Benchmark Computer BSE SME IPO review (May apply)

•    BCSL is in IT related services and products.
•    The company marked inconsistency in its bottom lines for the reported periods. 
•    It operates in a highly competitive and fragmented segment. 
•    Based on FY24 annualized super earnings, the issue appears greedily priced. 
•    Well-informed investors may park moderate funds for the medium term. 

ABOUT COMPANY:
Benchmark Computer Solutions Ltd. (BCSL) is an IT infrastructure solutions and technology consultancy and software development company. The Company provides end-to-end technology and technology related services including IT Infrastructure and Software Development Services. The Company provides service models such as IaaS (Infrastructure as a Service) and SaaS (Software as a Service). The Service portfolio of the company comprises of IT Infrastructure solutions, Software and Web Based Application Development Services and Annual Maintenance Contract (AMC) and Facility Management Services (FMS). 

Using its extensive understanding of its customers' businesses and leveraging a combination of advanced technologies and expertise, company provides tailored solutions designed to deliver differentiated outcomes. The Company has deep domain knowledge across industry sectors and technology expertise across traditional and new age technologies. Its IT infrastructure management and solutions services have impressive credentials. It has not only executed complex IT transformation projects and have also helped run efficient IT infrastructure solutions and services for enterprise customers. 

Its IT infrastructure and solutions management services offer the experience, talent, and tools required to help customers create, run, and manage next-generation IT infrastructure. Its solutions comprising workplace technologies aim at enhancing user satisfaction, freedom, and productivity while optimizing the ROI in workplace technologies. End users can consequently look forward to increased automation and collaboration by adopting workplace technology services. 

BCSL's managed IT workplace services ensure right-sized infrastructure and support. It is authorized partner to multiple OEM's including HP (Under HP amplify membership programme), SafeAeon (SafeAeon Partner Ecosystem Program), Veeam, Vertiv, Lenovo, Konika Minolta Business Solutions and Dell Technologies. BCSL's business verticals are - IT Infrastructure Solutions, Software and Web based Application Development Services, and Annual Maintenance Contracts (AMC) and Facility Management Services (FMS). As of March 31, 2023, it had 79 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden IPO of 1854000 equity shares of Rs. 10 each at a fixed price of Rs. 66 per share and mulls mobilizing Rs. 12.24 cr. The issue opens for subscription on December 14, 2023, and will close on December 18, 2023. The minimum application to be made is for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 27.01% of the post-IPO paid up capital of the company. The company is spending Rs. 1.56 cr. for this IPO process and from the net proceeds of the IPO funds, the company will utilize Rs. 3.90 cr. for capital expenditure, Rs. 3.80 cr. for working capital, and Rs. 2.98 cr. for general corporate purposes.  

The issue is solely lead managed by Beeline Capital Advisors Pvt. Ltd., and KFin Technologies Ltd. is the registrar of the IPO. Beeline Group's Spread X Securities Pvt. Ltd. is the market maker for the company. 

Having issued initial equity shares at par value, the has issued bonus shares in the ratio of 500 for 1. The average acquisition cost of shares by the promoters is Rs. Negative. 

Post-IPO, company's current paid-up equity capital of Rs. 5.01 cr. will stand enhanced to Rs. 6.86 cr. Based on the IPO price, the company is looking for a market cap of Rs. 45.30 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company posted total income/net profit of Rs. 15.08 cr. / Rs. 0.97 cr. (FY21), Rs. 19.04 cr. / Rs. 0.83 cr. (FY22), and Rs. 32.41 cr. / Rs. 2.03 cr. (FY23). For H1 of FY24 ended on September 30, 2023, it earned a net profit of Rs. 0.96 cr. on a total income of Rs. 13.23 cr. 

For the last three fiscals, it has reported an average EPS of Rs. 2.90 and an average RoNW of 12.01%. The issue is priced at a P/BV of 2.39 based on its NAV of Rs. 27.65 as of September 30, 2023, and at a P/BV of 1.74 based on its post-IPO NAV of Rs. 38.01 per share. 

If we annualize FY24 earnings and attribute it to post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 23.66. Thus the issue appears greedily priced. 

For the reported periods, the company has posted PAT margins of 6.58% (FY21), 4.43% (FY22), 6.35% (FY23), 7.37% (H1-FY24), and RoCE margins of 11.36% (FY21), 11.07% (FY22), 18.88% (FY23), 8.07% (H1-FY24) respectively for the referred periods. Thus the company has marked inconsistency in its profit margins for the reported periods. 
 
DIVIDEND POLICY:
The company has not declared any dividends for any reported financial years. 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 Silver Touch, and Dynacons Syst. As their listed peers. They are trading at a P/E of 78.85 and 17.26 (as of December 12, 2023). However, they are not comparable on an apple-to-apple basis. 

MERCHANT BANKER'S TRACK RECORD:
This is the 25th mandate from Beeline Capital in the last two fiscals (including the ongoing one). Out of the last 10 listings, all listed at premiums ranging from 2.67% to 85.71% on the day of listing.