specific needs and demographics of the trucking industry.

Successfully grown its customer base of annual transacting truck operators to 963,345 in Fiscal 2024 from 482,446 in Fiscal 2022. Moreover, the platform retained 85.52% of the annual transacting truck operators in the first year, who transacted for the first time in Fiscal 2023.

Provides truck operators cost benefits and effective control over expenses through decreased risk of pilferage and unauthorized spending.

Omni channel distribution network with robust sales and service strategy driving customer adoption. As of June 30, 2024, sold and serviced its products across 628 districts constituting 80% of India’s districts, including in all the major transportation hubs and across 76% of the toll plaza network in India.

The asset-light business model focuses on providing services to truck operators, generating revenue through platform fees, subscription fees, and commissions. Does not assume inventory risk or own trucks, keeping balance sheet lean.

Scalable business with in-house technology stack and solutions aimed at providing reliable, accurate and real-time solutions.

Extensive experience of promoters and senior management personnel.

Weaknesses

Incurred losses and experienced negative operating cash flows in the past, including subsidiaries TZF Logistics Solutions and BlackBuck Finserve.

Some investors transferred 2,66,644 equity shares to Rajesh Kumar Naidu Yabaji, one of the promoters, in October 2024 as a gift, at Re 1 per equity share. There were no conditions attached to these transfers, raising potential concerns about proper valuation and transparency.

Dependent on revenue generated from key strategic partners in its payments and vehicle financing offerings. One of the FASTag Partner Banks contributed 29.62% and 33.51% of total revenue from continuing operations in the three months ended June 30, 2024, and Fiscal 2024, respectively. The loss of such partners may adversely affect business.

Significantly dependent on revenue from payments and telematics offerings, which contributed 92.79% and 94.53% to total revenue from continuing operations in the three months ended June 30, 2024, and Fiscal 2024, respectively. Any negative impact on these offerings could materially affect business.

Depend on certain key suppliers to procure a significant portion of vehicle tracking solutions. Largest supplier contributed 80.71% to total purchases of vehicle tracking solutions in Q1 FY25. Any supply chain disruption faced by major suppliers may in turn significantly affect business.

Changes in subscription or pricing models in response to rising competition could adversely affect business. In Q1 FY25, subscription fees contributed 38.37% to total revenue from continuing operations.

There have been certain instances of delays in payment of statutory dues in the past. Such delays could lead to regulatory actions and penalties.

The audited consolidated financial statements as of and for the periods ended June 30, 2024, and June 30, 2023, include certain emphasis of matters.

Promoters also hold directorships in its subsidiaries, which are engaged in businesses similar line of business, raising concerns about potential conflicts of interest.

Vehicle financing offering exposes it to various risks including in relation to high-risk borrowers and collateral recovery, which could adversely affect business.

Valuation

In Q1 FY2025, pro forma net sales increased by 55% to Rs 92.17 crore, compared to the restated sales in Q1 FY2024. The OPM improved by 6,058 bps to 9.07%, leading to an operating profit of Rs 8.36 crore, compared to a loss of Rs 30.63 crore. OI increased 26% to Rs 6.16 crore. Interest cost rose 25% to Rs 0.76 crore. Depreciation costs remained flat at Rs 6.95 crore. PBT and before exceptional items surged stood at Rs 6.81 crore compared to a loss of Rs 33.29 crore. This profit was further boosted by an exceptional item, which contributed a gain of Rs 25.62 crore. Tax expenses were Rs 0.05 crore as compared with Rs 0.02 crore. Profit from discontinued operations was Rs 42.23 crore compared to loss of Rs 2.62 crore. Net profit was Rs 74.60 crore compared to a loss of Rs 35.94 crore.

In FY2024, restated net sales increased by 69% to Rs 296.92 crore, compared to the restated sales in FY2023. The OPM improved from negative 132.34% to negative 53.36%, leading to an operating loss of Rs 158.44 crore, compared to a loss of Rs 232.49 crore. OI increased 1% to Rs 19.59 crore. Interest cost decreased 13% to Rs 2.8 crore. Depreciation cost increased 24% to Rs 25.34 crore. The loss before tax narrowed to Rs 166.98 crore, compared to a loss of Rs 236.68 crore. Tax expenses were Rs 0.01 crore as compared with Rs 0.17 crore. Loss from discontinued operations were Rs 26.96 crore compared to loss of Rs 53.65 crore. Net Loss narrowed to Rs 193.95 crore compared to a loss of Rs 290.50 crore.

Negative earnings were posted in FY2022, FY2023, and FY2024. As a result, the EV/FY2024 sales ratio is more appropriate for valuation. At the higher price band of Rs 273, the offer is made at post-issue EV/ TTM Sales of 15 times, on a post-issue equity share capital of Rs 17.65 crore of face value of Re 1 each.

There are no like to like listed companies in India or abroad that engage in a similar business. However, for the purpose of comparison, Corpay and Full Truck Alliance (foreign companies) have been considered peers due to similarities in certain offerings. Corpay trades at 8 times its EV/ TTM salesand Full Truck Alliance trades at 5 times.