Abysmal earned surplus, absurd share premium!
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OFFER AT A GLANCE |
|
|
Name |
Nirmitee Robotics India Ltd |
|
Offer Amount |
Rs 3.24 cr |
|
Offer Quantity |
1.75 lakh shares of Rs 10 each |
|
Offer on Total Equity |
29.19% |
|
Post-issue Promoter stake |
70.81% |
|
Post-IPO Capital |
Rs 0.60 cr |
|
Offer Price |
Rs 185 |
|
Minimum Application Qty |
600 |
|
Offer Opens |
March 31, 2020 |
|
Offer Closes |
April 9, 2020 |
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Basis Allotment |
April 16, 2020 |
|
Refund |
April 17, 2020 |
|
Demat Credit |
April 20, 2020 |
|
Trading |
April 21, 2020 |
|
Listing |
SME Platform of BSE |
|
Rating |
Nil |
|
Lead Manager |
Aryaman Financial Services |
|
Market Maker |
Aryaman Capital Markets |
|
Underwriter |
Aryaman Fin (94.52%), Aryaman Cap (5.48%) |
|
Registrar |
Bigshare Services |
The Offer
The present offer is an initial public issue of 1,75,200 equity shares of face value of Rs 10 at a price of Rs 185 a piece aggregating to Rs 324.12 lakh from the Nagpur-based 2016-incorporated HVAC duct cleaning and Ozone sterilization service provider namely, Nirmitee Robotics India Ltd (NRIL). Of the public offer, 9,600 shares (Rs 17.76 lakh) are reserved for the Market Maker. The present offer constitutes 29.19% of the company’s post-IPO tiny paid up equity share capital (Rs 0.60 cr). The promoters’ stake in the enlarged capital would be 70.81%.
This fixed price offer is proposed to be listed on the SME platform of BSE. Investors should apply for a minimum quantity of 600 shares (Rs 1,11,000). While the Mumbai-based Aryaman Financial, who has underwritten 94.5% or Rs 306.36 lakh, is acting as the manager to the offer, stable mate Aryaman Capital, who has underwritten the market maker portion of 5.5% or Rs 17.76 lakh, is going to act as the market maker. The shares are scheduled to be traded from April 21, 2020.
Issue Object
Of the IPO proceeds, Rs 41 lakh (12.65%) is budgeted for issue related expenses. Rs 175 lakh (54%) is earmarked for redeeming Preference Shares issued to one of the promoters (Kartik Eknath Shende). Rs 100 lakh will be placed as Security Deposit with a member of the promoter group (Sudarshan Eknath Shende) towards acquisition of Registered Office, R & D facility and assembling unit. The balance (Rs 8.10 lakh or 2.5%) is reserved for general corporate purpose.
Business & Background
The three and a half year-old NRIL, promoted by Jay Prakash Motghare (39), Kartik Eknath Shende (47) and Rajesh Narendra Admane (50), is engaged in providing HVAC duct cleaning and Ozone sterilization services using in-house made robots. These robots clean the inside of HVAC Air Ducts by scrubbing, polishing, sucking, scraping and removal of the accumulated contaminants like dust, debris, bacteria, dead pests and rodents and provides Ozone treatment to the ducts from the inside, thus sanitizing it for many more months to come. The robots built by NRIL are employed for inspection, cleaning and post-cleaning operations and are fitted with an advanced controller mechanism and a high-resolution camera.
NRIL’s activities are currently being carried out from the company’s registered office which also houses its R&D facility and assembling unit. Nevertheless, NRIL does not own this facility. The said premises were actually acquired on a leasehold basis from MIDC by M/s. Manisha Sales, a proprietary concern of Sudarshan Eknath Shende who is a member of NRIL’s promoter group.
Having been a closely held company till date, NRIL had not regularized its arrangement for the said facility as per market norms. Further, being a small and startup Company, NRIL does not wish to substantially increase its rental expenditure for the R & D facility, assembling unit and the registered office at this stage. It has therefore entered into a Memorandum of Understanding (MOU) dated December 09, 2019 for the Registered Office, assembling unit and R & D facility, with M/s. Manisha Sales, which is to be reviewed after every 5 years. As per the terms of the MOU, NRIL has to place an interest free refundable security deposit of Rs 100 lakh which is proposed to be met out of the net issue proceeds.
Financial Performance
Of the three years that NRIL is into operation, only in FY19 the company has put up a credible performance. On a top line of Rs 2.03 cr, it netted a profit of Rs 20.73 lakh which looked very attractive as compared to its miniscule equity base of Rs 1.5 lakh. During the first six months of FY20, though the top line was maintained in line with the previous year, the company could net a profit of only Rs 2.63 lakh which looks too small to service an enlarged post-IPO capital of Rs 60 lakh.
Financial Track Record (In Lakh)
|
PERIOD ENDED |
Sep-19 |
Mar-19 |
Mar-18 |
Mar-17 |
|
MONTHS |
6 |
12 |
12 |
12 |
|
OPERING REVENUE |
99.38 |
203.11 |
70.10 |
5.88 |
|
OTHER INCOME |
0.46 |
0.47 |
0.12 |
0.03 |
|
EBITDA |
5.98 |
32.32 |
9.45 |
0.8 |
|
OPM% |
5.6 |
15.7 |
13.3 |
13.1 |
|
DEPRECIATION |
2.36 |
5.93 |
4.11 |
0.06 |
|
NET PROFIT |
2.63 |
20.73 |
2.16 |
0.52 |
|
EQUITY |
1.5 |
1.5 |
1.5 |
1 |
|
EQUITY PENDING |
60.02* |
1.5 |
1.5 |
1 |
|
RESERVES |
26.05 |
23.43 |
2.69 |
0.53 |
|
RESERVES PENDING |
311.65 |
23.43 |
2.69 |
0.53 |
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* After 14:1Bonus (Rs 21 lakh), Rights 8:9 (Rs 20 lakh) and IPO (Rs 17.52 lakh) |
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Valuation
NRIL is asking for an IPO premium of Rs 175 per share (paid-up value Rs 10) aggregating to Rs 306 lakh though in last three full years the company could not log in a turnover of even Rs 3 cr! Last fiscal’s bottom line of Rs 21 lakh yields an EPS of Rs 3.45 on the company’s post-IPO equity. The offer price (Rs 185) discounts this earning more than 53 times which is too steep to justify for a small start-up company. Moreover, after a bumper 14:1 bonus issue in February 2020, the company’s earned surplus/reserves stood at just Rs 5 lakh. Asking for an exorbitant IPO premium of 61 times its earned surplus/reserves surely exposes the company’s management quality. Either they are too greedy or ill-advised by the merchant bankers.
Perception & Concern
The duct cleaning service market is highly fragmented and competitive in nature and characterized by the presence of globally operating companies and various local domestic players. Since a significant portion of NRIL’s revenue is dependent on very few clients and the company does not have any contractual arrangements with its customers, the loss of any one or more of its major clients or a reduction in their demand for services will have a serious impact on NRIL’s business operations, profitability and financial condition.
NRIL’s business is based on an innovative concept and is a relatively niche field. Hence, it is unable to maintain strong net profit margins due to lack of awareness of duct cleaning needs in India. In last three and a half years, the margin has wildly fluctuated between 2.7% and 10.2%. Further, last two full years’ net operating cash flow has been negative.
Promoter group companies viz. Ozone Research and Applications (India) Private Ltd and Omniscient Treatment Technologies Private Ltd are engaged in related line of business and the public company does not have any non-compete agreement with the group companies. Such a conflict of interest may have adverse effect on the public company’s business and growth.
Moreover, raising public money in order to redeem the promoters’ preference shares and taking on lease of promoter group’s property at a hefty interest-free deposit is certainly not in the interest of the investing public.
Market Maker Track
The track record of Mumbai-based Aryaman Capital as a market maker is pathetic. It has handled as many as 29 IPOs in last three years of which just one 2018-IPO found quote more than 75% of the days since listing. 15 IPOs were liquid less than 30% of the working days. With such a poor track record of the market maker, what will happen to NRIL’s scrip, especially under the present market condition, is anybody’s guess.
Market Making Track of Aryaman Capital
|
ISSUER_NAME |
IPO DATE |
DAYS |
DAYS |
Liquid |
|
Shreeshay Engg |
9-Mar-18 |
499 |
42 |
8.4 |
|
Transpact |
26-Aug-19 |
140 |
15 |
10.7 |
|
Galactico Corp |
24-Sep-19 |
119 |
16 |
13.4 |
|
Gleam Fabmat |
19-Feb-19 |
263 |
38 |
14.4 |
|
Silgo Retail |
27-Sep-18 |
362 |
54 |
14.9 |
|
Ambani Organic |
6-Jul-18 |
417 |
73 |
17.5 |
|
Shiv Aum Steel |
19-Sep-19 |
123 |
22 |
17.9 |
|
Advitiya Trade |
14-Mar-18 |
496 |
96 |
19.4 |
|
Roni Household |
19-Nov-18 |
327 |
67 |
20.5 |
|
Sky Gold |
18-Sep-18 |
367 |
76 |
20.7 |
|
CKP Product |
26-Apr-17 |
716 |
157 |
21.9 |
|
Medico Remedies |
29-Jan-18 |
526 |
132 |
25.1 |
|
Shreeji Trans |
29-Sep-17 |
607 |
159 |
26.2 |
|
Geekay Wire |
9-Aug-17 |
641 |
168 |
26.2 |
|
Banka Bioloo |
5-Feb-18 |
514 |
141 |
27.4 |
|
Saketh Exim |
1-Aug-18 |
399 |
127 |
31.8 |
|
Uravi T & Wedge |
16-Mar-18 |
494 |
159 |
32.2 |
|
CKP Leisure |
21-Feb-18 |
510 |
171 |
33.5 |
|
Shradha Infra |
27-Nov-17 |
567 |
197 |
34.7 |
|
Yasho Indust |
19-Mar-18 |
493 |
192 |
38.9 |
|
Garv Ind |
12-Apr-18 |
476 |
186 |
39.1 |
|
Jakharia Fabric |
29-Jun-18 |
422 |
175 |
41.5 |
|
Valencia Nutri |
23-Dec-19 |
59 |
27 |
45.8 |
|
Ashoka Metcast |
23-Jan-18 |
529 |
258 |
48.8 |
|
DRS Dilip Road |
27-Nov-18 |
322 |
158 |
49.1 |
|
Silly Monks |
5-Jan-18 |
540 |
295 |
54.6 |
|
SKS Textile |
9-Jan-18 |
539 |
296 |
54.9 |
|
Supershak Met |
17-Jul-18 |
409 |
250 |
61.1 |
|
Marine Elect |
28-Sep-18 |
361 |
319 |
88.4 |
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12237 |
4066 |
33.2 |
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Lead Manager Track
Coming to the market performance of the IPOs managed by NRIL’s issue manager, the Mumbai-based Aryaman Financial Services handled 35 IPOs in last three years helping the issuers to raise about Rs 719 cr which is worth Rs 564 cr at the current market value. In other words, investors have lost more than Rs 155 cr or 21.6%. As many as 13 of these IPOs are quoting below the offer price today. Whereas just one IPO fetched more than 100% return, investors in seven IPOs lost more than 75% of their capital.
|
ISSUER NAME |
IPO |
IPO |
CUR. |
GAIN |
GAIN |
|
Valencia Nutri |
23-Dec-19 |
7.23 |
7.23 |
0 |
0 |
|
Vishwaraj Sug |
30-Sep-19 |
60.00 |
62.50 |
2.50 |
4.2 |
|
Galactico Corp |
24-Sep-19 |
3.70 |
3.67 |
-0.03 |
-0.9 |
|
Shiv Aum Steel |
19-Sep-19 |
3.60 |
16.20 |
12.60 |
350.0 |
|
Transpact |
26-Aug-19 |
1.35 |
1.40 |
0.05 |
3.8 |
|
Roopshri Resort |
19-Mar-19 |
3.60 |
4.05 |
0.45 |
12.5 |
|
Gleam Fabmat |
19-Feb-19 |
3.12 |
0.51 |
-2.61 |
-83.5 |
|
DRS Dilip Road |
27-Nov-18 |
31.50 |
28.83 |
-2.67 |
-8.5 |
|
Roni Household |
19-Nov-18 |
3.00 |
4.88 |
1.88 |
62.5 |
|
Marine Elect |
28-Sep-18 |
42.87 |
57.65 |
14.78 |
34.5 |
|
Silgo Retail |
27-Sep-18 |
4.88 |
5.49 |
0.61 |
12.5 |
|
Sky Gold |
18-Sep-18 |
25.56 |
27.69 |
2.13 |
8.3 |
|
Saketh Exim |
1-Aug-18 |
9.44 |
16.59 |
7.15 |
75.7 |
|
Supershak Met |
17-Jul-18 |
60.01 |
89.79 |
29.78 |
49.6 |
|
Ambani Organic |
6-Jul-18 |
9.03 |
8.37 |
-0.66 |
-7.3 |
|
Jakharia Fabric |
29-Jun-18 |
19.66 |
20.20 |
0.55 |
2.8 |
|
Garv Ind |
12-Apr-18 |
3.20 |
4.56 |
1.36 |
42.5 |
|
Giriraj Civil |
19-Mar-18 |
9.00 |
1.94 |
-7.07 |
-78.5 |
|
Yasho Indust |
19-Mar-18 |
28.99 |
33.34 |
4.35 |
15.0 |
|
Karda Construct |
16-Mar-18 |
77.40 |
53.75 |
-23.65 |
-30.6 |
|
Uravi T & Wedge |
16-Mar-18 |
15.00 |
15.02 |
0.02 |
0.1 |
|
Advitiya Trade |
14-Mar-18 |
4.31 |
8.04 |
3.73 |
86.7 |
|
Shreeshay Engg |
9-Mar-18 |
5.40 |
5.94 |
0.54 |
10.0 |
|
CKP Leisure |
21-Feb-18 |
11.54 |
1.79 |
-9.75 |
-84.5 |
|
Banka Bioloo |
5-Feb-18 |
12.63 |
6.43 |
-6.19 |
-49.0 |
|
Medico Remedies |
29-Jan-18 |
10.99 |
8.90 |
-2.09 |
-19.0 |
|
Ashoka Metcast |
23-Jan-18 |
12.00 |
1.19 |
-10.81 |
-90.1 |
|
Apollo Micro |
10-Jan-18 |
158.51 |
25.62 |
-132.89 |
-83.8 |
|
SKS Textile |
9-Jan-18 |
13.32 |
3.02 |
-10.30 |
-77.3 |
|
Silly Monks |
5-Jan-18 |
15.12 |
2.90 |
-12.22 |
-80.8 |
|
Shradha Infra |
27-Nov-17 |
18.93 |
6.17 |
-12.76 |
-67.4 |
|
Shreeji Trans |
29-Sep-17 |
12.40 |
9.27 |
-3.13 |
-25.2 |
|
AKM Lace |
20-Sep-17 |
4.76 |
2.36 |
-2.40 |
-50.4 |
|
Geekay Wire |
9-Aug-17 |
11.00 |
14.99 |
4.00 |
36.4 |
|
CKP Product |
26-Apr-17 |
6.24 |
3.39 |
-2.85 |
-45.7 |
|
719.29 |
563.67 |
-155.60 |
-21.6 |
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