Aprameya Engg NSE SME IPO review (Avoid)

•    The company is engaged in a highly competitive and fragmented segment.
•    It posted drastic fall in its top and bottom lines for the reported periods.
•    The issue appears exorbitantly priced based on its FY24 performance.
•    There is no harm in skipping this "High Risk/Low Return" pricey bet.
 
ABOUT COMPANY:
Aprameya Engg. Ltd. (AEL) is engaged in the business of installation, set up & maintenance of Intensive Care Units ("ICU"), Neonatal Intensive Care Units ("NICU"), Pediatric Intensive Care Units ("PICU"), Operation Theatre, dialysis centres and prefabricated structure ward (hereinafter referred to as "Healthcare Infrastructure projects") in the hospitals and medical care centres on turnkey basis along with supply of high value healthcare equipment and diagnostic equipment to private hospitals, Government hospitals and medical practitioners. 

Over the years, on the basis of its knowledge and understanding of the requirements of medical practitioners, industry standards and utility of the medical equipment, it has evolved itself and developed capabilities in offering solutions in the field of healthcare services relating to ICU set up, dialysis centres setup, operation theatre setup and providing medical equipment for easing operation related to patient treatment, monitoring and diagnosis by hospitals, medical practitioners and diagnostic service providers. The company is engaged in the business of setting up of medical, healthcare infrastructure, supply of consumables, trading of medical and healthcare equipment's and maintenance of the equipment supplied and installed it. Further, the company has many times received commission from the equipment suppliers for supply of the medical equipment directly to the customers.

It is engaged in selling of high value medical equipment as a dealer of medical equipment manufacturers and suppliers such as Johnson & Johnson Private Limited, Stryker India Private Limited and many other medical equipment manufacturers. Apart from these companies it also has established cordial relationship with medical device manufacturers like Alan Electronic Systems Pvt Ltd, Draeger Medical India Private Limited, Siemens Healthcare Private Limited, Schiller Healthcare India Private Limited, Epsilon, Resmed and many other medical devices manufacturers and suppliers for easy and timely procurement. With the knowledge and experience of over one & half decade in delivering the medical devices for patient care at reasonable outlay, it has during the year 2020 expanded business activity by providing turnkey healthcare infrastructure solution by setting-up of ICU, NICU, PICU, operation theater projects and prefabricated structure ward on turnkey basis. Further, during the year 2024, it has undertaken setting up, installing and commissioning of dialysis centres across the state of Rajasthan, its portfolio of products and services can be classified into two different segments i.e. setting up of healthcare infrastructure within the hospitals and medical care centres and dealing in high value medical equipment. 

It provides need based medical equipment to hospitals, medical practitioners, and diagnostic service providers, including patient monitoring systems, cardiology devices, respiratory management systems and radiology/ imaging systems. It has over the years worked on maintaining healthy relationship with customers through timely delivery of the medical equipment at reasonable cost. These relationships have enabled it to create a wide customer base of doctors, medical practitioners, private and government hospitals, medical colleges including AIIMS (All India Institute Medical Science) and diagnostic service providers across the country.

It started the business of setting up of ICUs and operation theatres in 2020, and have since then completed the installation of around 2000 critical care beds including ICUs, NICUs, PICUs and modular operation theatre across the state of Rajasthan. These healthcare infrastructure projects has been undertaken for different government hospital namely Dr. S N Medical College - Jodhpur, Government Medical College - Kota, RMSCL - Jaipur, RNT Medical College - Udaipur and SMS Medical College - Jaipur. Further, during the Fiscal year 2024, it has undertaken setting up, installing and commissioning of dialysis centres for Rajasthan Services Medical Corporation Limited in over 150 different locations in the state of Rajasthan. As of the date of filing this offer document, it had order book worth Rs. 8.43 cr. As of June 30, 2024, it had 43 employees on its payroll. It also employs casual labourers as and when required. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 5040000 equity shares of Rs. 10 each to mobilize Rs. 29.23 cr. at the upper cap. It has announced a price band of Rs. 56 - Rs. 58 per share. The issue opens for subscription on July 25, 2024, and will close on July 29, 2024. The minimum application to be made is for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.47% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, it will utilize Rs. 21.00 cr. for working capital, and the rest for general corporate purposes. 

The issue is solely lead managed by Hem Securities Ltd., and Link Intime India Pvt. Ltd. is the registrar to the issue. HEM Group's Hem Finlease Pvt. Ltd. is the market maker for the company. 

Having issued/converted initial equity shares at par value so far. It has also given bonus shares in the ratio of 1 for 1 in August 2022. The average cost of acquisition of shares by the promoters is Rs. 0.00, and Rs. 5.07 per share. 

Post-IPO, company's current paid-up equity capital of Rs. 14.00 cr. will stand enhanced to Rs. 19.04 cr. Based on the upper IPO price band, the company is looking for a market cap of Rs. 110.43 cr.  

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 200.26 cr. / Rs. 16.62 cr. (FY22), Rs. 78.33 cr. / Rs. 5.37 cr. (FY23), Rs. 65.62 cr. / Rs. 3.46 cr. (FY24).  Surprisingly the company has marked degrowth in its top and bottom lines for the reported periods. This financial performance is not in line with its asking price. 

For the last three fiscals, it has reported an average EPS of Rs. 4.49, and an average RoNW of 35.44%. The issue is priced at a P/BV of 3.48 based on its NAV of Rs. 16.69 as of March 31, 2024, and at a P/BV of 2.10 based on its post-IPO NAV of Rs. 27.63 per share (at the upper cap). 

If we attribute FY24 earnings to its post-IPO fully diluted paid-up capital, then the asking price is at a P/E of 31.87, and based on FY23 earnings, the P/E stands at 20.57. 

For the reported periods, the company has posted PAT margins of 8.31% (FY22), 6.87% (FY23), 5.30% (FY24), and RoCE margins of 88.38%, 18.22%, 9.60% respectively for the referred periods. 

DIVIDEND POLICY:
The company has not declared any dividends since incorporation. It will adopt a prudent dividend policy in July 2022, based on its financial performance and future prospects. 

COMPARISON 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 49th mandate from Hem Securities in the last three fiscals (including the ongoing one), out of the last 10 listings, all listed with premiums ranging from 4.63% to 165.22% on the date of listing.