Icodex Publishing BSE SME IPO review

•    The company is engaged in providing software solutions for scholarly publications etc.
•    The company marked growth in its top and bottom lines for the reported periods.
•    Boosted profits from FY24 onwards raise eyebrows and concern over its sustainability.
•    Based on its recent financial data, considering its non-convincing margins, the issue appears aggressively priced
•    There is no harm in skipping this pricey issue with dicey performances.

ABOUT COMPANY:
Icodex Publishing Solutions Ltd. (IPSL) was incorporated with a focus to provide software products to the scholarly and academic publishing industry. Since inception, the Company is engaged in the business of Software Product Development for Scholarly Publishing. Its Software products help in publication of research papers, studies and academic articles; that help researchers, academicians, and scholars in their field of work. The company specializes in a developing and providing publishing products and software, which support the publishing process, i.e., from manuscript preparation till print and digital content distribution.

The Company also provides Business Process Management services that support the publishing process with activities like Quality assurance checks, editorial services and back-end support to Global Publishing Client. IPSL also provides IT support services which includes installation of all kinds of hardware and peripherals and back-end support. Icodex operates as a software service provider for a Global Publishing Company (“Client”) headquartered in the United States (US) that provides content and services for research, education and professional development. The Client publishes books, journals, reference works and other materials in print and online in scientific, technical, medical and scholarly fields. As of June 30, 2025, it had 116 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book-building route combo IPO of 4120800 equity shares of Rs. 10 each to mobilize Rs. 42.03 cr. at the upper cap. The company has announced a price band of Rs. 98 – Rs. 102 per share. The issue consists of 3396000 fresh equity shares (worth Rs. 34.64 cr. at the upper cap), and an Offer for Sale (OFS) of 724800 equity shares (worth Rs. 7.39 cr. at the upper cap). The IPO opens for subscription on August 11, 2025, and will close on August 13, 2025. The minimum application to be made is for 2400 shares and in multiple of 1200 shares thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 26.35% of post-IPO paid-up equity capital of the company. From the net proceeds of the issue, the company will utilize Rs. 16.70 cr. for purchase of new office premises, Rs. 1.12 cr. for capex on purchase of hardware for new office, Rs. 5.20 cr. for working capital, and the rest for general corporate purposes.

The IPO is solely lead managed by Indcap Advisors Pvt. Ltd., while Cameo Corporate Services Ltd. is the registrar to the issue. Giriraj Stock Broking Pvt. Ltd. is the market maker. Prognosis Securities Pvt. Ltd. is a syndicate member. The issue is underwritten to the tune of 85% by Giriraj Stock Broking, and up to 15% by Indcap Advisors.

The company has issued entire initial equity shares at par, and issued further equity shares at a price of Rs. 750000 per share in September 2024. It also issued bonus shares in the ratio of 12000 for 1 in October 2024. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. Rs. NIL per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 12.24 cr. will stand enhanced to Rs. 15.64 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 159.50 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted total Revenue/Net Profit of Rs. 9.72 cr. / Rs. 1.81 cr. (FY23), Rs. 10.99 cr. / Rs. 4.40 cr. (FY24), and Rs. 22.08 cr. / Rs. 8.96 cr. (FY25). Boosted bottom lines from FY24 raise eyebrows and concern over its sustainability going forward. Such performance appears to be cooked one to get fancy valuations for the IPO.

For the last three fiscals, the company has reported an average EPS of Rs. 5.13, and an average RoNW of 47.78%. The issue is priced at a P/BV of 6.56 based on its NAV of Rs. 15.56 as of March 31, 2025, but its post-IPO NAV data is missing from offer documents.

If we attribute its FY25 super earnings on post-IPO expanded equity base, then the asking price is at a P/E of 17.80, and based on its FY24 earnings, the P/E stands at 36.30. Thus, based on its recent financial data, the issue appears aggressively priced.

The company has posted PAT margins of 18.64% (FY23), 40.02% (FY24), 40.56% (FY25), and RoCE Margins of 51.62%, 74.17%, 110.07%, respectively for the referred periods. The company has shown different percentages for its net profit data on page no. 97, 132, and page no. 98, that indicates some mismatches. The boosted margins appear to be a window dressing for fetching fancy valuations for the IPO.

DIVIDEND POLICY:
The company has not declared any dividends since incorporation. It will adopt a prudent dividend policy, based on its financial performances and future prospects.

COMPARISON WITH LISTED PEERS:
As per offer document, the company has shown MPS Ltd., as its listed peer. It is trading at a P/E of around 25.1 (as of August 08, 2025). However, they are not truly comparable on an apple-to-apple basis. This comparison appears to be an eyewash.

MERCHANT BANKER’S TRACK RECORDS:
This is the 1st mandate from Indcap Advisors in the last four fiscals (including the ongoing one). Hence, it has no track records for past mandates.