Infonative Solutions BSE SME IPO review (Avoid)

•    The company is principally engaged in developing, designing of eLearning content and related services.
•    It posted inconsistency in its top and bottom lines for the reported periods.
•    Boosted profits for H1 of FY25 appears to be window dressing for fetching fancy valuations.
•    Based on its recent financial performance, the issue appears aggressively priced. 
•    The company is operating in a highly competitive and fragmented segment.
•    Tiny equity capital post-IPO indicates longer gestation period.
•    There is no harm in skipping this “High Risk/Low Return” pricey bet.

ABOUT COMPANY:
Infonative Solutions Ltd. (ISL) is principally engaged in business of developing and designing of eLearning Content and services and courseware & other product including providing cloud-based learning management system (LMS) etc. Originally it was incorporated with a main object of carrying the business of manufactures, traders,distributors, exporters, importers and job workers of all kind of accessories such as Zip Fastners, riders, locks, hooks, buttons, labels, tags used in garments, clothing, leather goods, sports goods, hosiery goods, blankets, sweaters, pullovers, coats, shoes, soft top luggage and/or other articles and products.

In the year 2014, the Company started modestly, operating from a small, 10-seater office at the bustling IT hub of Delhi at Nehru Place, New Delhi. Within a year, the dedication and hard work paid off. Infonative Solutions outgrew its initial space and moved into a larger, 50-seater office, reflecting the company’s rapid growth and increasing client base. The expansion was not just physical; it marked the beginning of Infonative’s journey towards becoming a significant player in the e-Learning industry.

In 2018, Infonative Solutions made a strategic move that set the stage for future success by Investing in Mindscroll, a leading Learning Management System (LMS) software. This investment was a game-changer, enabling Infonative to offer a comprehensive suite of eLearning solutions that integrated cutting-edge technology with innovative educational methodologies. Today, the Company is engaged in crafting Bespoke e-Learning Solutions, e-Learning Consulting, Courseware and Off the Shelf content, also having its inhouse Learning Management Systems (LMS) with strong foothold in the field of Instructional Design, Gamification, Augmented and Virtual Reality based e-learning content, Software application simulations etc. 

It provides cutting-edge e-learning Delivery services designed to enhance business impact for Valued clients including Fortune 500 Companies, Big 4 Consulting Firms, Mid to Large Information Technology Companies, Education, Edtech and Learning Companies and Government Agencies with focus on BFSI, Consulting, IT/ITES, Education, Oil and Gas, FMCG etc. and geographies including India, USA and Malaysia etc Its team of learning professionals assists the world’s top Companies in revolutionizing their training functions. These services not only reduce their costs and add measurable value but also amplify business impact. Infonative is an end-to-end learning solutions organization assisting its clients throughout the learning journey of their employee. As of the date of filing this offer document, it had 157 qualified and experienced professional on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 3128000 equity shares to mobilize Rs. 24.71 cr. at the upper cap. The company has announced a price band of Rs. 75 – Rs. 79 per share of Re.1 each. The issue opens for subscription on March 28, 2025, and will close on April 03, 2025. The minimum number of shares to be applied is for 1600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 26.40% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, the company will utilize Rs. 7.35 cr. for development of new products, courses and new features in LMS and purchase of laptops, Rs. 5.01 cr. for working capital, and the rest for general corporate purposes. 

The IPO is solely lead managed by Share India Capital Services Pvt. Ltd., and KFin Technologies Ltd., is the registrar to the issue. Share India group’s Share India Securities Ltd., is the Market Maker for the company. The issue is underwritten to the tune of 15.09% by Share India Capital and to the tune of 84.91% by Prognosis Securities Pvt. Ltd.

Having issued initial equity shares at par value, the company issued further equity shares at a fixed price of Rs. 1.60 per share in July 2002. It has also issued bonus shares in the ratio of 5 for 1 March 2024. The average cost of acquisition of shares by the promoters is Rs. 0.10, Rs. 0.11, and Rs. 0.12 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 0.87 cr. will stand enhanced to Rs. 1.19 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 93.60 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 18.63 cr. / Rs. 2.23 cr. (FY22), Rs. 20.95 cr. / Rs. 1.07 cr. (FY23), Rs. 18.08 cr. / Rs. 1.45 cr. (FY24). For H1 of FY25 ended on September 30, 2024, it earned a net profit of Rs. 3.65 cr. on a total income of Rs. 11.42 cr. It posted inconsistency in its top and bottom lines for the reported periods. Boosted bottom line for H1 of FY25 appears to be the window dressing for getting fancy valuations.

For the last three fiscals, the company has reported an average EPS of Rs. 1.67 and an average RoNW of 17.85%. The issue is priced at a P/BV of 5.01 based on its NAV of Rs. 15.77 as of September 30, 2024, but post-IPO NAV data is missing from offer documents.

If we attribute FY25 annualized super earnings on post-IPO fully diluted equity capital, then the asking price is at a P/E of 12.85. Based on FY24 earnings, the P/E stands at 64.75. The issue relatively appears aggressively priced.

For the reported periods, the company has posted PAT margins of 12.15% (FY22), 5.19% (FY23), 8.20%, (FY24), 32.44% (H1-FY25), and RoCE margins of 44.71%, 16.86%, 18.60%, 37.52% for the referred periods, respectively. 

DIVIDEND POLICY:
The company has not paid any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy post listing, 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 16th mandate from Share India Capital in the last three fiscals.  From the last 14 listings so far, 3 opened at par and the rest with a premium ranging from 5.33% to 120% on the listing date.