ABS Marine NSE SME IPO review (Apply)

 •    AMSL is engaged in providing offshore vessel management, crew management and other seafarer/port related services.
•    With high margin contracts, it marked super growth from FY22 onwards, indicating future prospects.
•    The company has about ongoing six high margin contracts and many more in the pipeline.
•    Based on FY24 super earnings, the issue appears fully priced. 
•    Investors may park funds for the medium to long term rewards. 

ABOUT COMPANY:
ABS Marine Services Ltd. (AMSL) started operations with two offshore vessel management and as of the date of December 31, 2023 it had 5 owned vessels comprising of 2 advanced offshore vessels servicing the Oil & Gas sector & 3 Harbour Crafts serving the Indian Ports sector. The company has one long term chartered specialized multipurpose offshore vessel serving the Oil & Gas Sector. In addition, as of December 31, 2023 it is carrying out total ship management of 12 vessels on behalf of Government, public sector undertakings, private companies and port authorities. It is providing services to many renounced customers with who it enjoys long term relationships.

It is providing crew management services to a further 24 ships comprising Oil Tankers, Gas Tankers, Bulk Carriers, Passenger Vessels and High Speed Crafts. Its fully owned, chartered-in, totally managed & crewed fleet includes state of the art DP-2 Multipurpose offshore Supply Vessels, Anchor Handling Towing Supply Vessel, multi-disciplinary Ocean Research Vessels, Coastal Research Vessels, Fishery Oceanographic Research Vessel, Bulk Carriers, Gas Tankers, Oil Tankers, Passenger Vessels, High Speed Crafts & Harbour Crafts.

AMSL is a fully integrated company with in-house complete vessel management including commercial management. Its customers are primarily comprised of Government of India, large industrial concerns, public sector undertakings, port authorities and private sector. It has also entered into 10 (ten) strategic contracts with Government agencies which contributes towards company's Revenue from Operations. Out of the ten contracts, one major contract with the Ministry of Earth and Science (MOES) contributes towards its 23.50% of the Revenue from operations. As of March 31, 2024, it had 468 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 6550000 equity shares of Rs. 10 each to mobilize Rs. 96.29 cr. at the upper cap. It has announced a price band of Rs. 140 - Rs. 147 per share. The issue opens for subscription on May 10, 2024, and will close on May 15, 2024. The minimum application to be made is for 1000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.68% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, it will utilize Rs. 55.00 cr. for acquisition of offshore vessel, Rs. 25.00 cr. for working capital, and the rest for general corporate purposes. 

The issue is solely lead managed by GYR Capital Advisors Pvt. Ltd., and Purva Sharegistry (I) Pvt. Ltd. is the registrar of the issue. Giriraj Stock Broking Pvt. Ltd. and Commodity Mandi Pvt. Ltd. are the market makers (3.13% each) for the company. 

The company has issued entire equity capital at par so far and has also issued bonus shares in the ratio of 1799 for 1 in September 2023. The average cost of acquisition of shares by the promoters is Rs. NIL, Rs. 0.56 per share. 

Post-IPO, company's current paid-up equity capital of Rs. 18.00 cr. will stand enhanced to Rs. 24.55 cr. Based on the upper IPO price band, the company is looking for a market cap of Rs. 360.89 cr.  

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a consolidated basis) posted a total revenue/net profit of Rs. 82.84 cr. / Rs. 8.38 cr. (FY22), Rs. 113.81 cr. / Rs. 10.22 cr. (FY23), and Rs. 138.02 cr. / Rs. 25.41 cr. (FY24). The boosted profit for FY24 raise eyebrows and concern over sustainability of such margins. 

However, according to the management, for FY22 it got two high margin contracts that spurted its bottom lines and for FY24, it added four more new such contracts that boosted the bottom lines. This trends will continue considering some more similar contracts in the pipeline. 

For the last three fiscals, it has reported an average EPS of Rs. 9.06, and an average RoNW of 15.06%. The issue is priced at a P/BV of 2.26 based on its NAV of Rs. 65.10 as of March 31, 2024, and at a P/BV of 1.69 based on its post-IPO NAV of Rs. 86.95 per share (at the upper cap).

If we attribute annualized FY24 earnings to its post-IPO fully diluted paid-up capital, then the asking price is at a P/E of 14.20. 

For the reported periods, the company has posted RoCE margins of 9.80% (FY22), 11.66% (FY23), 18.67% (FY24), but is missing PAT margin details in KPI Data. 

DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Shipping Corp. of India and Seamec Ltd., as their listed peers. They are trading at a P/E of 62.8 and 41.7 (as of May 07, 2024). However, they are not comparable on an apple-to-apple basis.

MERCHANT BANKER'S TRACK RECORD:
This is the 24th mandate from GYR Capital in the last four fiscals (including the ongoing one), out of the last 10 listings, all listed with premiums ranging from 30.84% to 366.67% on the listing date.