DJ Mediaprint BSE SME IPO review (May apply)

•    DJML is in printing and logistic services segment.
•    Its financial performance indicates a growth pattern.
•    It operates in highly competitive and fragmented segments.
•    LM has poor track records.
•    Based on the latest financial performance, the issue appears reasonably priced.

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

DJML caters to a wide customer base across various industry segments such as Banking, Airlines, Shipping, Logistics, Education, Finance, Lottery Ticket, Healthcare, Insurance, Manufacturing, Retail, Stockbroking, Telecom, Utilities among others. As per offer documents, some of its clients are LIC, National Insurance, Bharti Axa, GIC Housing Finance, Citi Bank, Bank of India, Union Bank of India, Corporation Bank, Federal Bank, Bank of India, State Bank of India, Punjab National Bank, Infosys, Wipro, Britannia, Aditya Birla Group, Indian Institute of Architects, Dish TV, Philips, Larson & Turbo, NSDL among others.

The company has executed many short term/long terms contracts for Printing & Dispatch of monthly Credit Cards Statement, Letter, Annual Reports & Other ancillary services, Storage of records and its management, Digital franking machines services and ancillary services etc. with its clients. The company operates in a highly competitive and fragmented industry and that's the main concern.

ISSUE DETAILS/CAPITAL HISTORY:
To meet its working capital (Rs. 1.90 cr.) and general corpus fund (Rs. 0.15 cr.) needs, DJML is coming out with a maiden IPO of 1200000 equity shares of Rs. 10 each at a fixed price of Rs. 20 per share to mobilize Rs. 2.40 cr. The issue opens for subscription on 26.03.20 and will close on 31.03.20. Minimum application is to be made for 6000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue constitutes 28.48% of the post-issue capital of the company. DJML is spending Rs. 0.35 cr. for this IPO 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 acting as a market maker for this IPO.

Having issued entire equity at par, DJML has also issued bonus shares in the ratio of 5 shares for every 1 share held in February 2020. The average cost of acquisition of shares by the promoters is Rs. 1.67 per share. Post issue, the company's current paid-up equity capital of Rs. 3.01 cr. will stand enhanced to Rs. 4.21 cr. With this IPO company is looking for a market cap of Rs. 8.43 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, DJML has posted turnover/net profits of Rs. 10.11 cr. / Rs. 0.29 cr. (FY17), Rs. 17.34 cr. / Rs. 0.65 cr. (FY18) and Rs. 20.67 cr. / Rs. 0.92 cr. (FY19). For the first nine months of FY20, it has earned net profit of Rs. 0.75 a cr. on a turnover of Rs. 13.12 cr.

For the last three fiscals, DJML has posted an average EPS of Rs. 2.41 and an average RoNW of 29.54%. The issue is priced at a P/BV of 1.62 based on its NAV of Rs.12.36 as on 31.12.19 and at a P/BV of 1.38 based on post issue NAV of Rs. 14.53.

If we annualize latest earnings and attribute it on fully diluted post issue equity then asking price is at a P/E of around 8.5, thus IPO appears reasonably priced.

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

MERCHANT BANKER'S TRACK RECORD:
On merchant banker's front, this is the 16th mandate from its stable. Out of last 10 listings, 2 opened at discount, 1 at par and the rest with premiums ranging from xx% to xx% on the day of listing. Alumilite Architectural IPO handled by this merchant banker was surprisingly withdrawn after closure with a full subscription.