Review By Dilip Davda on February 27, 2021
• The company is engaged in offering augmented/virtual reality services.
• ATL has shown minuscule financial data for limited periods.
• The issue is priced exorbitantly.
• Lead Manager has an average track record so far.
ABOUT COMPANY:
Adjia Technologies Ltd. (ATL) is engaged in the business of offering augmented reality and virtual reality related services to various customers electronically. It also is doing software consultancy services.
The segment of augmented/virtual reality related service has may multinational key market players like Google, PTC, Apple, Sony (Japan), Samsung, Microsoft, Seiko Epson, Lenovo etc to name a few. Thus it is competing with many big names. The company has no technical/financial or performance guarantee collaboration with anyone. It does not have any intellectual property.
As on filing of the offer documents, the company has just 5 employees besides a board of directors. It is operating from a rented office.
ISSUE DETAILS/CAPITAL HISTORY:
To part finance its plans for funding purchase of equipment (Rs. 1.01 cr.), marketing initiatives (Rs. 0.28 cr.) and general corporate funds (Rs. 0.30 cr.) needs, ATL is coming out with a maiden Initial Public Offer (IPO) of 270400 equity shares of Rs. 10 each at a fixed price of Rs. 74 per share to mobilize Rs. 2.00 cr. The issue opens for subscription on March 02, 2021, and will close on March 04, 2021. Minimum application is to be made for 1600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME Startup. The issue constitutes 30.71% of the post issue paid-up capital of the company. ATL will be spending around Rs. 0.41 cr. (above 20%) for this issue process.
The issue is solely lead managed by Shreni Shares Pvt. Ltd. and KFin Technologies Pvt. Ltd. is the registrar to the issue. Shreni Shares Pvt. Ltd. is also a Market Maker for this issue.
ATL's initial equity is issued at par; the company has also issued further equity at a price of Rs. 110 per share and bonus shares in the ratio of 4 shares for every 1 share held in December 2020. The average cost of acquisition of shares by the promoters is Rs. 10.71 per share.
Post issue, ATL's current paid-up equity capital of Rs. 0.61 cr. will stand enhanced to Rs. 0.88 cr. With the IPO pricing, the company is looking for a market cap of Rs. 6.51 cr.
FINANCIAL PERFORMANCE:
In fact, the company had no income for FY18 and FY19. Income for FY20 and the first nine months of FY21 is at minuscule levels at Rs. 0.10 cr. and Rs. 0.17 cr. with a net profit of 0.02 cr. and 0.06 cr. respectively.
For the last three fiscals, the company has posted an average EPS of Rs. 0.18 and an average RoNW of 25.69%. The issue is priced at a P/BV of 7 based on its consolidated Net Asset Value (NAV) of Rs. 10.57 and at a P/BV of 2.46 based on post issue NAV of Rs. 30.05.
If we annualize the latest earnings and attribute it to fully diluted post issue equity, then the asking price is at a P/E of around 87. On the basis of FY20 earnings, it is at a P/E of 352, thus the issue is exorbitantly priced.
COMPARISION WITH LISTED PEERS:
As per the offer documents, the company has no listed peers to compare with.
MERCHANT BANKER'S TRACK RECORD:
On the merchant banker's front, this is the 5th mandate from its stable in the last three fiscals (including the ongoing one). Out of the last 4 listings, 2 opened at par to offer price and the rest with a premium ranging from 1.25% to 1.95% on the day of listing. Thus the Lead Manager has average track records.
Review By Dilip Davda on February 27, 2021
Dilip Davda is a veteran financial journalist associated with the Indian stock market since 1978. He has been contributing to print and electronic media on capital markets, insurance, and finance since 1985.
He is widely recognized for reviewing public issues and non-convertible debentures (NCDs) in the primary market. Drawing on over three decades of market experience and close interaction with merchant bankers, his reviews focus on detailed fundamental and financial analysis of companies, with a special emphasis on SME public issues.
Dilip Davda
SEBI Registered Research Analyst – Mumbai
Registration No.: INH000003127 (Perpetual)
Email: dilip_davda@rediffmail.com
Disclaimer: The information provided herein is solely for educational and informational purposes and does not constitute an offer, solicitation, or recommendation to buy or sell any securities. Readers are advised to consult a qualified financial advisor before making any investment decisions. Investments in the securities market are subject to market risks. The author does not intend to invest in the securities discussed.
The initial public offer (IPO) of ADJIA Technologies Ltd. offers an early investment opportunity in ADJIA Technologies Ltd.. A stock market investor can buy ADJIA Technologies IPO shares by applying in IPO before ADJIA Technologies Ltd. shares get listed at the stock exchanges. An investor could invest in ADJIA Technologies IPO for short term listing gain or a long term.
Read the ADJIA Technologies IPO recommendations by the leading analyst and leading stock brokers.
ADJIA Technologies IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the ADJIA Technologies IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts mentioned in the above answer to "How is ADJIA Technologies IPO?"
Our recommendation for ADJIA Technologies IPO is to avoid.
As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the ADJIA Technologies IPO.
The ADJIA Technologies IPO allotment status will be available on or around March 9, 2021. The allotted shares will be credited in demat account by March 12, 2021. Visit ADJIA Technologies IPO allotment status to check.
