Innokaiz India BSE SME IPO review (May apply)

•    IIL is in the highly competitive business of corporate services and solutions providing.
•    It has posted consistent growth in its top and bottom lines amidst competition.
•    Based on its FY23 earnings, the issue is priced at a reasonable P/E.
•    The sustainability of trends remains a major concern due to fragmented segments. 
•    Well-informed investors may consider parking funds for long-term rewards.

PREFACE:
The IPO is a book-building issue, its ad miss Lead Manager's track record data for a book-building issue. 

ABOUT COMPANY:
Innokaiz India Ltd. (IIL) is a corporate services and solutions provider Company. It has emerged as a one-stop solution provider for various corporate needs. IIL offers a comprehensive range of services covering Advertising and Marketing Solutions including Digital Marketing, Corporate Travel Arrangements, Gifting Solutions, Event Management etc. Recently, the company has also ventured into new business verticals i.e., E-Commerce Business. 

IIL thrives to provide the highest level of services on every assignment and to provide best-in-class and cost-effective services and solutions to our clients. As of the filing of this offer document, the company had 35 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden IPO of 2713600 equity shares of Rs. 10 each via book building route to mobilize around Rs. 21 cr. The company has announced a price band of Rs. 76 - Rs. 78 and at the upper cap, mulls raising Rs. 21.17 cr. The issue opens for subscription on April 28, 2023, and will close on May 03, 2023. The minimum application is to be made for 1600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 26.54% of the post-issue, paid-up capital of the company. IIL is spending Rs. 2.90 cr. for this IPO process and from the net proceeds, it will utilize Rs. 14.00 cr. for working capital, and the rest surplus for general corporate purposes. Post reservation of 5.01% for the market maker, the company has allocated 50% for QIBs, 15% for HNIs and 35% for Retail investors. 

Gretex Corporate Services Ltd. is the sole lead manager and Bigshare Services Pvt. Ltd. is the registrar of the issue. Gretex Group's Gretex Share Broking Pvt. Ltd. is the market maker for the company. 

Having issued initial equity shares at par, the company issued bonus shares in the ratio of 750 for 1 in June 2022. The average cost of acquisition of shares by the promoters is Rs. 0.01 per share. 

Post-IPO, IIL's current paid-up equity capital of Rs. 7.51 cr. will stand enhanced to Rs. 10.22 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 79.74 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, IIL has posted a total revenue/net profit of Rs. 138.72 cr. / Rs. 3.62 cr. (FY20), Rs. 185.06 cr./ Rs. 5.09 cr. (FY21), and Rs. 286.09 cr. / Rs. 7.92 cr. (FY22). For 7M of FY23 ended on October 31, 2022, it earned a net profit of Rs. 6.10 cr. on a total revenue of Rs. 148.84 cr. 

For the last three fiscals, IIL has reported an average EPS of Rs. 8.33 and an average RoNW of 48.75%. The issue is priced at a P/BV of 2.39 based on its NAV of Rs. 32.66 as of October 31, 2022, and at a P/BV of 1.86 based on its post-IPO NAV of Rs. 41.87 per share (at the upper cap).

If we annualize FY23 earnings and attribute it to a post-IPO fully diluted paid-up equity capital base, then the asking price is at a P/E of 7.62.

DIVIDEND POLICY:
The company has not declared 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. 

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown DAPS Advertising and Brandbucket Media as their listed peers. They are currently trading at a P/E of 12.96 and 37.5 (as of April 25, 2023). However, they are not truly comparable on an apple-to-apple basis.  

MERCHANT BANKER'S TRACK RECORD:
This is the 17th mandate from Gretex Corporate in the last four fiscals (including the ongoing one). Out of the last 10 listings, 1 opened at discount, 1 at par and the rest listed at premiums ranging from 0.47% to 67.71% on the listing date. Thus it has an average track record.