Banka Bioloo NSE SME IPO Review (Avoid)

Banka Bioloo Ltd. (BBL) is focusing on giving sanitation solutions to those who do not have access to toilets as well as to those who have toilets but face trouble treating and managing waste. BBL aims to provide sanitation infrastructure and hygienic solutions for human waste treatment and disposal. Currently it provides sanitation services to Indian Railways and corporate entities. Its bio-digester technology is patented by DRDO (Defense Research and Development Organization). It has installed over 6000 bio-toilet units across India and currently undertake 12 O & M service contracts with Indian Railways.

To part finance its capital expenditure at its Aler and Ibrahimpatnam units, working capital and general corpus fund needs, BBL is coming out with a maiden IPO of 1098000 equity shares of Rs. 10 each at a fixed price of Rs. 115 per share to mobilize Rs. 12.63 cr. Issue opens for subscription on 05.02.18 and will close on 07.02.18. Minimum application is to be made for 1200 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. Issue is solely lead managed by Aryaman Financial Services Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue. Issue constitutes 26.7% of the post issue paid up capital of the company. Average cost of acquisition of shares by the promoters is Rs. 1.63 per share. After initial equity raising at par, it raised further equity in the price range of Rs. 500 to Rs. 1079 per share between March 2013 and March 2015. It has also issued bonus shares in the ratio of 23 for 1 in October 2017. Post issue its current paid up equity capital of Rs. 3.01 cr. will stand enhanced to Rs. 4.11 cr.

On performance front, BBL has posted turnover/net profits of Rs. 5.30 cr. / Rs. 0.09 cr. (FY14), Rs. 8.20 cr. / Rs. 0.08 cr. (FY15), Rs. 14.33 cr. / Rs. 0.32 cr. (FY16) and Rs. 15.16 cr. / Rs. 1.16 cr. (FY17). For first half of current fiscal, it has reported net profit of Rs. 0.32 cr. on a turnover of Rs. 5.67 cr. It appears that for FY17 inventory adjustment has resulted in improved profits. For last three fiscals, it has posted an average EPS of Rs. 2.32 and an average RoNW of 18.82% on an equity base of Rs. 0.13 crore that will enhance many fold now. Issue is priced at a P/BV of 0.34 on the basis of its NAV of Rs. 342.30 as on 30.09.17 and at a P/BV of 2.79 on the basis of its post issue NAV of Rs. 41.16. If we annualize latest earnings and attribute it to fully diluted post issue equity, then asking price is at a P/E of around 74 making it exorbitantly priced offer. It has no listed peers to compare with.

On merchant banker’s front, this is the 26th mandate from its stable in last three fiscals. Out of last 10 listings, 2 opened at discount, 3 around par and the rest with a premium ranging from 1% to 73%. 73% premium was from Apollo Micro the only main board IPO from Aryaman in last thee fiscals.