DelaPlex NSE SME IPO review (May apply)

•    DPL is a global IT solutions provider with related services.
•    It posted steady growth in its top and bottom lines for the reported periods. 
•    Based on FY24 annualized earnings, the IPO appears fully priced. 
•    Well-informed investors may park funds for the medium to long term rewards.

ABOUT COMPANY:
DelaPlex Ltd. (DPL) is a technology and software development solution and consulting provider, helping client companies to achieve in deriving growth, revenue and marketplace value. The Company has developed expertise and partnerships with various industry players that provide the latest technology, tools, and software development solutions. DPL is a global technology partner in Supply Chain Consulting, Custom Software Development, Cloud Services, and Data Science.

Further the Company, offers various tech solutions encompassing software-defined data centers, integrated infrastructure, cloud technologies, DevOps, security solutions, data analytics, and artificial intelligence. Built for its channel partners and end users i, we create next-gen solutions to address IT problems.

As an end-to-end integrated Omni-channel supply chain consulting and software solutions provider, it assists businesses worldwide in optimizing their supply chains. DPL's focus is on automation, IT initiatives, digital tools, and value driven approaches, ensuring its clients can meet their unique demands quickly and efficiently.

The company offers services across industries and a diversified customer base majorly in the United States of America which include clients from Broadcasting, Petroleum, Retail, 3PL, WFM, QSRs, Hospitality, IT & ITES, Telecom etc. The Company caters mainly to international markets. Its customer base is spread across the globe with presence in countries majorly United States of America. It also has a presence in international markets by way of its foreign holding Company and foreign Group Company such as DelaPlex INC and Xperity LLC.

DelaPlex Limited (DPL) is a subsidiary of DelaPlex INC., a U.S.- based enterprise, where DelaPlex INC. holds 51% of the company's shares. As of September 2023, it had 300 employees on its payroll (including 14 contractors). 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden combo book building route IPO of 2400000 equity shares of Rs. 10 each (worth Rs. 46.08 cr. at the upper cap) consisting 1800000 fresh equity shares (worth Rs. 34.56 cr. at the upper end), and an Offer for Sale (OFS) of 600000 shares (worth Rs. 11.52 cr. at the upper cap). It has announced a price band of Rs. 186 - Rs. 192 per share. The issue opens for subscription on January 24, 2024, and will close on January 29, 2024. The minimum application to be made is for 600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.34% of the post-IPO paid-up capital of the company. From the net proceeds of the fresh equity issue, it will utilize Rs. 4.16 cr. for APAC - advertising/marketing expense for enhancing awareness, Rs. 0.65 cr. for capex for purchase of Office equipment, Rs. 13.34 cr. for working capital and the rest for general corporate purposes. 

The issue is solely lead managed by Shreni Shares Ltd., and Bigshare Services Pvt. Ltd. is the registrar of the issue. Shreni Shares Ltd. is also the market maker for the company. 

The company has issued entire equity capital at par so far and has also given bonus shares in the ratio of 730 for 1 in October 2023. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. NIL, Rs. 9.68, and Rs. 50 per share

Post-IPO, company's current paid-up equity capital of Rs. 7.31 cr. will stand enhanced to Rs. 9.11 cr. Based on the upper IPO price band, the company is looking for a market cap of Rs. 174.91 cr.  

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 36.33 cr. / Rs. 4.04 cr. (FY21), Rs. 50.34 cr. / Rs. 6.12 cr. (FY22), and Rs. 55.22 cr. / Rs. 7.91 cr. (FY23). For H1 of FY24 ended on September 30, 2024, it earns a net profit of Rs. 4.26 cr. on a total income of Rs. 28.14 cr. Thus its top and bottom lines posted growth for the reported periods. 

For the last three fiscals, it has reported an average EPS of Rs. 9.12, and an average RONW of 37.01%. The issue is priced at a P/BV of 5.06 based on its NAV of Rs. 37.97 as of September 30, 2023, and at a P/BV of 3.11 based on its post-IPO NAV of Rs. 61.73 per share (at the upper cap).

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 20.56. Thus the issue appears fully priced. 

For the reported periods, the company has posted PAT margins of 11.15% (FY21), 12.30% (FY22), 14.64% (FY23), 15.27% (H1-FY24), and RoCE margins of 72.68%, 68.81% 56.73%, 23.04% respectively for the referred periods. 

DIVIDEND POLICY:
The company has not declared any dividends since incorporation. 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 shown Ksolves India, Micropro Soft., and Sigma Solve as their listed peers. They are trading at a P/E of 50.47, 13.6, and 213.59 (as of January 20, 2024). However, they are not comparable on an apple-to-apple basis.

MERCHANT BANKER'S TRACK RECORD:
This is the 27th mandate from Shreni Shares in the last three fiscals, out of the last 10 listings, all opened at premiums ranging from 4.94% to 143.24% on the date of listing.