DJ Mediaprint BSE SME FPO review (Avoid)

•    DJML is coming out with another issue within two years.
•    Its maiden IPO came at Rs. 20 and now it wants Rs. 125 per share.
•    On all parameters the FPO is having greedy pricing.
•    The company carries the risk of higher competition and fragmented segments.
•    There is no harm in skipping this pricy offer. 

PREFACE:
This company came with its maiden IPO in the month of March 2020 to mobilize Rs.2.40 cr. at a price of Rs. 20 per share. Now it is coming with a Follow-on Public Offer (FPO) at a price of Rs. 125 per share to mobilize Rs. 15 cr. During this period, while the counter on BSE SME marked high/low of Rs. 197.30 / Rs.19.95 since listing, its price witnessed hand in glow operations with a very thin volume to pave the way for this greedily priced offer. This time the company is issuing the same quantity of shares but at 6.5 times higher valuations. As the promoters hold above 71%, it appears that with wasted interest deals, its price is rigged above Rs. 140 since January 04, 2022 (with few trades/thin volume) to lure investors for the FPO. DJML that came at a market cap of Rs. 8.43 cr. for IPO is now looking for a market cap of Rs. 67.67 cr. with this pricy issue. 

ABOUT COMPANY
DJ Mediaprint & Logistics Ltd. (DJML) is providing Integrated Printing, Logistics and Courier solutions in India with some well-networked transport operations, pre-eminent quality standards and processes & operations. It provides Bulk Mailing, Speed Post, Records Management, Manpower Supply, Return of Post Management, Bulk Scanning, Moving Services, Newspaper Print Advertising services and other related services.

DJML caters to a wide customer base across various industry segments such as Banking, Airlines, Shipping, Logistics, Education, Finance, Lottery tickets, Healthcare, Insurance, Manufacturing, Retail, Stockbroking, Telecom, Utilities among others.

The company currently has several offices spread across Mumbai, Navi Mumbai & Bhiwandi (Thane), one in Delhi and one in Goa, where it is supported by a well-connected network across the city. 

It operates in the highly competitive and fragmented printing and logistics services industry. There are no entry barriers in the industry which put it to the threat of competition from new entrants. There are numerous players operating in the industry. The company face tough competition in business from a large number of unorganized and a few organized players. It competes with competitors on a regional or product line basis. Many of its competitors have a substantially large capital base and resources than DJML does and offer a broader range of products.  As of December 03, 2021, it had 57 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its need for working capital (Rs. 13.41 cr.), General corporate purpose (Rs. 1.25 cr.), DJML is coming out with a Follow-on Public Offer (FPO) of 1200000 equity share of Rs. 10 each at a fixed price of Rs. 125 per share to mobilize Rs. 15 cr. The minimum application to be made is for 1000 shares and in multiples thereon, thereafter. The issue opens for subscription on January 18, 2022, and will close on January 20, 2022. Post allotment, shares will be listed on BSE SME. Issue constitutes 22.17% of the post issue paid-up capital of the company. DJML is spending Rs. 0.34 cr. for this FPO process.

The issue is solely lead managed by Finshore Management Services Ltd. and Purva Sharegistry (India) Pvt. Ltd. is the registrar to the issue. Nikunj Stock Brokers Ltd. is the market maker for this company. 

Having issued initial equity at par, it raised further equity by way of IPO at a price of Rs. 20 per share in March 2020. It has also issued bonus shares in the ratio of 5 for 1 in February 2020. The average cost of acquisition of shares by the promoters is Rs. 1.67 per share. 

Post issue, DJML's current paid-up capital of Rs. 4.21 cr. will stand enhanced to Rs. 5.41 cr. Based on the FPO pricing, the company is looking for a market cap of Rs. 67.67 cr. It is worthwhile to note that at the time of IPO, it came at a market cap of Rs. 8.43 cr. Thus within two years, the company is looking for over 8 times more valuation. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, DJML has posted turnover/net profits of Rs. 20.67 cr. / Rs. 0.92 cr. (FY19), Rs. 21.32 cr. / Rs. 1.09 cr. (FY20) and Rs. 24.82 cr. / Rs. 1.26 cr. (FY21). For the first half of FY22 ended on September 30, 2021, it has earned a net profit of Rs. 1.05 cr. on a turnover of Rs. 13.12 cr. It has shown steady growth in top and bottom lines for all these periods. 

For the last three fiscals, it has posted an average EPS of Rs. 3.22 and an average RoNW of 22.58%. The issue is priced at a P/BV of 6.18 based on its NAV of Rs. 20.22 and at a P/BV of 2.88 based on its post-issue NAV of Rs. 43.45.

If we annualize FY22 earnings and attribute it to fully diluted post FPO equity, then the asking price is at a P/E of 32.22, thus FPO is priced greedily.  

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

DIVIDEND POLICY:
The company has not paid any dividends since going public. It will follow a prudent dividend policy based on its financial performance and future prospects. 

MERCHANT BANKER'S TRACK RECORDS:
This is the 20th mandate from Finshore in the last four fiscals (including the ongoing one). Out of the last 10 listings (till Timescan Logi), 2 opened at discount and the rest opened with premiums ranging from 1.90% to 60.78% (Timescan). Timescan was perhaps an exceptional case. The rest were just below 11%. Thus it has an average track record.