CRP Risk BSE SME IPO review (May apply)

CRP Risk Management Ltd. (CRP) is a risk management and risk mitigation enterprise. It verifies critical information for large and mid-sized corporate. The company provides its services to multiple departments like Finance, Compliance, Operations etc. Over the last one and half decade CRP has evolved from being an Employee Background check entrepreneurial start-up to an Integrated risk mitigation solutions company with professional management team and international best practices. The company also has a Veterinary Division where in it deals in various types of veterinary products such as poultry feed enzymes; poultry feed toxin binders, aquaculture feeds and other products. CRP also subcontract specific execution work related to its services to third party vendors.

To part finance its payment/repayment of certain debts, purchase of computers Hardware and Office equipments, additional infrastructure at it offices, marketing and brand building, working capital needs, CRP is coming out with a maiden IPO of 5160000 equity shares of Rs. 10 each at a fixed price of Rs. 60 per share to mobilize Rs. 30.82 crore. Issue comprises fresh equity issue of 4000000 shares and offer for sale of 1160000 shares. Issue opens for subscription on 18.01.18 and will close on 22.01.18. Minimum application is to be made for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue constitutes 29.37% of the post equity paid up capital of the company. Average cost of acquisition of shares by the promoters is Rs. 1.17 per share. Issue is solely lead managed by Inventure Merchant Banker Services Pvt. Ltd. and Skyline Financial Services Pvt. Ltd. is the registrar to the issue. Having issued initial equities at par between March 2000 and June 2011, it raised further equity at a price of Rs. 30 per share in October 2017. It has also issued bonus shares in the ratio of 36 for 1 in May 2011 and 1 for 1 in July 2017. Post issue, its current paid up equity capital of Rs. 13.48 crore will stand enhanced to Rs. 17.48 cr.

On performance front, CRP has reported total revenues/net profits of Rs. 98.75 cr. / Rs. 5.12 cr. (FY14), Rs. 92.31 cr. / Rs. 4.21 cr. (FY15), Rs. 74.71 cr. / Rs. 1.78 cr. (FY16) and Rs. 82.11 cr. / Rs. 5.05 cr. (FY17). It has suffered a severe setback for FY16 in top and bottom lines. For first four months of the current fiscal ended on 31.07.18 it has posted net profit of Rs.1.64 crore on total revenues of Rs. 24.59 cr. The company has reported an average EPS of Rs. 2.94 and an average RoNW of 14.20%for last three fiscals on the basis of equity capital of Rs. 6.50 crore. Issue is priced at a P/BV of 2.51 on the basis of its NAV as on 31.07.18 and at a P/BV of 1.86 on the basis of its post issue NAV of Rs. 32.30. If we annualize latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 21 plus. According to offer documents (p72) it has no listed peers to compare with. Surprisingly, it has preferred to give current financial performance for only four months instead of first half. Issue appears fully priced.

On merchant banker’s front, this is the 6th mandate from its stable and out of last ffive listings 1 opened at par 2 at a premium ranging from 1.5% to 2% and 2 at 20% premium to offer price on the day of listing.

Conclusion: Cash surplus risk savvy investors may consider investment for long term. (Others- Apply at your own risk).