Faalcon Concepts BSE SME IPO review (Apply)

•    FCL is engaged in the business of installation of façade systems for beautifying front look of premises.
•    It marked inconsistency in its top and bottom lines. From FY23 onwards, it stabilized its margins with domestic projects. 
•    Based on FY24 annualized earnings, the issue appears fully priced. 
•    It has order book worth Rs. 50 cr. (approx.) as of March 31, 2024.
•    Investors may park funds for the medium to long term rewards.
 
ABOUT COMPANY:
Faalcon Concepts Ltd. (FCL) is engaged in designing, engineering, fabrication and installation of façade systems. It specializes in technically demanding facades. The company offers various range of products to meet the demands of customers. Its product basket ranges from glazing /curtain walls, high end aluminium doors & windows, skylights, canopies, frameless glazing, MS structures, stone cladding, metal cladding, roofing & others. FCL is offering facades which are resistant against UV rays, acidic rain, dust, noise and others. It has catered to customers' base in various states such as Haryana, Uttar Pradesh, Rajasthan, Madhya Pradesh, Karnataka, Gujrat, Punjab and Delhi.

FCL has completed a varied variety of projects for Schools, financial institutions, hospitality installations, corporate buildings, and luxury houses with success. Its clients are spread across India and the World, in communities from various states. It has offered services for varied type of facade projects including residential buildings, commercial complexes, schools, parks etc. FCL's list of clients include Espirit Techno Consultant Pvt. Ltd, Galaxy Magnum Infra Height Limited, Babbar Films, Maconns Infra Pvt. Ltd, Silvers Stone Regency Pvt. Ltd., St Xavier School Gurgaon High School etc. among others. As of the date of filing this offer document, it had 26 employees on its payroll. 

As of March 31, 2024, the company had orders on hand worth Rs. 50 cr. (approx.), and had many more in the pipelines. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden IPO of 1950000 equity shares of Rs. 10 each at a fixed price of Rs. 62 per share of Rs. 10 each to mobilize Rs. 12.09 cr. The issue opens for subscription on April 19, 2024, and will close on April 23, 2024. The minimum application to be made is for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 28.55% of the post-IPO paid-up capital of the company. The company is spending Rs. 1.96 cr. for this IPO process, and from the net proceeds of the IPO, it will utilize Rs. 2.51 cr. for capex on façade structural equipments, Rs. 5.75 cr. for working capital, and Rs. 1.87 cr. for general corporate purposes. 

The issue is solely lead managed by Navigant Corporate Advisors Ltd., and Beetal Financial & Computers Services Pvt. Ltd. is the registrar of the issue. Alacrity Securities Ltd. is the market maker for the company. While Navigant has underwritten this issue to the tune of 15%, Alacrity has underwritten to the tune of 85%. Pooja Equiresearch Pvt. Ltd. is the advisor to the company.

Having issued initial equity shares at par value, the company issued further equity shares in the price range of Rs. 221.13 - Rs. 1410 per share between March 2022 and August 2023. It has also issued bonus shares in the ratio of 139 for 1 in August 2023. The average cost of acquisition of shares by the promoters is Rs. 2.93, Rs. 2.95 and Rs. 4.00 per share. 

Post-IPO, company's current paid-up equity capital of Rs. 4.88 cr. will stand enhanced to Rs. 6.83 cr. Based on the upper IPO price band, the company is looking for a market cap of Rs. 42.35 cr.  

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 5.02 cr. / Rs. 0.12 cr. (FY21), Rs. 18.53 cr. / Rs. 0.98 cr. (FAY22), Rs. 13.25 cr. / Rs. 1.80 cr. (FY23). For the first 7 months of FY24 ended on October 31, 2023, it earned a net profit of Rs. 1.32 cr. on a total income of Rs. 12.49 cr. For odd working of FY22, the lower net is attributed to low margin projects done in African countries, that increased top line, but dented its bottom line. 

For the last three fiscals, it has reported an average EPS of Rs. 1.98, and an average RONW of 61.92%. The issue is priced at a P/BV of 4.78 based on its NAV of Rs. 12.96 as of October 31, 2023, and at a P/BV of 2.30 based on its post-IPO NAV of Rs. 26.95 per share. 

If we attribute annualized FY24 earnings to its post-IPO fully diluted paid-up capital, then the asking price is at a P/E of 18.73. Thus the issue appears fully priced based on its recent financial data.

For the reported periods, the company has posted PAT margins of 2.46% (FY21), 5.31% (FY22), 13.65% (FY23), 10.57% (7M-FY24), and RoCE margins of NIL%, 102.90%, 71.75%, 26.18% respectively for the referred periods. Its PAT margin data shows different percentages for FY22 onwards. (refer page no. 107 of the prospectus). 

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 Innovators Facade as their listed peers. It is trading at a P/E of 26.1 (as of April 16, 2024). However, they are not comparable on an apple-to-apple basis.

MERCHANT BANKER'S TRACK RECORD:
This is the 22nd mandate from Navigant Corporate in the last eight fiscals, out of the last 10 listings, 2 opened at discount, 2 at par and the rest with premiums ranging from 0.13% to 54.47% on the date of listing.