Aakar Medi NSE SME IPO review (May apply)

•    The company is dealing in a wide range of aesthetics products and related devices.
•    It posted growth in its top and bottom lines for the reported periods.
•    The sudden boost in top and bottom lines in a pre-IPO year i.e., FY25 raise eyebrows and concern over its sustainability going forward.
•    Based on its recent financial data, the issue appears aggressively priced.
•    Well-informed/cash surplus investors may park moderate funds for long term.

ABOUT COMPANY:
Aakar Medical Technologies Ltd. (AMTL) is a medical aesthetic company dealing in a wide range of aesthetics & specialized cosmetic products & devices. Its product range includes both Own brands (domestically manufactured products & internationally manufactured devices) and Imported Brands (distribution of imported brands) from countries such as Korea, Spain, Italy, and Austria. 

It has established a distinctive presence in the medical aesthetic market by exclusively focusing on business-to-business(B2B) channels for product distribution and sales. AMTL supplies products & devices primarily to dermatologists, plastic surgeons, aesthetic physicians who then sell these products to their end consumers as well as use certain device consumables as part of their treatments. The company derive majority of its revenue from Aesthetic products and will continue to focus on Aesthetic products pipeline. As of May 30, 2025, it had 177 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 3750400 equity shares of Rs. 10 each to mobilize Rs. 27.00 cr. at the upper cap. It has announced a price band of Rs. 68 – Rs. 72 per share. The issue opens for subscription on June 20, 2025, and will close on June 24, 2025. The minimum number of shares to be applied is for 1600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.46% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, it will utilize Rs. 20.35 cr. for working capital, and the rest for general corporate purposes. 

The IPO is solely lead managed by Indorient Financial Services Ltd., and Bigshare Services Pvt. Ltd., is the registrar to the issue. Alacrity Securities Ltd., is the market maker.

The company has issued initial equity shares at par value, and issued further equity capital in the price range of Rs. 64 – Rs. 800 per share between July 2024 and October 2024. It also issued bonus shares in the ratio of 6 for 1 in August 2021, 6 for 1 in August 2024, 12 for 1 in August 2024. The average cost of acquisition of shares by the promoters is Rs. 0.11 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 10.42 cr. will stand enhanced to Rs. 14.17 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 102.04 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 32.88 cr. / Rs. 2.15 cr. (FY23), Rs. 46.27 cr. / Rs. 2.87 cr. (FY24), Rs. 61.76 cr. / Rs. 6.04 cr. (FY25). It posted growth in its top and bottom lines for the reported periods. However, the boosted bottom lines for FY25 i.e., pre-IPO year raise eyebrows and concern over its sustainability going forward. It appears to be window dressing to fetch fancy valuations.

For FY25, Aesthetic products contributed to the tune of 86.12% of the total revenue and the rest came from Aesthetic devices and device consumables. In product segment, 94 brands were imported and 60 own brands were included. It billed 5236 customers with a sales team of 129 executives during FY25.

For the last three fiscals, the company has reported an average EPS of Rs. 4.51 and an average RoNW of 29.59%. The issue is priced at a P/BV of 3.23 based on its NAV of Rs. 22.26 as of March 31, 2025, and at 2.03 P/BV based on its post-IPO NAV of Rs. 35.42 per share (at the upper cap).

If we attribute FY25 super earnings on post-IPO fully diluted equity capital, then the asking price is at a P/E of 16.90. Based on FY24 earnings, the P/E stands at 35.47. The issue relatively appears aggressively priced.

For the reported periods, the company has posted PAT margins of 6.57% (FY23), 6.22% (FY24), 9.81%, (FY25), and RoCE margins of 22.30%, 17.68%, 21.02%, respectively for the referred periods. 

DIVIDEND POLICY:
The company paid a dividend of 75% for FY23. It has already adopted a dividend policy in December 2024, based on its financial performance and future prospects.

COMPARISION WITH LISTED PEERS:
As per the offer document, the company has no listed peers to compare with.

MERCHANT BANKER’S TRACK RECORD:
This is the 11th mandate from Indorient Financial in the last four fiscals including the ongoing one.  From the last 10 listings, 2 listed at discount and the rest with a premium ranging from 1.16% to 90%, on the listing date.