Fabino Life BSE SME IPO review (Avoid)

•    FLSL is engaged in the pharma/healthcare-related products segment.
•    It has posted erratic financial performances for the past three fiscals. 
•    Based on the latest earnings, the issue is exorbitantly priced. 
•    Poor performance during the pandemic period is a bit surprising.
•    There is no harm in ignoring this IPO. 

ABOUT COMPANY: 
Fabino Life Sciences Ltd. (FLSL) is a growing pharmaceutical and other wellness-focused consumer Products Company operating from Delhi and Haryana. The company emphasizes developing high-quality and affordable products for all sections of society by harnessing the skills of competent manpower and other resources. 

FLSL is engaged in manufacturing, marketing, trading and Packing of pharmaceutical and other wellness-focused consumer products. Its core business is the marketing of Pharmaceutical formulation & products in the domestic market through its own distribution network and Salesforce under its own brand name. 

It is getting Ayurvedic formulations manufactured through Loan Licensing facilities, Packing, Labeling etc. The company exports wellness and FMCG products like Coffee, Malt powder, Protein powder, Hair shampoo which is marketed by it. FLSL's Ayurvedic/Herbal business operations are supported by loan licensing facilities that are approved by relevant authorities. It typically enters into Loan License Agreement for periods ranging from one to five years. As of June 30, 2021, it had 8 employees on its payroll. It is selling its products under 97 trademarks. 

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its needs for part repayment of loans (Rs. 0.25 cr.), working capital (Rs. 2.05 cr.) and general corporate purpose (Rs. 0.50 cr.), FLSL is entering the capital market with its maiden IPO of 900000 equity shares of Rs. 10 each at a fixed price of Rs. 36 per share to mobilize Rs. 3.24 cr. The issue opens for subscription on December 31, 2021, and will close on January 05, 2022. Minimum application is to be made for 3000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 42.86% of the post issue paid-up capital of the company. FLSL will spend around Rs. 0.44 cr. for this IPO process. 

The issue is solely lead managed by Aryaman Financial Services Ltd., and Bigshare Services Pvt. Ltd. is the registrar to the issue. Aryaman Capital Markets Ltd. is the market maker for this IPO. 

Having issued initial equity at par, it raised further equity at a price of Rs. 50 per share in April 2015. It has also issued bonus shares in the ratio of 3 for 1 in September 2020. The average cost of acquisition of shares by the promoters is Rs. 10.22 per share. 

Post issue, FLSL's current paid-up equity capital of Rs. 1.20 cr. will stand enhanced to Rs 2.10 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 7.56 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, FLSL has posted turnover/net profits of Rs. 2.76 cr. / Rs. 0.001 cr. (FY19), Rs. 7.52 cr. / Rs. 0.07 cr. (FY20) and Rs. 3.06 cr. / Rs. 0.03 cr. (FY21). For the first three months of FY22 ended on June 30, 2021, it has earned net profits of Rs. 0.01 cr. on a turnover of Rs. 1.13 cr. Surprisingly despite operating in the healthcare segment, it has posted lower top and bottom lines during pandemic periods and has been posting static margins. 

For the last three fiscals, the company has posted an average EPS of Rs. 0.63 and an average RoNW of 4.58%. The issue is priced at a P/BV of 3.28 based on its NAV of Rs. 10.97 as of June 30, 2021, and at a P/BV of 1.66 based on its post-issue NAV of Rs. 21.70 per share. 

If we annualize FY22 earnings and attribute it to the fully diluted post issue equity capital, then the asking price is at a P/E of around 133. Thus the issue is exorbitantly priced. 

COMPARISON WITH LISTED PEERS:
As per offer documents, FLSL has shown Earum Pharma, Vaishali Pharma and Chandra Bhagat Pharma as its listed peers. They are currently trading at a P/E of 00, 14.94 and 356 (as of December 29, 2021). However, they are not truly comparable on an apple-to-apple basis. 

DIVIDEND POLICY:
The company has not declared any dividend for the referred periods of offer documents. It will adopt a prudent dividend policy post listings based on its financial performance and future prospects.

MERCHANT BANKER'S TRACK RECORDS:
This is the 17th mandate from Aryaman Financial in the last three fiscals (including the ongoing one). Out of the last 10 listings, 1 opened at discount and the rest with premiums ranging from 0.04% to 2.16% on the day of listings. Thus it has an average track record.