What you must know about Zeal Global Services IPO

Zeal Global Services Ltd, is an SME IPO on the NSE which is opening for subscription on 28th July 2023. The company, Zeal Global Services Ltd, was incorporated in the year 2014 to offer detailed and end-to-end logistic solutions in the air cargo industry. It operates as a General Sales and Service Agent (GSSA) and also acts as a sales partner for various airlines to facilitate the logistics of their air cargo business. Zeal Global Services Ltd is headquartered in Delhi but has operations and spread across India.

Broadly, Zeal Global Services Ltd has two verticals viz. cargo carrier service and passenger carrier service. Typically, Zeal Global Services Ltd curates logistics solutions for customers based on these verticals and the network and the skill sets built up over time. The company deploys its services across various industries including pharmaceuticals, automotive, fashion and industrials. It also offers sales, marketing, and administrative support for its clients, more as an add-on service.

Key terms of the Zeal Global Services SME IPO

Here are some of the highlights of the Zeal Global Services Ltd IPO on the SME segment of the National Stock Exchange (NSE).

• The issue opens for subscription on 28th July 2023 and closes for subscription on 01st August 2023; both days inclusive.
   
• The company stock has a face value of ₹10 per share and the IPO issue will be a fixed price issue. The fixed price for the IPO has been set at ₹103 per share. This is the price that will be used for most of the value calculations.
   
• The entire issue is a fresh issue of shares. The company will issue a total of 35.40 lakh shares, which at the fixed IPO price of ₹103 per share aggregates to a total fund raising of ₹36.46 crore.
   
• There is no offer for sale (OFS) component in the IPO. Hence the fresh issue portion of the IPO is also the total size of the issue.
   
• Like every SME IPO, this issue also has a marketing making portion with a market maker portion allocation carved out of the issue. The market maker (Rikhav Securities) will be given 177,600 shares as the market maker quota to provide buy and sell quotes on a continuous basis post listing to keep the stock in a liquid mode.
   
• The company has been promoted by  Nipun Anand and Vishal Sharma and the promoter stake in the company stands currently at 100%. Post the IPO, being a fresh issue of shares, the promoter stake will be get diluted to 73.40%.
   
• The fresh issue funds will be used for investment in subsidiaries for business expansion, part payment of debt, working capital needs and for general corporate purposes. This will be the net cash raised through the issue, net of issue expenses.
   
• While Expert Global Consultants Private Ltd will be the lead manager to the issue, Skyline Financial Services Private Ltd will be the registrar to the issue. Post the issue, the issued capital base will expand from 97.69 lakh shares to 133.09 lakh shares.

The company has allocated a minimum of 50% of the issue size for the Retail investors and a maximum of 50% for the HNI / NII investors. The table below captures the IPO reservation for Zeal Global Services Ltd.

The minimum lot size for the IPO investment will be 1,200 shares. Thus, retail investors can invest a minimum of ₹123,600 (1,200 x ₹103 per share) in the IPO. That is also the maximum that the retail investors can invest in the IPO. HNI / NII investors can invest a minimum of 2 lots comprising of 2,400 shares and having a minimum lot value of ₹247,200. There is no upper limit on what the HNI / NII investors can apply for. The table below captures the break-up in detail.

Key dates to be aware of in the Zeal Global Services IPO (SME)

The SME IPO of Zeal Global Services Ltd IPO opens on Friday, July 28th, 2023 and closes on Tuesday August 01st, 2023. The Zeal Global Services Ltd IPO bid date is from July 28th, 2023 10.00 AM to August 01st 2023, 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is the 01st of August 2023.

It must be noted that in ASBA applications, there is no refund concept. The total application amount is blocked under the ASBA (applications supported by blocked amounts) system. Once the allotment is finalized, only the amount is debited to the extent of the allotment made and the lien on the balance amount is automatically released in the bank account.

Financial highlights of Zeal Global Services Ltd

The table below captures the key financials of Zeal Global Services Ltd for the last 3 completed financial years.

Data Source: Company DRHP filed with SEBI

The profit margins have been very moderate at above 4.32% in the latest year but at relatively lower levels in the previous years. Even the return on equity has been in excess of 40% in the current year although it was lower in previous years. While sales growth has been robust in the latest year, it has been erratic in the year before that. However, the profit growth has been steadier in the last 2 years. Investors must remember that this is a traditionally a low margin and high risk business. However, the company has a healthy asset turnover ratio as a measure of asset sweating. That can justify valuations for the company.

The weighted average EPS of the company for the last 3 years is around ₹4.54 and that makes the company reasonably valued at the upper band of ₹103 per share. In terms of valuation, the stock valuation is over 20 times forward earnings, so a lot of the story is already in the price. However, growth remains the big boost for the company and that could make it an interesting play for investors with a higher risk appetite and with longer time frame.