Healthy Life BSE SME IPO review (May apply)

•    HLAL is engaged in trading activities only.
•    It is marketing raw milk, live chicken and agro products in two states.
•    Based on FY22 consolidated earnings, this at-par issue is priced aggressively.
•    Higher promoter stake dilution is a concern.
•    Risk seeker/cash surplus investors may consider an investment.

ABOUT COMPANY:
Healthy Life Agritec Ltd. (HLAL) incorporated in the month of November 2019, is engaged in the business of trading Raw Milk in the state of Maharashtra and Live Chicken and Agro Products in the state of Maharashtra and Karnataka.

It procures raw cow milk from milk farmers in the State of Maharashtra, a significant cow milk-producing region in India. HLAL's direct procurement model enables it to control costs and ensure the quality of the raw milk procured. The company has engaged procurement partners, to coordinate the milk procurement process with milk farmers and supply Raw milk to milk wholesalers in the state of Maharashtra. In addition to Raw Milk, the company also procure Poultry from Poultry Growers in the state of Maharashtra and Karnataka and supplies poultry to Chicken Wholesalers in both states.

During 2021-22, it sold 39.20 Lakhs litres of raw Cow Milk and 7.69 Lakhs Kgs of Live Chicken which contributes approximately 60.05% and 39.95% of total revenue, while for 2020-21, it sold 6.50 Lakhs litres of raw Cow Milk and 1.21 Lakhs Kgs of Live Chicken which contributes approximately 59.95% and 40.05% of total revenue. As of the date of filing this offer document, it has 8 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its needs for working capital (Rs. 8.54 cr.) and general corporate purposes (Rs. 1.00 cr.), HLAL is coming out with a maiden IPO of 10000000 equity shares of Rs. 10 each at par to mobilize Rs. 10 cr. The issue is opening for subscription on July 13, 2022, and will close on 18.07.2022. Minimum application is to be made for 10000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 45.43% of the post-IPO paid-up capital of the company. HLAL is spending Rs. 0.46 cr. for this IPO process. 

The issue is solely lead managed by Finshore Management Services Ltd., Cameo Corporate Services Ltd. is the registrar to the issue and Nikunj Share Brokers Ltd. is the market maker for this IPO.

The company has issued its entire equity capital at par value so far. The average cost of acquisition of shares by the promoters is Rs. 10 per share.  

Post-IPO, HLAL's current paid-up equity capital of Rs. 12.01 cr. will stand enhanced to Rs. 22.01 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 22.01 cr.

FINANCIAL PERFORMANCE: 
On the financial performance front, while on a standalone basis, HLAL has reported turnover/net profits of Rs. 4.12 cr. / Rs. 0.07 cr. (FY21) and Rs. 26.16 cr. / Rs. 0.76 cr. (FY22). On a consolidated basis, it has posted a net profit of Rs. 0.83 cr. on a turnover of Rs. 33.96 cr. (FY22). 

For the last three fiscals, on a standalone basis, HLAL has posted an average EPS of Rs. 25.23 and an average RoNW of 30.94% (based on the paid-up equity capital of respective years). The issue is priced at a P/BV of 0.92 based on its NAV of Rs. 10.82 as of March 31, 2022, and at a P/BV of 0.96 based on its post-IPO NAV of 10.37 per share. 

If we attribute its consolidated FY22 earnings on post IPO fully diluted equity, then the asking price is at a P/E of 26.31 making it an aggressively priced IPO despite being at par. 

DIVIDEND POLICY:
HLAL has not declared any dividend for the reported periods of accounting in the offer document. It will adopt a prudent dividend policy post listing, based on its financial performance and future prospects. 

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

MERCHANT BANKER'S TRACK RECORDS:
This is the 25th mandate from Finshore Management in the last five fiscals (including the ongoing one). Out of the last 10 listings, 2 opened at par and the rest with premiums ranging from 0.09% to 65.50% on the day of listings.