LEAP India IPO Filing Reveals Reliance on Pallet Pooling Revenue

After making a name for itself in the supply chain and logistics industry, pallet rental company LEAP India is looking to make its Dalal Street debut. The Mumbai-based company has filed its draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (SEBI) to raise Rs 2,400 crore through an initial public offering (IPO).

The company plans to raise Rs 400 crore through issuance of fresh shares while it will have an offer for sale (OFS) component of Rs 2,000 crore where its early backers will dilute some of their shareholding.

Vertical Holdings II Pte Ltd, a promoter entity backed by NYSE-listed global investment firm Kohlberg Kravis Roberts & Co. (KKR & Co.), is looking to divest shares worth up to Rs 1,998.6 crore. As of May 2025, Vertical held a 73.94% stake in LEAP India on a fully-diluted basis, as per the draft IPO papers seen by MediaNama.

The OFS will also see KIA EBT Scheme offloading shares worth up to Rs 1.37 crore. Other shareholders, including Sixth Sense India Opportunities III, First Bridge India Growth Fund and Madhurima International Private Limited will not be participating in the OFS.

LEAP India has also slotted a pre-IPO placement of Rs 80 crore, which, if completed, will proportionately trim the size of the fresh issue.

Background

Founded in 2013 by Sunu Mathew, LEAP India utilizes its “share and reuse” model, also known as pooling, to provide supply chain assets such as pallets, containers and material handling equipment (MHE) to companies across sectors such as FMCG, food and beverage, third-party logistics, e-commerce and quick commerce. The pallet pooling platform counts brands such as Amazon, Flipkart, LG, Pepperfry, Pepsi, Mahindra, BHEL and Exide among its clients.

The company claims to be the largest on-demand asset pooling provider within India’s supply chain management sector. As per its draft IPO papers, LEAP India has 14 millionassets with a pan-India network of 7,747 customer touchpoints and 30 fulfilment centres as of May 2025.

It is pertinent to note that KKR & Co. acquired a majority stake in LEAP India in 2023. In January this year, LEAP India acquired CHEP India for an undisclosed sum, strengthening its presence in the supply chain industry. Ahead of filing its DRHP with the market regulator, LEAP India converted into a public entity in July, as per its regulatory filing seen by Entrackr.

How will the IPO proceeds be used

Of the total IPO proceeds from the fresh issue, LEAP India plans to use Rs. 300.1 crore to repay term loans and other working capital borrowing arrangements with banks and financial institutions.

As of May 31, 2025, the supply chain solutions provider owed Rs 873.6 crore to lenders including IDFC First Bank Limited, Kotak Mahindra Bank Limited, Bajaj Finance Limited, Yes Bank Limited and Hongkong and Shanghai Banking Corporation Limited, the draft IPO papers showed.

Another 25% of the net proceeds will be utilised to fund growth initiatives, including but not limited to strategic investments, insurance and other working capital expenditure requirements.

Financial scorecard

The financials paint a picture of steady ascent, albeit with a few caveats. Revenue from operations came in at Rs. 466.5 crore in the fiscal year ended March 31, 2025, an increase of over 27% from Rs 364.9 crore from the previous year.

Earnings before interest, taxes, depreciation and amortisation (EBITDA) stood at Rs 273.7 crore for FY25, up over 30% year-on-year (YoY) from Rs 209.9 crore a year ago.

Despite a sharp increase in its operating revenue and higher EBITDA, LEAP India saw a muted growth in its net profit. For context, its consolidated net profit rose a mere 1% to Rs 37.55 crore during FY25 from Rs 37.2 crore in FY24.

Risk factors outlined

Customer dependence on long-term contracts

LEAP India is heavily dependent on long-term, recurring contracts with its key customers to generate income. For context, the top 10 customers contributed Rs 159.5 crore (excluding customers of CHEP India) to its revenue from operations in FY25.

Any failure to renew, expand or maintain contract arrangements, especially its top clients, could have an adverse impact on its revenue and profitability.

“While we have had no instances where we have exited contracts with our customers which have had a material impact on our business in fiscals 2025, 2024 and 2023, there is no assurance that such incidents will not occur in the future.

“Accordingly, there can be no assurance that the terms of our contracts will continue to be favourable to us or that we will be able to find new customers of appropriate size or at all in the future to compensate for any of our key customers that we lose or that renew their contracts on less favourable terms,” it said in its DRHP.

Reliability of IT systems

The company leverages in-house and third-party technologies and software for its business operations, including billing activities. If its IT systems malfunction or suffer cyberattacks and system failures, it could disrupt its normal operations.

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For instance, LEAP India experienced a shutdown of power supply in its server room in January 2025. Prior to that, in November 2024, the company’s firewall system became unresponsive due to suspicious traffic.

Asset pooling losses and control failures

In its DRHP, LEAP India acknowledged that loss, damage or theft of pooling assets (pallets, containers and handling equipment) requiring write-offs is a recurring risk.

The loss or leakage of its pallets and other pooling assets could lead to “lower-than-expected” financial returns, “undermine our business model” and “hinder our ability to deliver on our customer value proposition”, the company said.

While certain provisions in the contracts allow the company to recover costs incurred due to loss of assets “directly” from customers, there may be instances where customers don’t cover these costs.

Notably, impairment loss due to lost assets stood at Rs 5.2 crore in FY25 versus Rs 5.4 crore in FY24.

Heavy concentration in pallet pooling business

LEAP India earns a lion’s share of its revenue from pallet pooling. In the fiscal year ended March 2025, the pallet pooling business contributed about 68% or Rs 316.7 crore to its revenue from operations.

Rising competition, changes in consumer preferences and further regulatory hurdles could lead to a decline in its top line, which “may not be offset by gains in other business segments,” the pallet rental company said.

Limited competition…for now

While LEAP India faces limited competition from its peers in the Indian pallet pooling industry, the entry of new players in this space in the future is likely to heighten competition based on innovation, brand recognition and more cost-effective services. This could consequently hurt the company’s dominance in the pallet pooling market.

Supplier/service provider concentration

Without disclosing their names, LEAP India said that top 10 of its suppliers accounted for 60% of purchases amounting to Rs 263 crore in FY25. Dependency on a limited number of suppliers for assets and services means that any disruption, quality failure or price spike can adversely impact the company’s revenue.

Rising maintenance costs

LEAP India has limited control over the end-use of its pooled assets. An increase in asset repair, inspection or replacement costs (subject to labour, timber and transportation etc.) may hurt profitability and cash flows, especially if the company fails to pass on these expenses to customers. Notably in FY25, LEAP India incurred repairs and maintenance cost of Rs 26.7 crore.

Pricing of raw material

Raw materials such as timber and plastic are critical for manufacturing pallets and containers, respectively. However, LEAP India doesn’t procure these raw materials itself, and instead relies on suppliers, who primarily source timber from Europe and Oceanic countries. This exposes the company to risks associated with fluctuations in timber availability and pricing.

Additionally, it imports forklifts from China, which exposes the company to geopolitical, regulatory, logistical, economic and operational uncertainties.

Emerging tech may threaten competitive position

LEAP India acknowledges that the success of its business model depends on widespread adoption of its pallets, containers and MHEs. However, the emergence of new technology in pallets, containers and MHEs design and low-cost alternatives may lead to customer churn, and in turn, loss of market share.