Bombay Metrics NSE SME IPO review (May apply)

•    BMSCL is in supply chain management services.
•    The company is getting major work from a single customer.
•    It has posted growing top lines for the last four fiscals. 
•    It suffered minor setbacks in FY21 bottom lines following the pandemic.
•    Issue is reasonably priced, but dependency on a single customer raises concern.

ABOUT COMPANY:
Bombay Metrics Supply Chain Ltd. (BMSCL) is a full-service provider of the manufacturing of engineered goods and supply chain management services. It also offers efficient services in advanced engineering, 3D scanning, rapid prototyping, flow simulation, project management and quality management. The company's primary focus is to benefit from the "Make in India" initiative by the Government of India by aiding in developing supplier capabilities in India.

BMSCL helps customers find the right manufacturing source in India for their products and ensure optimal execution and quality by working with qualified and ISO-certified suppliers. It oversees the operations, manages the supply chain process and chooses the right logistics partners to be close to ports connecting its customer locations. The company helps customers understand the benefits and savings of global manufacturing by helping many OEMs and Tier 1 customers manage their entire manufacturing and supply chain processes. As of August 31, 2021, it had total manpower of 31 on its roll including key management. Since the last three fiscals, its 90%+ revenue comes from a major customer MES, Inc. 

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its needs for working capital (Rs. 3.44 cr.), general corporate purpose (Rs. 0.43 cr.), BMSCL is coming out with a maiden IPO of 460800 equity shares of Rs. 10 each at a fixed price of Rs. 93 per share to mobilize Rs. 4.29 cr. The issue opens for subscription on September 30, 2021, and will close on October 04, 2021. Minimum application is to be made for 1200 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes xx% of the post issue paid-up capital of the company. BMSCL will spend around Rs. 0.42 cr. for this IPO process. 

The issue is solely lead managed by Unistone Capital Pvt. Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue. Rikhav Securities Ltd. is the market maker for this issue. 

The company has raised entire equity capital at par so far and has also issued bonus shares in the ratio of 75 for 1 in March 2021. The average cost of acquisition of shares by the promoters is Rs. 0.13 and Rs. 0.99 per share. 

Post issue, BMSCL's current paid-up capital of Rs. 1.08 cr. will stand enhanced to Rs. 1.54 cr. (1539240 shares). Based on the IPO pricing, the company is looking for a market cap of Rs. 14.32 cr. 

FINANCIAL PERFORMANCE: 
On the financial performance front, for the last four fiscals, the company has posted turnover/net profits of Rs. 7.64 cr. / Rs. 0.44 cr. (FY18), Rs. 20.03 cr. / Rs. 0.93 cr. (FY19), Rs. 29.93 cr. / Rs. 1.39 cr. (FY20) and Rs. 32.41 cr. / Rs. 1.30 cr. (FY21). It suffered a minor setback in FY21 of the fallout of the pandemic.

For the last three fiscals, BMSCL has reported an average EPS of Rs. 11.84 and an average RoNW of 56.12%. The issue is priced at a P/BV of 2.4 based on its NAV of Rs. 38.75 as of March 31, 2021, and at a P/BV of 1.69 based on its post-issue NAV of Rs. 54.88. 

If we attribute FY21 earnings on fully diluted post issue equity capital, then the asking price is at a P/E of around 11.02. Thus the issue is reasonably priced. 

COMPARISON WITH LISTED PEERS:
As per offer documents, BMSCL has no listed peers to compare with.

DIVIDEND POLICY:
The company announced a dividend of 200% for FY20 which was paid during FY21. Thereafter no dividend is declared. It will adopt a product dividend policy based on its financial performance and future prospects. 

MERCHANT BANKER'S TRACK RECORD:
This is the 5th mandate from Unistone Capital in the last four fiscals (including the ongoing one). Out of the last four listings, 1 opened at discount and the rest with premiums ranging from 0.4% to 13.83% on the day of listing.