Fourth Dimension Solutions NSE Emerge IPO review (Apply)

While OFS Tech is the last BSE SME IPO for the calendar year 2015, NSE Emerge too have one IPO that is opening in the last week of December 2015. Details of the same are given hereunder:

Fourth Dimension Solutions Ltd (FDSL) is an information technology (IT) infrastructure, technical support services and operations outsourcing company having CMMI level 5 accreditation. It provides value to its customers by innovation, accomplishment, trust and long-term relationship through our unique service portfolio and expertise. FDSL provides range of information technology and consultancy services, including infrastructure services, end user IT support, IT asset life cycle, and integrated solutions. FDSL enables large and medium enterprises, Government organization and institutes to reduce their total cost of ownership using an onsite and on-call services, deliver strategic, personalized, full-service Technical Support services solutions with quality, value and commitment to total customer satisfaction. Its service assignments are mostly tender based contracts awarded to us by Local/State/Central Government bodies.

To meet its working capital requirements, the company is coming out with its maiden IPO of 2892000 equity shares of Rs. 10 each at a fixed price of Rs. 30 per share to mobilize Rs. 8.68 crore. Issue opens for subscription on 30.12.15 and will close on 07.01.2016. Minimum application is to be made for 4000 shares and in multiples thereon, thereafter. Issue is solely managed by Sarthi Capital Advisor Pvt Ltd and Sharepro Services (India) Pvt Ltd is the registrar to the issue.  After having issued equity at par since incorporation to November 2014, it issued 10 lac shares by way of rights at a price of Rs. 30 and also issued bonus in the ratio of 3 for 1 in September 2015. Its current equity capital of Rs. 8 crore will stand enhanced to Rs. 10.89 crore post IPO. Post allotment shares will be listed on NSE Emerge.

On performance front, the company has posted average EPS of Rs. 74.15 and RoNW at 77.21% for last three fiscals. However, these earnings are on the paid up equity capital of Rs. 1 crore for FY 2013-14 and Rs. 2 crore for the remaining two fiscals. For first six months of the current fiscal, it has earned net profit of Rs. 5.88 crore on a turnover of Rs. 320.83 crore. If we annualize these earnings and attribute to the post IPO equity then EPS will stand around Rs. 10.80 and thus asking price is at around 3 P/E against peers P/E ranging from 8 to 67. Thus issue pricing is reasonable. On merchant banker’s front, this is the 13th IPO and earlier 12 have given average returns.

Conclusion: Considering reasonable pricing of the IPO, investors may consider long term investment, as most of SME IPOs have given some rewards post listings in the process.