Trekkingtoes.com BSE Startup IPO review (Avoid)

•    This is the 6th Startup IPO for BSE Startup platform since launch.
•    TCL is offering travel aggregator platform including rental services.
•    Travel aggregator platform is highly competitive with organized/unorganized players.
•    Financial performance so far is falling short to match asking price for IPO.
•    Lead Manager has an average track record.

PREFACE:
BSE that lead the space for SME IPO since 2012 started Startup platform in 2019 which has seen five IPO listing till date. Now the sixth startup IPO is coming in this month. Details of the same are given here below:

ABOUT COMPANY:
Trekkingtoes.com Ltd. (TCL) is engaged in the business of offering travel aggregator platform to cab rental services to a wide range of customers via its on Call booking Service, Website i.e. www.hippocabs.com and mobile application (app) i.e. HippoCabs. The company built technology and data-driven solutions for every area of the business which enables it to increase efficiency. TCL works on an exclusive and non-exclusive model with driver and vendors. It has more than 1500 vendors with more than 4000 vehicles registered for intercity services. The company provides dynamic pricing and route-specific approach. Currently, its services cover approximately 200 cities across India.

TCL plans to replicate the route-specific approach which it applied on Jaipur-Delhi route on similar routes like Delhi- Agra, Delhi-Chandigarh, Delhi-Dehradun, Delhi - Manali, Jaipur - Agra and Mumbai - Pune to become a market leader on these routes. TCL is also engaged in DataBase trading, Software Consultancy services, Currency Conversion Services in Indian as well as International Markets.

The company is solving a core problem of finding return journeys for its driver-partners. TCL is able to achieve this through a combination of its algorithms and strategic approach. Using dynamic pricing algorithms, it has been able to increase the efficiency of return booking to a point where almost all driver-partners are able to get the return journeys directly through the company's platform. Following a route-specific approach, the company is able to manage the demand and supply on both sides of the route, enabling the client to pay only for one way and for drivers to have customers on both the sides.
It adheres to all necessary regulatory specifications.

ISSUE DETAILS/CAPITAL HISTORY:
To meets its strategic initiatives and investments (Rs. 3.00 cr.), repayment/prepayment of certain debts (Rs. 0.40 cr.) and general corpus fund (Rs. 0.87 cr.) needs, TCL is coming out with a maiden IPO of 433200 equity shares of Rs.10 each at a fixed price of Rs. 105 per share to mobilize Rs. 4.55 cr. The issue opens for subscription on August 18, 2020, and will close on August 20, 2020. Minimum application is to be made for 1200 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE Startup platform.

Issue constitutes 27.04% of the post issue paid-up capital of the company. The company will be spending Rs. 0.28 cr. for this IPO process. The issue is solely lead managed by Fast Track Finsec Pvt. Ltd. and KFin Technologies Pvt. Ltd. is the registrar to the issue. Nidhi Broking Services Pvt. Ltd. is also acting as a Market Maker for this company. Having raised initial equity and preferential issue in April 2019 (1105800 shares) at par, TCL issued 1112 shares at Rs. 5395.68 per share (rights issue) in November 2018 and 52200 shares at Rs. 110 per share in April 2020.

The average cost of acquisition of shares by the promoters is Rs.10.00 and Rs. 13.50 per share. Post issue, TCL's current paid-up equity capital of Rs. 1.17 cr. will stand enhanced to Rs.1.60 cr. With this IPO, the company is looking for a market cap of Rs. 16.82 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, TCL has posted total revenue/net profits of Rs. 3.17 cr. / Rs. - (0.44) cr. (FY18), Rs. 4.84 cr. / Rs. - (1.07) cr. (FY19) and Rs. 2.70 cr. / Rs. 0.03 cr. (FY20). It has suffered a setback for the concluded fiscal 2019-20.

For the last three fiscals, TCL has posted an average negative EPS of (Rs. 410.03) and RoNW of 92.41%. The issue is priced at a P/BV of 1312.5 based on its NAV (Net Asset Value) of Rs. 0.08 as on March 31, 2020, and at a P/BV of 3.28 based on post issue NAV of Rs. 32.03. Considering the negative average EPS for last three fiscals, its issue has negative pricing.

If we attribute FY20 earnings on fully diluted equity post issue, then asking price is at a P/E of around 552 making it exorbitantly priced.

COMPARISION WITH LISTED PEERS:
As per offer documents, TCL has no listed peers to compare with.  

MERCHANT BANKER'S TRACK RECORDS:
On merchant banker's performance front, this is the 4th mandate from its stable in the last three fiscals (including the ongoing one). Out of last 3 listings, one issue opened at a discount and the rest with premiums ranging from 0.08% to 0.58% on the day of listing. Thus it has an average track record.