Zinka Logistics IPO: 10 key risks investors should know before investing to the issue

Zinka Logistics IPO: The initial public offering for Zinka Logistics Solutions Ltd, a digital platform catering to truck operators, has commenced subscription today (Wednesday, November 13). While the issue is experiencing a sluggish start, it aspires to succeed like other offerings throughout the week.

On Tuesday, Zinka Logistics attracted over ₹501 crore from anchor investors for its IPO. The IPO, amounting to ₹1,115 crore, is set at a price range of ₹259-273 per share and will be open for public subscription until Monday, November 18.

This IPO consists of a fresh issue of shares totalling ₹550 crore and an offer for sale (OFS) of up to 2.06 crore shares. The OFS, featuring shares from promoters and selling investors, is estimated to be worth ₹565 crore at the highest end of the price range.

The funds raised from the new issuance, up to ₹200 crore, will be allocated for sales and marketing activities; ₹140 crore will be invested in Blackbuck Finserve to strengthen the capital base for future financing needs; ₹75 crore will be dedicated to expenses related to product development, and a portion will also be reserved for general corporate purposes.

Zinka Logistics is committed to revolutionizing the trucking sector in India by equipping truck operators with digital tools to handle their operations and enhance their income. The BlackBuck app offered by the company acts as an all-in-one platform, delivering services for payments, telematics, load management, and vehicle financing.

The book-running lead managers for the issue include Axis Capital, Morgan Stanley India Company, JM Financial, and IIFL Capital Services.

Zinka Logistics IPO - Key Risks

Here are some of the key risks listed by the company in its Red-Herring Prospectus (RHP):

• The company and its subsidiary, TZF Logistics Solutions Private Limited, have experienced losses and have had negative operating cash flows previously. Additionally, their subsidiary, BlackBuck Finserve Private Limited, has reported negative operating cash flows for the last three financial years.
• The company's income heavily relies on their payments and telematics services, which accounted for 92.79% and 94.53% of their overall revenue from ongoing operations in the three months ending June 30, 2024, and Fiscal 2024, respectively. Any adverse effects on these services could significantly impact their business, operating results, and financial health.
• The company relies on specific key suppliers to obtain a considerable part of their vehicle tracking solutions. They do not establish long-term contracts with these suppliers, so any denial of supplies, loss of relationships with them, or interruptions in the supply chain could negatively impact their business, operational results, and financial health.
• The company stands as the largest digital platform for truck operators in India in Fiscal 2024, representing 27.52% of the nation's truck operators. A failure to attract new truck operators or to retain current ones could significantly negatively impact their business, operational results, and financial standing.
• The company plans to allocate a portion of the Net Proceeds for investment in Blackbuck Finserve Private Limited, their non-banking financial company subsidiary, which lacks a well-established operational history, to enhance its capital base and fulfill future capital needs.

• The company utilises specific services from third-party providers on their platform to execute their sales and service strategy, and any interruption or obstruction in their access to these services could negatively impact their business, operational results, and financial health.
• The company's operations demand substantial sales and marketing efforts, leading to higher operating expenses that could negatively affect their business, operational outcomes, and financial stability.
• The company's product development initiatives might not achieve the anticipated success or deliver the expected returns or advantages, and they may struggle to provide their customers with innovative solutions and uphold their competitive edge.
• Variations in the road transportation sector and fuel costs could influence freight volumes and truck availability, potentially leading to negative effects on their business, operational outcomes, and financial health.
• The company must adhere to data privacy laws and information technology regulations, and any future failure to comply may negatively impact business, operational results, and financial condition.

Zinka Logistics IPO GMP today

Zinka Logistics IPO GMP today or grey market premium was ₹0, which meant shares were trading at their issue price of ₹273 with no premium or discount in the grey market according to investorgain.com.

According to the grey market activity observed over the last eight sessions, the IPO GMP is showing a downward trend today and is anticipated to decline further. The GMP has a minimum of ₹0 and a maximum of ₹24, based on insights from experts at investorgain.com.

'Grey market premium' indicates investors' readiness to pay more than the issue price.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.