Future Supply Chain Solutions Limited: Information Analysis

About the company Future Supply Chain Solutions (FSC) is a third-party logistics player. Integrated logistics services come under its ambit and the company primarily serves Kishore Biyani-promoted Future Group entities. It has three segments: Contract logistics, express logistics and temperature-controlled business. Contract logistics, which involves supply chain management and warehousing, and express logistics, which is related to time-sensitive deliveries, formed 70 and 22 per cent of its revenues in FY17 respectively. Temperature-controlled business was launched in 2016 for transportation of perishable food items in special vehicles and contributed 6 per cent to FSC's FY17 revenues. The company hires vehicles from third parties for its contract & express logistics business while for its temperature controlled business, it owns the specialized vehicles. A Brief on Promoter's history Future Supply Chain Solutions is part of Kishore Biyani promoted Future Group. The Group traces back its history to 1987 as garment manufacturer. It got listed on stock exchange in 1991 and expanded into retailing of fashion garments in big stores. In early 2000, the group expanded into other retail segments setting up Big Bazaar and Food Bazaar. Between 2005 and 2010, the group diversified into various businesses like insurance, capital advisory, real estate through joint ventures and acquisitions increasing its debt levels alarmingly. Since then, the group has had a number of demergers, which lead to restructuring and renaming of its entities. The Group currently has Future Enterprises, Future Retails & Future Consumers Limited as its major listed companies. Pros FSC's revenues have grown modestly at 10 per cent CAGR since 2012, but this is accompanied by higher operating margins of 13 per cent (five-year average). Incidentally, it is 4 per cent for its peers Mahindra Logistics and Tiger Logistics. The company's client base excluding Future Group entities is also well diversified across sectors, with no sector contributing more than 24 per cent to its FY17 revenues. This is unlike its peers (they have higher dependence on the automotive sector). Cons Though the company is growing and has plans to increase its warehousing space and vehicles for temperature-controlled business, it will not receive any proceeds from the IPO. This means that the company will have to rely on external debt to fund its