Zinka Logistics Solution Limited IPO (BlackBuck IPO): Check IPO Date, Lot Size, Price & Details

About the Company:

Zinka Logistics Solutions Limited, famously known as ‘Blackbuck’, is India’s largest digital platform for truck operators in terms of the number of users according to RedSeer Report, with 9,63,345 truck operators (27.52% of India’s truck operators) transacted on its platform in Fiscal 2024. Trucking is one of the fastest-growing sectors in logistics in India which has a US$ 18-25 billion revenue pool as of Fiscal 2024 and is expected to grow to US$ 35 billion by Fiscal 2028. The company aims to digitally empower India’s truck operators, helping them manage their business and grow their income.

Using the company’s offerings truck operators can:

Payments - digitally manage payments for tolling and fuelling,

Telematics - monitor drivers and fleets using telematics,

Loads marketplace - find loads on the marketplace and

Vehicle Financing - get access to finance for the purchase of used vehicles.

Key business highlights:

• Processed ₹173,961.93 million gross transaction value in payments in Fiscal 2024.
• Managed 356,050 average monthly active telematics devices in Fiscal 2024
• With 2.12 million load postings in Fiscal 2024, enabled 256,685 truck operators to get a load
• Facilitated disbursements of 4,035 loans to truck operators amounting to ₹197 crore as of March 31, 2024

Promoters hold 32% of the pre-offer equity share capital of the Company on a fully diluted basis. Their stake would reduce to 27% post-issue.

IPO Details:

Objects of the Offer:

 The company proposes to utilise the Net Proceeds towards funding the following objects: 

Key Strengths and Opportunities:

• India’s largest digital platform for truck operators: As per Redseer Report, it facilitated over 413.34 million transactions for 9,63,345 truck operators in Fiscal 2024, up from 4,82,446 truck operators in Fiscal 2022. It served 27.52% truck operators in India and facilitated 32.92% of the commercial vehicles tolling payments in Fiscal 2024. It offers services across 628 districts, constituting 80% of India’s districts as of March 31, 2024.
• Strong network effects of the platform result in robust customer retention: Over nine years of operations, it has built a nationwide truck operator base through targeted digital and telemarketing campaigns and on-ground teams. Leveraging on this, the platform retained 87.82% of annual transacting truck operators in their first year and 64.36% in their second year among those who first transacted in Fiscal 2022. Similarly, it retained 85.52% of annual transacting truck operators in their first year among those who first transacted in Fiscal 2023.
• Omnichannel distribution network with robust sales and service strategy driving customer adoption: The company uses a mix of digital marketing and targeted notifications and 9,395 Touchpoints (as of March 31, 2024) on the ground, to acquire new customers, as well as cross-sell/upsell products to existing customers. Touchpoints include a 549-member telesales unit and 1,112 channel partners. It has served in 80% of India’s districts and across 75% of the toll plaza network in India.
• High-growth business with operating leverage: By scaling the operations in the last three fiscal years, it has improved contribution, adjusted EBITDA margin and operating leverage. Its contribution increased from Rs. 132 crore in Fiscal 2022 to Rs. 288 crore in Fiscal 2024 and Adjusted EBITDA Margin from (84.01)% to 4.21% in same period. It achieved 150.59% Operating Leverage in Fiscal 2024.

Risk factors:

• Losses and Negative Cash Flows: The company and its subsidiary, TZF Logistics Solutions Private Limited have incurred losses and witnessed negative operating cash flows in the past. Also, its subsidiary, BlackBuck Finserve Private Limited, has witnessed negative operating cash flows in the past. Operating expenses could be expected to increase as it continues to invest to grow its current offerings and develop new offerings.
• Substantial dependency on partners in the Payments segment, especially FASTag Partner Banks: The company relies on its business partners for its payments and vehicle financing offerings. Partners in the payments segment contributed a substantial portion of revenue, accounting for 45.26% of total revenue from continuing operations in Fiscal 2024. The loss of any of these partners could negatively impact the company's business and results.
• Inability to expand customer base: An inability to attract new truck operators or retain existing truck operators could materially and adversely affect its business. If it is unable to foresee or respond effectively to changes in consumer preferences, demand for its offerings may decline, thereby reducing its sales and market share.
• Vehicle Financing Risks: The company’s vehicle financing offering exposes it to multiple risks, including those associated with high-risk borrowers and collateral recovery, which could negatively impact its financial condition. Also, failure to comply with minimum capital adequacy or any other regulatory requirements could lead to adverse actions by RBI, including imposition of penalties.

Financial Snapshot:

Conclusion:

The company has remained focused on expansion and reported strong revenue growth over the past two financial years, but it has burned a significant amount of cash to grow its customer base. Its net worth has declined and return on equity has remained at alarmingly low in previous financial years. Though in quarter ended June 30, 2024, it has reported profit, the major part of it is due to exceptional item gain. If it fails to achieve sustainable profitability, then its financial condition could be adversely affected. Changes to subscription or pricing models to improve margins could result in a drop in customers. Additionally, its operations may be impacted by fluctuations in the road transportation industry and fuel prices. Considering these factors, we recommend that investors avoid this IPO.