Innovative Ideals BSE SME IPO review (May apply)

•    Company is engaged in security solution services.
•    It offers novel devices/gadgets for self security.
•    FY18 performance is post merger of group entities.
•    Based on given parameters, issue is fully priced.
 
ABOUT COMPANY:
Innovative Ideals And Services (India) Ltd. (IIDSL) is the security solution provider company. Having started initially as traders in variety of security equipments by importing from Korea gradually they have emerged as the security solution providers. In August and September 2017 it merged two of its proprietorship concerns in the company for better management control and synergies. Currently IIDSL is providing services of System Integration for security, safety and building automation and installation of various electronics systems. It provides a wide range of services with respect to security and electronic systems, such as, Video Door Phone, Audio Door Phone, Access Controls, Home Automation Systems, Intrusion Alarm System, CCTV Systems, Fire Alarm Systems and Telecom Products. Company targets the requirements of residential construction industry in B2B segment. It provides Video Door Phones under its own brand names, namely, 'Onyx' and 'Inok'. Further, home automation solutions are provided under the brand name of 'eHomes'. Strengthening its service to B2B segment, Company introduced Fibre to the Home (FTTH) solutions in the residential projects which are a single line connection for Voice, Direct to Home and Broadband internet services. This fibre allows multiple Internet Service Providers (ISPs) to use the single fibre cable to provide their services. Further to expand its  product portfolio to reach B2C segment with a view of catering to a mass market, it has developed 2 innovative products, 'Savior' and 'ArmHer', addressing the need of safety of the citizens in the country, primarily, children, women and senior citizens. Apart from this, it has also launched basic feature mobile phones which are sold under own brand name, 'Inoyo'. IIDSL is trying to create awareness among public about self security with the use of such novel devices. However, it has to face stiff competition from mobile app and competition from unorganized sectors on these aspects.

IIDSL is authorized distributor of FERMAX Electronica S.A.U. for their products FERMAX Audio/Video Door Entry System in the territory of India and hold valid certificate of distributorship until February 04, 2019. It has entered an agreement with Tata Sky Broadband Private Limited for provision of broadband services including installation, operation, security, maintenance and provision of access infrastructure to the residents / subscribers in the service Area i.e. Amanora Park Town, Pune for the period of five years commencing from March 15, 2018 to March 14, 2023. IIDSL also entered an agreement with Tata Sky Limited for provision of Direct to Home (DTH) services as an authorized distributor of Tata Sky to the residents / subscribers in the service Area i.e. Amanora Park Town, Pune for the period of five years commencing from March 15, 2018 to March 14, 2023. Innovative has provided its services to more than 21,800 apartments and continue to earn revenue from Annual Maintenance Contracts (AMC) from many of its projects.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its working capital and general corpus fund needs, IIDSL is coming out with a maiden IPO of 3066000 equity shares of Rs. 10 each via book building route. It has fixed a price band of Rs. 36 – Rs. 40 per share. IIDSL mulls mobilization of Rs. 11.04 cr. to Rs. 12.26 cr. based on lower and upper price bands. Issue opens for subscription on 24.09.18 and will close on 26.09.18. Minimum application is to be made for 3000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue constitutes 26.94% of post issue paid up capital of the company. Issue is solely lead managed by Pantomath Capital Advisors Pvt. Ltd. while Bigshare Services Pvt. Ltd. is the registrar to the issue.  Having issued initial equity at par, it raised further equity at a price of Rs. 12 per share between October and December 2017. It has also issued bonus in the ratio of 1 for 1 (March 2010, December 2013 and October 2015), 1 for 4 (March 2017) and 4 for 5 (August 2017). Average cost of acquisition of shares by the promoters is Rs. 00 (negative) and Rs. 1.67 per share. Some promoters/stake holders sold their shares in last one year (as per information given by the management, sale took place in the average price range of Rs. 30 to Rs. 36 per share) to murky investors like Hitesh Patel, Kent RO Systems, Gita Amar Ambani, Valueworth Capital (approx 15.76% of existing equity capital). Post issue, company’s current paid up equity capital of Rs. 8.31 cr. will stand enhanced to Rs. 11.38 cr. Post issue promoter groups’ stake will stand reduced to 52.47% from existing 71.81%.

FINANCIAL PERFORMANCE:
On financial performance front, for last four fiscals, IIDSL has posted turnover/net profits of Rs. 12.45 cr. / Rs. 0.16 cr. (FY15), Rs. 12.18 cr. / Rs.  0.01 cr. (FY16), Rs. 10.75 cr. / Rs. 0.97 cr. (FY17) and Rs. 20.32 cr. / Rs. 3.09 cr. (FY18). According to management, FY18 results are due to merger of group entities. For last three fiscals, it has posted an average EPS of Rs. 2.93 and an average RoNW of 16.34%. Issue is priced at a P/BV of 2.49 on the basis of its NAV of Rs. 16.08 as on 31.03.18. If we consider FY18 earnings and attribute it to fully diluted equity post issue, then asking price is at a P/E or around 15.

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

MERCHANT BANKER’S TRACK RECORD:
On merchant banker’s front, this is 82nd mandate from its stable in last four fiscals. Out of last 10 listings, 1 opened at par and the rest with a premium ranging from 0.5% to 8% on the day of listing.