Hamps Bio BSE SME IPO review (Avoid)

•    The company is engaged in pharma formulations marketing and manufacturing freeze dried and frozen products. 
•    It posted listless financial performance for the reported periods, which is not matching its asking price.
•    Based on FY25 annualized earnings, the IPO appears aggressively priced. 
•    Small paid-up equity base post-IPO indicates longer gestation period for migration.
•    There is no harm in skipping this pricey issue. 

PREFACE:
The IPO is opening on December 13, 2024, but its offer documents were not available on BSE till this noon. The offer document has filing date of December 09, 2024. In fact, this afternoon, though the IPO info appears in the list, its link was not leading to Prospectus data.

ABOUT COMPANY:
Hamps Bio Ltd. (HBL) is engaged in the ethical marketing and distribution of pharmaceutical formulation products ("Pharma") across wide range of dosage including tablets, syrups, capsules, injectable, oil, gel and powder used as medicine and nutrition supplements as well as the manufacturing of freeze dried and frozen products ("FDFP") such as fruits, vegetables, herbs and flowers. 

It is recognized in the pharmaceutical industry under own brand name "Hamps" and in freeze-dried and frozen food segment through own brand "FzyEzy". HBL sells its products through more than 50 distributor's network as on October 31, 2024 and E-commerce platform, including Amazon.com, Amazon.ca, Amazon.eu, Flipkart, Jio Mart, Etc. The company sells its pharma products primarily in 8 States and Union territories and FDFP products primarily in 6 countries and 22 States and Union territories. As on the date of this Prospectus, it had a range of more than 180 different products sold across both the segments. As of October 31, 2024, it had 78 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden IPO of 1220000 equity shares of Rs. 10 each at a fixed price of Rs. 51 per share to mobilize Rs. 6.22 cr. The issue opens for subscription on December 13, 2024, and will close on December 17, 2024. The minimum number of shares to be applied is for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 28.01% of the post-IPO paid-up capital of the company. The company is spending Rs. 0.61 cr. for this IPO process, and from the net proceeds of the IPO, the company will utilize Rs. 3.59 cr. for purchase of plant and machinery for its FMCG division, Rs. 0.50 cr. for enhancing visibility and brand awareness, and Rs. 1.52 cr. for general corporate purposes

The IPO is solely lead managed by Marwadi Chandarana Intermediaries Brokers Pvt. Ltd., and Bigshare Services Pvt. Ltd., is the registrar to the issue. Pure Broking Pvt. Ltd., is the Market Maker for the company.

Having issued initial equity shares at par value, the company issued further equity shares at a fixed price of Rs. 60 per share in January 2024. It has also issued bonus shares in the ratio of 3 for 5 in June 2024. The average cost of acquisition of shares by the promoters is Rs. 4.03, Rs. 4.95, Rs. 6.25, and Rs. 26.38 per share. 

Post-IPO, company's current paid-up equity capital of Rs. 3.14 cr. will stand enhanced to Rs. 4.36 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 22.22 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 5.35 cr. / Rs. 0.12 cr. (FY22), Rs. 5.59 cr. / Rs. 0.36 cr. (FY23), and Rs. 6.50 cr. / Rs. 0.50 cr. (FY24). For 7M of FY25 ended on October 31, 2024, it earned a net profit of Rs. 0.34 cr. on a total income of Rs. 4.36 cr. It posted steady growth in its top lines and bottom line but the profits are minuscule. It generates over 87% revenue for Pharma segment and around 63% revenue for FDFP segment from Gujarat only.

For the last three fiscals, the company has reported an average EPS of Rs. 1.46 and an average RoNW of 18.21%. The issue is priced at a P/BV of 4.32 based on its NAV of Rs. 11.82 as of October 31, 2024, and at a P/BV of 2.24 based on its post-IPO NAV of Rs. 22.80 per share.

If we attribute FY25 annualized super earnings on post-IPO fully diluted equity capital, then the asking price is at a P/E of 38.06, and based on FY24 earnings, it stands at 44.35. The issue relatively appears aggressively priced.

For the reported periods, the company has posted PAT margins of 2.28% (FY22), 6.44% (FY23), 7.73% (FY24), 7.99% (7M-FY25), but RoCE margins data is missing.

DIVIDEND POLICY:
The company has not declared any dividends for the last five years. It will adopt a prudent dividend policy, based on its financial performance and future prospects. 

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

MERCHANT BANKER'S TRACK RECORD:
This is the 1st mandate from Marwadi Chandarana in the ongoing fiscal, thus it has no past track records of listing performances.