Bright Outdoor BSE SME IPO review (Avoid)

•    BOML is engaged in the business of OOH and other modes of advertising 
•    It has posted average financial performance till FY22.
•    For H1 of FY23, it posted whooping profits, which raises eyebrows and concern over sustainability. 
•    Based on FY23 annualized earnings, the issue is aggressively priced. 
•    There is no harm in skipping this "High-risk / Low-return" pricey bet. 

ABOUT COMPANY:
Bright Outdoor Media Ltd. (BOML) is engaged in the business of providing advertising services offering advertising media services consisting of Out of Home (OOH) media services. Its array of service hoardings includes Railway boards, Railway panels, transfer stickers, Cinema slides, Promos, full trains, Bus panels, Full Bus painting, Mobile sign trucks, Kiosks, Traffic booths, Toll Naka, Gantry and Vinyl. Apart from Out-of-Home (OOH) Advertising and providing various novel communication solutions to clients, the Company also offers services assuring multicultural and ethnic Outdoor Advertising campaigns that engage audiences and achieve impact, for every creative need, idea and budget. 

Apart from the business of providing advertising services, BOML is also engaged in the real estate business which mainly includes the sale and purchase of properties and also sharing the same on rental/leave and license basis. Its client domain mainly includes corporate clients operating in various business fields viz. Entertainment Industries, Construction, Education, Jewellery, Insurance, Financial service providers, Aviation, Government Organizations etc., thus providing exposure to serve clients working in various industries and widening BOML's exposure.

The company has purchased the business of M/s. Bright Advertising Agency vide Business Purchase and Takeover Agreement dated April 01, 2007. The seller, M/s. Bright Advertising Agency has been carrying on the business of Outdoor Publicity and Advertisement. Whereas, BOML has purchased the entire running business as going concern with all rights, claims, interests in the business and assets of the said sole proprietorship concern. As of September 30, 2022, it had 52 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden IPO of 3800000 equity shares of Rs. 10 each at a fixed price of Rs. 146 per share to mobilize Rs. 55.48 cr. The issue opens for subscription on March 14, 2023, and will close on March 17, 2023. The minimum application is to be made for 1000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 27.28% of the post-IPO paid-up equity capital of the company. BOML is spending Rs. 0.61 cr. for this IPO process, and from the net proceeds, it will utilize Rs. 12.41 cr. for repayment/prepayment of certain borrowings, Rs. 13.10 cr. for the purchase of LED hoardings, Rs. 18.26 cr. for working capital, and Rs. 11.10 cr. for general corporate purposes. 

Shreni Shares Pvt. Ltd. is the sole lead manager and the market maker, and Bigshare Services Pvt. Ltd. is the registrar of the issue. 

Having issued/converted equity shares at a par value so far, the company has also issued bonus shares in the ratio of 1 for 1 in December 2021. The average cost of the acquisition of shares by the promoters is Rs. 2.50 per share. 

Post-IPO, BOML's current paid-up equity capital of Rs. 10.13 cr. will stand enhanced to Rs. 13.93 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 203.36 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, BOML has (on a standalone basis), posted a turnover/net profit of Rs. 71.51 cr. / Rs. 1.71 cr. (FY20), Rs. 24.95 cr. / Rs. 1.08 cr. (FY21), and Rs. 50.90 cr. / Rs. 2.59 cr. (FAY22). For the H1 of FY23 ended on September 30, 2022, it earned a net profit of Rs. 4.20 cr. on a turnover of Rs. 45.18 cr. 

As per restated consolidated financial results for the period ended on March 31, 2020, it earned a net profit of Rs. 2.21 cr. on a turnover of Rs. 82.35 cr.

For the last three fiscals, BOML has reported an average EPS of Rs. 1.92 and an average RoNW of 5.42%. The issue is priced at a P/BV of 3.61 on the basis of its NAV of Rs. 40.40 as of September 30, 2022, and at a P/BV of 2.12 based on its post-IPO NAV of Rs. 68.77 per share. 

If we annualize FY23 super earnings and attribute them to the post-IPO fully diluted paid-up equity capital, the asking price is at a P/E of 24.21. Boosted profits for FY23 so far raise eyebrows and the sustainability of such margins going forward. It appears that these results are purely window dressed to get fancy valuations. Based on FY22 earnings, the issue is at a P/E of 78.49. Thus the issue is priced aggressively. 

DIVIDEND POLICY:
The company has not declared any dividends since incorporation. It will adopt a prudent dividend policy post-listing, 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 19th mandate from Shreni Shares in the last three fiscals (including the ongoing one). Out of the last 10 listings, all were listed at premiums ranging from 2.45% to 101.18% on the listing date.