Brisk Techno BSE SME IPO review (Avoid)

•    BTL is in the business of providing IT solutions to its customers.
•    It is operating in a highly competitive and fragmented segment. 
•    The company has posted inconsistency in its top line for the reported periods. 
•    The sudden boost in bottom lines for the last 18 months' raises concern over its sustainability. 
•    There is no harm in skipping this pricey OFS.

ABOUT COMPANY:
Brisk Technovision Ltd. (BTL) is engaged in the business of providing information technology solutions to corporate customers. The primary business of the Company is (a) to provide various third party hardware products such as servers, desktops, personal computers and laptops as well as (b) third party software to Indian corporate customers. 

It also offers other service offerings, which includes services relating to design, supply and installation of data centres, enterprise networking management, email management, system integration and annual maintenance contract (AMC) for hardware and system maintenance, monitoring and managed services. In the last three financial years, it has begun to focus on offering more of service offerings. Presently, predominately its business (both Sales of Goods and Sales of Services) is in state of Maharashtra. As of November 30, 2023, it had 119 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden secondary IPO of 800000 equity shares of Rs. 10 each at a fixed price of Rs. 156 per share to mobilize Rs. 12.48 cr. The issue opens for subscription on January 22, 2024, and will close on January 24, 2024. The minimum application to be made is for 800 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 40% of the post-IPO paid-up capital of the company. It is spending Rs. 2.35 cr. (18.86%) for this IPO process. This being a pure Offer for Sale (OFS) issue, no funds are going to company. The issue is being made to provide partial exit to promoters and to unlock listing benefits. Higher spending indicates fully structured mode of this IPO. 

The issue is solely lead managed by Sun Capital Advisory Services Pvt. Ltd. and KFin Technologies Ltd. is the registrar of the issue. NNM Securities Pvt. Ltd.  is the market maker for the company. 

The company has issued entire equity capital at par value so far. It has also issued bonus shares in the ratio of 199 for 1 in March 2022. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. 0.05 per share. 

This being a pure secondary issue, its paid-up capital will remain same at 2.00 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 31.20 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profits of Rs. 16.91 cr. / Rs. 0.15 cr. (FY21), Rs. 22.08 cr. / Rs. 1.10 cr. (FY22), and Rs. 18.40 cr. / Rs. 1.99 cr. (FY23). For H1 of FY24 ended on September 30, 2023, it earned a net profit of Rs. 1.53 cr. on a total income of Rs. 15.77 cr. Thus while its top line marked fluctuations, its bottom line posted growth and in particular boost in H1 of FY24 for top and bottom lines raise eyebrows and the concern over the sustainability going forward. 

For the last three fiscals, the company has reported an average EPS of Rs. 6.92 and an average RoNW of 33.87%. The issue is priced at a P/BV of 4.95 based on its NAV of Rs. 31.55 as of September 30, 2023 as well as on the post-IPO basis. 

If we attribute annualized super earnings for FY24 to the post-IPO paid-up capital of the company, then the asking price is at a P/E of 10.23 and based on FY23 earnings, P/E stands at 15.68. Thus the issue appears is fully priced. 

The company has posted PAT margins of 0.86% (FY21), 4.97% (FY22), 10.86% (FY23), 9.73% (H1-FY24), and RoCE margins of 15.64%,47.77%, 54.71%, 32.32% respectively for the referred periods. 

DIVIDEND POLICY:
The company declared 14% interim dividend for FY23. It has already adopted a dividend policy based on its financial performance and future prospects, in September 2022.  

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 2nd mandate from Sun Capital in the last two fiscals. The only listing that took place so far was at a premium of 5% on the listing date.