Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Elbee Services: Diluting gains - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Jun 18, 2001

    Elbee Services: Diluting gains

    Elbee Services is the second largest courier company in the country, with a market share of around 20%. The company has undergone a massive restructuring exercise in the recent past, which is bearing fruit now. The company has registered a smart turnaround in its fortunes after being in red for couple of years. To improve profitability, the company changed its product mix drastically, in favour of high margin businesses. In the courier industry, domestic operations are more profitable compared to international business. Again, within the domestic business, non-documents business is more profitable compared to the document one because of competition from unorganised players and proliferation of advanced communication devices.

    Elbee Services- Changing Product Mix
    Particulars 2000 2001 E
    Domestic Business 49% 56%
    International Business 51% 44%

    The operating margins of the company have shown a sharp improvement from 6.8% in FY00 to 10% in 3QFY01, following the restructuring. Apart from product mix change, the company has also decided to use commercial airlines for its operations. It has decided to sell off its 5.5 Fokker aircraft. This would result in low fixed cost and high variable cost model, which would enable it to have flexibility to scale down its operations, in case of a slowdown scenario.

    The survival strategy in the courier industry now, is to offer complete logistics management. Courier companies are integrating supply chain on behalf of their clients to help them cut on inventory carrying costs. A sophisticated hub and spoke model coupled with investments in technology, enabling real time tracking of transportation pipeline is required to offer value differentiation. Elbee Services is in the process of putting in place its new hub, which is likely to be operational in a couple of months (after witnessing some legal hitches). The company has also tied with 70 leading portals to cash in on E-commerce opportunities.

    The domestic express industry is likely to grow at around 25-30% in the next few years. Established players with well-entrenched networks, value added offerings and competitive technological edge are expected to maintain growth momentum. Elbee's restructuring exercise as well as other initiatives seem to be in the right direction. However the flip side is, though the financials of the company are expected to witness a smart turnaround, the effect would be diluted to a large extent due to substantial private placements carried out in the recent past.

    The company's shareholders recently approved a second preferential allotment of 3 m shares to financial institutions and mutual funds (at a minimum price of Rs 140). In the first preferential allotment the company had placed around 3.3 m shares to ICICI, UTI and others. The share capital of the company is expected to increase by 94% following these placements. The company plans to utilize these funds to retire debts, which should result in interest savings in the current year. At the current market price of Rs 112, the stock is trading at 12 times its FY01E earnings.



    Equitymaster requests your view! Post a comment on "Elbee Services: Diluting gains". Click here!


    More Views on News

    Sorry! There are no related views on news for this company/sector.

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies(The 5 Minute Wrapup)

    Aug 4, 2017

    The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    • Track your investment in ELBEE SERVICES with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks