Blue Pebble NSE SME IPO review (May apply)

•    The company is engaged in providing spatial design and bespoke environmental branding solutions. 
•    It has served known clients like Infosys, HDFC Bank, Bank of America, Nestle - to name a few.
•    Its current order book stands at Rs. 17.81 cr. indicating medium term trends.
•    Based on FY24 annualized super earnings, the issue appears fully priced. 
•    Well-informed investors may park moderate funds for medium term rewards in this dark horse.

PREFACE:
It appears that this offer documents are filed in a hurried way to complete the IPO process before the end of concluding fiscal FY24. While the offer document is missing last three fiscals average EPS and RoNW data, the IPO ad is missing its post-IPO NAV data on the lower and the upper price band. Is such lacuna permissible under the framed compliances? How the offer documents get approval with such incomplete framework?

ABOUT COMPANY:
Blue Pebble Ltd. (BPL) is engaged in providing spatial design and bespoke environmental branding solutions. It provides a comprehensive range of services encompassing conceptualization, design, printing, furnishing, and installation of Vinyl graphics, signage, and different furnishing products, including but not limited to 3D walls, frost/clear glass films, artifacts, wall panels, wall murals, sculptures for corporate interiors and exterior workplace environments. Its solutions are custom-tailored to meet the unique requirements of each client. BPL's clientele spans across diverse industry sectors, including banks, multinational corporations (MNCs), IT etc. Over the years, the company has successfully executed design, printing, furnishing, installation, and related projects at various locations throughout India, serving notable clients such as Infosys Limited, HDFC Bank Limited, American Express, Bank of America, Nestle, British Petroleum, Moody's etc. 

It prioritizes building long-term client relationships by delivering quality products and services. It offers comprehensive solutions, catering to clients' design, printing, and fabrication needs. BPL manages the entire process, from conceptualization to the final product delivery. It provides a wide range of printing and designing services, including theme-based designs, large format printing, vinyl printing, fabric printing, canvas printing, signage manufacturing, and 3D art installation. The company also deals in sourcing and installation of curios, sculpture and artisanal hand paintings. Its expertise extends to designing and printing signage components aimed at enhancing workspace functionality, efficiency, and aesthetics. This includes wayfinding signage, digital signage, outdoor signage, indoor signage, safety signage, and more. Through its graphics and signage solutions, the company transforms workspaces into inviting and functional environments that align with its clients' corporate culture and values.

It has successfully completed more than 20 projects during the period of last 3 years. Its current order book value stands at Rs. 17.81 cr., covering designing, printing, and installation of graphics, 3D elements, vinyl, wall panels, glass films, sculptures, wall murals, and interior and exterior products. Its focus on quality design, printing, and installation enable it to deliver aesthetically pleasing work environments. The company also engages artisans and artists for custom artwork, utilizing various materials to enhance the overall ambiance of workspaces. As of September 30, 2023, it had 34 employees on its payroll and is also engaging additional casual laborers when required. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 1080000 equity shares of Rs. 10 each to mobilize Rs. 18.14 cr. at the upper cap. It has announced a price band of Rs. 159 - Rs. 168 per share. The issue opens for subscription on March 26, 2024, and will close on March 28, 2024. The minimum application to be made is for 800 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. 4.93 cr. for capex on installation of additional machinery, Rs. 6.55 cr. for working capital, and the rest for general corporate purposes. 

The issue is solely lead managed by Hem Securities Ltd., and Bigshare Services Pvt. Ltd. is the registrar of the issue. HEM Group's Hem Finlease Pvt. Ltd. is the market maker for the company. 

Having issued entire equity capital at par so far, it has also issued bonus shares in the ratio of 299 for 1 in September 2023. The average cost of acquisition of shares by the promoters is Rs. 0.03, Rs. 10.00 per share. 

Post-IPO, company's current paid-up equity capital of Rs. 3.00 cr. will stand enhanced to Rs. 4.08 cr. Based on the upper IPO price band, the company is looking for a market cap of Rs. 68.54 cr.  

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 4.21 cr. / Rs. 0.20 cr. (FY21), Rs. 5.48 cr. /Rs. 0.38 cr. (FY22), and Rs. 15.95 cr. / Rs. 2.00 cr. (FY23). For H1 of FY24 ended on September 30, 2023, it earned a net profit of Rs. 2.92 cr. on a total income of Rs. 13.23 cr. 

The offer documents are blank for its last three years' average EPS, and average RONW data. (Refer p 71 and 72 of the offer document). The issue is priced at a P/BV of 8.31 based on its NAV of Rs. 20.21 as of September 30, 2023. The IPO ad has erred on its post-IPO NAV data and has given IPO price band figures. 

If we attribute annualized FY24 earnings to its post-IPO fully diluted paid-p capital, then the asking price is at a P/E of 11.75. Though the issue appears fully priced, it appears to be a dark horse bet.

For the reported periods, the company has posted PAT margins of 4.77% (FY21), 6.95% (FY22), 12.58% (FY23), 22.14% (H1-FY24), and RoCE margins of 23.67%, 33.78%, 79.83%, 61.12% respectively for the referred periods. 

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 no listed peers to compare with.

MERCHANT BANKER'S TRACK RECORD:
This is the 44th mandate from Hem Securities in the last three fiscals, out of the last 10 listings, 1 opened at discount (Sona Machinery) and the rest with premiums ranging from 8.57% to 125% on the date of listing.