Fundamentals justify the offer price but ………
|
OFFER AT A GLANCE |
|
|
Name |
DJ Mediaprint & Logistics Ltd |
|
Offer Amount |
Rs 2.4 cr |
|
Offer Quantity |
12 lakh shares of Rs 10 each |
|
Offer on Total Equity |
28.48% |
|
Post-issue Promoter stake |
71.11% |
|
Post-IPO Capital |
Rs 4.21 cr |
|
Offer Price |
Rs 20 |
|
Minimum Application Qty |
6000 |
|
Offer Opens |
March 26, 2020 |
|
Offer Closes |
March 31, 2020 |
|
Basis Allotment |
April 7, 2020 |
|
Refund |
April 8, 2020 |
|
Demat Credit |
April 9, 2020 |
|
Trading |
April 13, 2020 |
|
Listing |
SME Platform of BSE |
|
Rating |
Nil |
|
Lead Manager |
Finshore Management Services |
|
Market Maker |
Nikunj Stock Brokers |
|
Underwriter |
Finshore Management Services (100%) |
|
Registrar |
Purva Sharegistry |
The Offer
The present offer is an initial public issue of 12,00,000 equity shares of face value of Rs 10 at a price of Rs 20 a piece aggregating to Rs 240 lakh from the Mumbai-registered eleven years old Integrated Printing, Logistics and Courier solution provider namely, DJ Mediaprint & Logistics Ltd (DJML). Of the public offer, 60,000 shares (Rs 12 lakh) are reserved for the Market Maker. The present offer constitutes 28.48% of the company’s post-IPO paid up equity share capital (Rs 4.21 cr). The promoters’ stake in the enlarged capital would be 71.11%.
This fixed price offer is proposed to be listed on the SME platform of BSE. Investors should apply for a minimum quantity of 6000 shares (Rs 1,20,000). While the Kolkata-based Finshore Management Services, who has underwritten the entire issue amount, has been appointed as the Lead Manager to the offer, New Delhi-registered Nikunj Stock Brokers is going to act as the market maker. The shares are scheduled to be traded on BSE-SME from April 13, 2020.
Issue Object
Of the IPO proceeds Rs 35 lakh (14.58%) is budgeted for issue related expenses. Working capital accounts for Rs 190 lakh (79.17%) and the balance (Rs 15 lakh or 6.25%) is kept for general corporate purpose.
Business & Background
The main promoter of DML, Dinesh Muddu Kotian (46) started his journey with a sole proprietary firm called “DJ Corporation” in the year 1999 with Courier and Logistics services as its core business. DJ Corporation is reportedly having speed post license (OSA) from Department of Post, Mumbai and Postal Bulk mailing License. The turnover of the firm was about Rs 65 cr in FY19. With a vision for further expansion and diversification, the promoter along with his brother incorporated DJML in the year 2009 and entered into printing business along with logistics, courier, bulk scanning and storage services, record management, bulk mailing, Newspaper advertising services etc.
In the year 2018 DJML also took over business operation of Pansecure Record Storage Management LLP which was in the business of providing customized solutions for records, documents and files storage and management.
DJML claims to have offices spread across Mumbai, Navi Mumbai & Bhiwandi (Thane), one in Delhi and one in Goa. The company reportedly has the capability to process 40 to 50 lakh articles per month catering to wide customer base across various industry segment such as Banking, Airlines, Shipping, Logistics, Education, Finance, Lottery Ticket, Healthcare, Insurance, Manufacturing, Retail, Stockbroking, Telecom, Utilities, etc.
According to the offer document, DJML’s clientele includes LIC, National Insurance, Bharti Axa, GIC Housing Finance, Citi Bank, Bank of India, Union Bank of India, Corporation Bank, Federal Bank, Bank of India, State Bank of India, Punjab National Bank, Infosys, Wipro, Britannia, Aditya Birla Group, Indian Institute of Architects, Dish TV, Philips, Larson & Turbo, NSDL among others.
The company claims to have executed many contracts for Printing & Dispatch of monthly Credit Cards Statement, Letter, Annual Reports & Other ancillary services, Storage of records and its management, Digital franking machines services and ancillary services etc. with its clients.
Financial Performance
DJML has put up an encouraging show in last three years. Whereas the company’s top line doubled, from Rs 10.10 cr in FY17 to Rs 20.46 cr in FY19, bottom line more than tripled, from Rs 31 lakh to Rs 96 lakh, during the period. A noteworthy aspect of DJML’s operations is that the company’s operating margin has grown consistently, from 8.6% in March 2017 to 14.8% December 2019.
The company made a bumper 5:1 bonus issue in February this year thereby enlarging the equity capital base to Rs 3.01 cr. The performance during the first 9 months of FY20 is any indication, one should see the bottom line crossing the Rs 1 cr mark this year.
DJML’s Financial Track Record
|
PERIOD ENDED |
Dec-19 |
Mar-19 |
Mar-18 |
Mar-17 |
|
MONTHS |
9 |
12 |
12 |
12 |
|
OPERATING REVENUE |
1301.6 |
2046.08 |
1730.7 |
1010.19 |
|
OTHER INCOME |
10.28 |
21.23 |
2.96 |
0.35 |
|
EBITDA |
203.11 |
243.79 |
156.91 |
86.9 |
|
OPM% |
14.8 |
10.9 |
8.9 |
8.6 |
|
INTEREST |
47.65 |
51.43 |
27.9 |
14.63 |
|
DEPRECIATION |
45.45 |
57.99 |
40.89 |
26.57 |
|
NET PROFIT |
79.31 |
96.07 |
64.79 |
31.01 |
|
EQUITY |
50.23 |
50.23 |
50.23 |
48.3 |
|
EQUIDY PENDING |
421.39 |
50.23 |
50.23 |
48.3 |
|
RESERVES |
322.18 |
247.32 |
154.92 |
90.12 |
|
RESERVES PENDING |
191.02 |
247.32 |
154.92 |
90.12 |
Valuation
DJML is asking for a share premium of Rs 1.20 cr (Rs 10 per share) through the IPO which seems reasonable when compared to the company’s growth track and current earnings. A bottom line of Rs 1 cr should yield an EPS of Rs 2.37on the company’s post-IPO equity. The offer price of Rs 20 discounts this earning 8.4 times which can be well justified.
Perception & Concern
Currently, DJML derives nearly 18% of its revenue (Rs 2.33 cr out of Rs 13.01 cr for the 9-month period ended December 2019) from courier services which is the main stay of the promoter’s flagship, DJ Corporation whose turnover was Rs 65 cr in FY19. When their private firm is fully into courier business, what prospects can one expect for the public company in this stream of business?
Even while the markets are in the dumps and main frame IPOs are facing uncertainty, DJML wants to go ahead with the public issue which shows its desperation to list the share. Interestingly, the Mumbai-based company has availed the services of a Kolkata-registered investment banker to manage the IPO and a Delhi-based broking firm for market making.
Market Maker Track
The track record of New Delhi-based Nikunj Stock Brokers Ltd as a market maker is none too impressive. Nikunj has handled seven IPOs in last two years of which just one has witnessed 100% liquidity. The market maker failed to provide a quote for as many as five IPOs for 75% of the days stipulated by the exchanges. Two of the 2019 IPOs failed to get quote even 25% of the trading days.
Liquidity of IPOs where Nikunj Stock Brokers acted as Market Maker
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ISSUER NAME |
IPO DATE |
DAYS |
DAYS |
Liquid% |
|
Jonjua Overseas |
12-Feb-19 |
263 |
57 |
21.7 |
|
Alphalogic |
26-Aug-19 |
135 |
31 |
23.0 |
|
Diksha Green |
26-Nov-18 |
320 |
86 |
26.9 |
|
Lorenzini Appar |
31-Jan-18 |
517 |
162 |
31.3 |
|
KHFM Hospitalty |
22-Mar-19 |
231 |
120 |
51.9 |
|
Tranway Tech |
27-Jan-20 |
31 |
24 |
77.4 |
|
SBC Export |
24-Jun-19 |
177 |
177 |
100.0 |
|
1674 |
657 |
39.2 |
Lead Manager Track
Coming to the market performance of the IPOs managed by the issue manager, the Kolkata-based Finshore Management handled 15 IPOs in last three years helping the issuers to raise about Rs 222 cr which is worth only Rs 198 cr at the current market value. As many as 11 of these IPOs are quoting below the offer price today. As a matter of fact, five IPOs are quoting at less than 50% of the offer price. Two of the 2018 issues have lost more than 85% of the IPO value!
PERFORMANCE OF FINSHORE-MANAGED IPOs
|
ISSUER NAME |
IPO DATE |
IPO |
CUR. |
GAIN |
% |
|
ICL Organic |
31-Jan-20 |
4.08 |
3.56 |
-0.52 |
-12.8 |
|
Tranway Tech |
27-Jan-20 |
4.24 |
4.8 |
0.56 |
13.3 |
|
Alphalogic |
26-Aug-19 |
6.18 |
5.53 |
-0.65 |
-10.5 |
|
SK Internation |
28-Jun-19 |
5.94 |
2.34 |
-3.6 |
-60.7 |
|
White Org Ret |
26-Apr-19 |
15.46 |
38.41 |
22.94 |
148.4 |
|
Northern Spirit |
22-Mar-19 |
18.50 |
7.7 |
-10.8 |
-58.4 |
|
Mahip Indust |
26-Feb-19 |
16.63 |
5.53 |
-11.1 |
-66.8 |
|
Jonjua Overseas |
12-Feb-19 |
1.30 |
4.86 |
3.56 |
273.9 |
|
Shankar Lal Ram |
12-Dec-18 |
7.29 |
7.13 |
-0.16 |
-2.2 |
|
Diksha Green |
26-Nov-18 |
13.32 |
8.64 |
-4.68 |
-35.2 |
|
Shree Kris Infr |
15-Nov-18 |
1.17 |
0.51 |
-0.66 |
-56.7 |
|
AKI India |
28-Sep-18 |
3.08 |
3.23 |
0.15 |
4.8 |
|
Powerful Tech |
9-Aug-18 |
13.55 |
1.95 |
-11.59 |
-85.6 |
|
Sungold Media |
9-Aug-18 |
18.23 |
0.92 |
-17.3 |
-94.9 |
|
East India Sec |
5-Mar-18 |
92.74 |
102.82 |
10.08 |
10.9 |
|
221.71 |
197.93 |
-23.77 |
-10.7 |