Interiors & More NSE SME IPO review (Avoid)

•    IML is in the business of manufacturing and trading of artificial flowers and other decorative materials. 
•    The company marked boost in its top and bottom lines from FY23 onwards.
•    The jump in bottom lines from FY23 onwards raise eyebrows and the concern over its sustainability.
•    Based on FY24 super annualized earnings, the issue appears aggressively priced. 
•    There is no harm in staying away from this pricey bet. 

ABOUT COMPANY:
Interiors & More Ltd. (IML) is having focused on trading artificial flowers, importing them and selling them domestically. An artificial flower resembles a real flower but is non-perishable in nature, hence it is commonly utilized in Indian marketplaces. Artificial flowers are commonly utilized in weddings, celebrations, corporate settings, and home decor. The company has been serving businesses of all sizes for over a decade. 

Following its success with artificial flowers, the company expanded into decorative items such as vases, plants, planters, wedding props, lights, furniture, fabric, chandeliers, candles, fragrance, and other related décor items. As on today, it is a manufacturer and trader of quality artificial flowers, plants, and other home and office décor items. The company sources raw materials from both domestic and foreign markets. 

The primary revenue of the company is generated from the sales of artificial flowers, plants & leaves. Artificial flowers, plants & leaves have been a core focus of its business. The company continues to invest in the development and expansion of its other product categories. As of December 31, 2023, it had 93 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 1850400 equity shares of Rs. 10 each (worth Rs. 42.00 cr. at the upper cap) It has announced a price band of Rs. 216 - Rs. 227 per share. The issue opens for subscription on February 15, 2024, and will close on February 20, 2024. The minimum application to be made is for 600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.45% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO funds, it will utilize Rs. 4.50 cr. for repayment/prepayment of certain debts, Rs. 25.00 cr. for working capital, and the rest general corporate purposes. 

The issue is solely lead managed by Gretex Corporate Services Ltd., and Bigshare Services Pvt. Ltd. is the registrar of the issue. GRETEX Group's Gretex Share Broking Ltd. is the market maker for the company. The issue is underwritten by Gretex Corp. and Gretex Share on a 50 :50 bases.

The company has issued entire equity capital at par so far and has also given bonus shares in the ratio of 2 for 1 in June 2023. The average cost of acquisition of shares by the promoters is Rs. 3.33, Rs. 4.39, Rs. 4.69, Rs. 5.08, and Rs. 5.67 per share.

Post-IPO, company's current paid-up equity capital of Rs. 5.15 cr. will stand enhanced to Rs. 7.00 cr. Based on the upper IPO price band, the company is looking for a market cap of Rs. 158.80cr.  

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total revenue/net profit of Rs. 6.63 cr. / Rs. 0.43 cr. (FY21), Rs. 9.99 cr. / Rs. 1.04 cr. (FY22), and Rs. 25.27 cr. / Rs. 5.93cr. (FY23). For 3Qs of FY24 ended on December 31, 2023, it earns a net profit of Rs. 3.55 cr. on a total revenue of Rs. 18.54 cr. The sudden boost in its bottom lines from FY23 onwards raise eyebrows and concern over its sustainability. 

The management claims that this segment has entry barriers and hence they are confident of maintaining the trends posted for their financial performance. However, the segment is highly fragmented one and may pose threats on margins.

For the last three fiscals, it has reported an average EPS of Rs. 6.67, and an average RONW of 41.95%. The issue is priced at a P/BV of 8.65 based on its NAV of Rs. 26.23 as of December 31, 2023. The IPO price band ad is missing the post-IPO NAV data for this IPO. 

If we attribute annualized FY24 earnings to its post-IPO fully diluted paid-p capital, then the asking price is at a P/E of 33.58. Thus the issue appears aggressively priced. 

For the reported periods, the company has posted PAT margins of 6.74% (FY21), 10.56% (FY22), 23.85% (FY23), 19.24% (9M-FY24), and RoCE margins of 7.51%, 14.60%, 75.58%, 37.21% respectively for the referred periods. 

DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy based on its financial performance and future prospects. 

COMPARISON 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 20th mandate from Gretex Corporate in the current fiscals, out of the last 10 listings, 3 opened at discount, 1 at par and the rest with premiums ranging from 4.26% to 90% on the date of listing.