Eppeltone Engg. NSE SME IPO review (May apply)

•    The company is engaged in the manufacturing and marketing of SMPs, power conditioning devices etc.
•    It marked growth in its top lines for the reported periods.
•    The sudden boost in its bottom lines from FY24 onwards raise eyebrows and concern over its sustainability, as it operates in highly competitive and fragmented segment.
•    Based on its recent financial data, the issue appears fully priced.
•    Well-informed investors may park moderate funds for long term.

ABOUT COMPANY:
Eppeltone Engineers Ltd. (EEL) is engaged in the manufacturing and marketing of Switch Mode Power Supply (SMPS) for Personal Computers and other electronic devices and later added various power conditioning devices like AVR, UPS & Transducers etc.

EEL diversified its activities and set up manufacturing facilities to manufacture counter based Static Energy Meters in year 1999 and a factory at Okhla Industrial Area, Phase-1, New Delhi. In the year 2002, it started the production of LCD based Static Meter Energy Meters and further in the year 2009 fully automatic SMT line and moulding machines were installed to assist in production and increase efficiency. In 2014, with a view of energy saving due to the scarcity of natural resources, it invested in the manufacturing of various LED products like bulbs, street lights etc. Then in the year 2016, EEL shifted its energy meter works to Greater Noida, Uttar Pradesh, to cater the need of the electric grids in India along with establishing itself as a reliable vendor across various state and central PSU's. The product portfolio was then diversified to include Water Meters, CT Meters and Smart Meters as per BIS 16444 in the years 2017, 2019 and 2020 respectively.

The trademark “EPPELTONE” was registered by it in the year 2019. It has 28,000 square feet (sq. ft.) of manufacturing plant located at G-91, UPSIDC Site V, Industrial Area, Surajpur Kasna Road, Greater Noida, Uttar Pradesh - 201306 and 8,000 square feet of manufacturing plant at Plot No H – 164, Site – 5, Area 800, Industrial Area, Surajpur, Situated at Upsida, Kasna, Dist. Gautam Budh Nagar, Uttar Pradesh (aggregating to 36,000 square feet) with advanced technology, machinery and experienced team. The company also has a NABL approved R&D Testing laboratory, with a focus on pioneering futuristic and innovative technologies. It has supporting facilities and offices in Noida, Uttar Pradesh and Okhla, New Delhi.

The Company is engaged in business to business (B2B) segment. The primary focus of its business is to providing products and services to Government Entities, which constitute the majority of business transactions. Additionally, it extends B2B operations to private sector companies, supplying products to Non-Government and Government Companies across various industries. As of March 31, 2025, it had 164 employees on its payroll, and additional 199 contract workers in various departments.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 3434000 equity shares of Rs. 10 each to mobilize Rs. 43.96 cr. at the upper cap. It has announced a price band of Rs. 125 – Rs. 128 per share. The issue opens for subscription on June 17, 2025, and will close on June 19, 2025. The minimum number of shares to be applied is for 1000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.50% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, it will utilize Rs. 5.00 cr. capex on additional machinery, Rs. 30.00 cr. for working capital, and the rest for general corporate purposes. 

The IPO is solely lead managed by Expert Global Consultants Pvt. Ltd., and Skyline Financial Services Pvt. Ltd., is the registrar to the issue. Prabhat Financial Services Ltd., is the market maker as well as a syndicate member.

The company has issued initial equity shares at par value, and issued further equity capital in the price range of Rs. 18 – Rs. 159.31 per share between June 2011, and June 2024. It has also issued bonus shares in the ratio of 1 for 1, in August 2024. The average cost of acquisition of shares by the promoters is Rs. NIL, Rs. 6.68, and Rs. 18.00 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 9.53 cr. will stand enhanced to Rs. 12.96 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 165.88 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 72.99 cr. / Rs. 1.50 cr. (FY23), Rs. 80.04 cr. / Rs. 8.16 cr. (FY24), Rs. 125.74 cr. / Rs. 11.23 cr. (FY25). The quantum jump in bottom lines fromFY24 raises eyebrows and concern over its sustainability going forward. Trade receivables above Rs. 27 cr. for FY24, FY25 and estimated at Rs. 104.8 cr. for FY26, as well as Trade payable of Rs. 46.8 cr. for FY25 and estimated at Rs. 84.70 cr. for FY26 raise alarm. The company claims that it has a strong order book on hand.

For the last three fiscals, the company has reported an average EPS of Rs. 8.94 and an average RoNW of 28.95%. The issue is priced at a P/BV of 3.05 based on its NAV of Rs. 42.00 as of March 31, 2025, but the offer documents is missing its post-IPO NAV data.

If we attribute FY25 super earnings on post-IPO fully diluted equity capital, then the asking price is at a P/E of 14.76. Based on FY24 earnings, the P/E stands at 20.32. The issue relatively appears fully priced.

For the reported periods, the company has posted PAT margins of 1.49% (FY23), 10.40% (FY24), 9.03%, (FY25), and RoCE margins of 9.08%, 33.51%, 23.37%, respectively for the referred periods.  

DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy post listing, based on its financial performance and future prospects. 

COMPARISION WITH LISTED PEERS:
As per the offer document, the company has shown Akanksha Power, Rishabh Instruments, and Genus Power Infra, as their listed peer. They are trading at a P/E of 50.1, 53.8, and 38.4 (as of June 13, 2025). However, they are not truly comparable on an apple-to-apple basis. This compare appears to be an eyewash.

MERCHANT BANKER’S TRACK RECORD:
This is the 15th mandate from Expert Global in the last four fiscals including the ongoing one.  From the last 14 listings, 1 listed discount, 1 at par and the rest with a premium ranging from 10.47% to 90%, on the listing date.