Getalong Enterprise BSE SME IPO review (Avoid)

•    GEL is in the trading business with a variety of product portfolios.
•    So far it has just about 12 months working overall.
•    Post issue paid-up equity indicates longer gestation for migration to the mainboard.
•    The issue is fully structured based on its issue expenses.

ABOUT COMPANY: 
Getalong Enterprise Ltd. (GEL) is mainly engaged in the trading business. Its product portfolio is diversified with operating in three key segments i.e. export of textiles, trading in Gold Bullion and sale of female care products. It also provides other services. It is operating in highly competitive segments. The company was incorporated in July 2020 and started its business. The company does not have any long term contracts for procurement or supply of inputs and does trading on the basis of purchase orders from customers. Its revenue includes about 56% from exports of products. Its top 10 customers contributed 72.55% of the total revenues. It operates from a rented office and does not own and is doing largely third party business. It has entered into an agreement for 2 years only for its rented office.  

As on the filing of the prospectus, it has 9 employees including directors and KMPs. 

ISSUE DETAILS/CAPITAL HISTORY: 
To part finance its needs for working capital (Rs. 3.90 cr.) and general corporate purpose (Rs. 0.75 cr.), GEL is coming out with a maiden IPO of 750000 equity shares of Rs. 10 each at a fixed price of Rs. 69 per share to mobilize Rs. 5.18 cr. The issue opens for subscription on September 27, 2021, and will close on September 30, 2021. Minimum application is to be made for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 41.02% of the post issue paid-up capital of GEL. The company will be spending Rs. 0.53 cr. for this IPO process. Based on issue expenses, the company has already structured IPO funding.

The issue is solely lead managed by Shreni Shares Pvt. Ltd. and Link Intime India Pvt. Ltd. is the registrar to the issue. Shreni Shares Pvt. Ltd. is also the market maker for this issue. 

Having issued initial equity at par, the company raised further equity at the price of Rs. 70 per share between January 2021, and February 2021, and has also issued bonus shares in the ratio of 3 for 1 in February 2021. The average cost of acquisition of shares by the promoters is Rs. 14.73 and Rs. 17.50 per share. 

Post issue, GEL's current paid-up equity capital of Rs. 1.08 cr., will stand enhanced to Rs. 1.83 cr. Based on the issue pricing, the company is looking for a market cap of Rs. 12.62 cr. 

FINANCIAL PERFORMANCE: 
On the financial performance front, GEL has posted a net profit of Rs. 0.86 cr. on a turnover of Rs. 66.50 cr. for FY21. For the first four months of FY22 ended on July 31, 2021, it has earned a net profit of Rs. 1.08 cr. on a turnover of Rs. 17.06 cr. Thus super-profits in the pre-IPO period raise concern. 

The company has posted an EPS of Rs. 7.97 and RoNW of 32.63% for FY21. The issue is priced at a P/BV of 2.83 based on its NAV of Rs. 24.42 as of March 31, 2021, and at a P/BV of 4.79 based on its post-issue NAV of Rs. 14.40.

If we annualized super earnings for FY22 and attribute it to fully diluted post issue equity then the asking price is at a P/E of 3.90, and based on FY 21 earnings then P/E stands at 14.68. 

DIVIDEND POLICY:
The company has not declared any dividend so far. Post listing, it will adopt a prudent dividend policy based on its earnings and future prospects. 

COMPARISON WITH LISTED PEERS:
As per the offer documents, the company has no listed peers to compare with. 

MERCHANT BANKER'S TRACK RECORDS:
This is the 6th mandate from Shreni Shares Pvt. Ltd. in the last three fiscals (including the ongoing one). Out of the last 5 listings. 2 opened at par and the rest with premiums ranging from 0.67% to 1.95% on the day of listings. Thus it has an average track record.