Janus Corp BSE SME IPO review (Avoid)

•    JCL is engaged in constructions related business and trading activities.
•    Last three fiscals' financial data has shown inconsistency in the top and bottom lines.
•    The issue is aggressively priced based on the latest performance data.
•    Lead Manager has poor track records.
•    There is no harm in giving this issue a miss.

ABOUT COMPANY:
Janus Corporation Ltd. (JCL) is a diversified business company with Construction, Media, Consulting and Trading as primary segments having based in Mumbai. It is engaged in the business of Civil Construction, land and site development, landfilling, fencing walls, erection of hoardings etc. JCL is also engaged in the business of trading of various constructions related materials such as cement, iron & steel, sand, soil, aluminium etc.

The company also provides construction and projects related consulting to various clients. It's Construction Management Consultancy include Site Management, Construction Supervision & Management, Safety Management, Safety audits, safety systems & processes, Safety documentation amongst others. From the initial concept to project closeout, JCL assists its clients in facilitating and coordinating the construction process to mitigate complex problems.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its needs for working capital (Rs. 5.85 cr.) and general corpus fund (Rs. 1.40 cr.) JCL is coming out with a maiden IPO of 1599000 equity shares of Rs. 10 each at a fixed price of Rs. 50 per share to mobilize Rs. 8.00 cr. The issue opens for subscription on 27.01.20 and will close on 30.01.20. The minimum application is to be made for 3000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 27.86% of the post issue paid-up capital of the company. JCL is spending Rs. 0.75 cr. for the entire proceeds of this IPO.

The issue is solely lead managed by First Overseas Capital Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue. NNM Securities Pvt. Ltd. is the market maker for this issue. Having issued entire equity at par, JCL issued bonus shares in the ratio of 6 shares for every 1 share held in August 2015.

The average cost of acquisition of shares by the promoters is Rs. 9.84 and Rs.10.22 per share. Post issue, JCL's paid-up capital will stand enhanced from Rs. 4.14 cr. to Rs. 5.74 cr. Thus the company mulls market capitalization of Rs. 28.70 cr.

FINANCIAL PERFORMANCE:
For the last three fiscals, JCL has posted turnover/net profits of Rs. 12.82 cr. / Rs. 0.43 cr. (FY17), Rs. 25.16 cr. / Rs. 0.22 cr. (FY18) and Rs. 17.14 cr. / Rs. 0.48 cr. (FY19). For the seven months period ended on 31.10.19 of FY20, it has clocked in the net profit of Rs. 0.29 cr. on a turnover of Rs. 10.73 cr. JCL's top and bottom line have shown inconsistency for these periods.

For the last three fiscals, JCL has posted an average EPS of Rs. 0.94 and an average RoNW of 7.29%. The issue is priced at a P/BV of 3.56 based on its NAV of Rs. 14.06 as on 31.10.19 and at a P/BV of 2.08 based on post-IPO NAV of Rs. 24.07. JCL has not paid any dividend so far.

If we annualize FY20 first seven months earnings and attribute it to post issue paid-up equity capital then asking price is at a P/E of 57 against the industry average of 81. Thus issue appears aggressively priced. Its debtors holding days are 90 days that raises concern.

COMPARISION WITH LISTED PEERS:
As per offer documents, JCL has shown Bharat Road, Shristi Infra and Shervani Indl as its listed peers. They are currently trading at a P/E of 30.82, 213.64 and 2.99 (as on 21.01.20). However, they are not strictly comparable.

MERCHANT BANKER'S TRACK RECORD:
On merchant banker's front, this is the 14th mandate from its stable in the last four fiscals (including the ongoing). Out of the last 10 listings, five issues opened at a discount, one at par and the rest with a premium ranging from 0.39% to 25% on the day of listings. Thus it has poor track records.