Jay Jalaram Techno NSE SME IPO review (May apply)

•    JJTL is a multi-brand retailer for mobiles/electronic products. 
•    Since FY20 it has marked growth in its top and bottom lines.
•    Based on FY22 earnings, the issue appears fully priced. 
•    Risk seeker/cash surplus investors may consider parking funds for the long term. 

ABOUT COMPANY:
Jay Jalaram Technologies Ltd. (JJTL) is engaged in multi-brand retail selling of Smart Phones and allied accessories from manufacturers like Apple, Samsung, Oppo, Realme, Nokia, Vivo, Xiaomi, Nokia, Redmi, Techno, One Plus, and Xiaomi. It is also engaged in multi-brand retail selling of consumer durable electronics goods like Smart TVs, Air Conditioners, Fridges, Coolers, etc. from brands like TCL, Haier, Diakin, Voltas, Mi, Realme, OnePlus, Xiaomi, and Skytron.

JJTL operates under the brand name "Kore Mobile".  As of April 30, 2022, it operates from a total of 82 stores across the state of Gujarat. It primarily sells smart mobile handsets of all the major brands, accessories for mobile handsets, tablets, data cards, and other consumer durable electronics goods under one roof. 

Out of 82 stores, 10 are company-owned retail outlets, 65 are franchisee-owned and franchisee-operated branch retail stores ("FOFO Model") and 7 are franchisee-owned and company-operated branch retail stores ("FOCO Model"). Its other business vertical includes an exclusive dealership of Electric Bikes, its spare parts, and accessories under the brand name "Revolt" for the Ahmedabad region. As of April 30, 2022, it sells Electric Bikes through company-owned retail outlets situated at Ashram Road area in Ahmedabad and Nana Chiloda in Gandhinagar for which the company has signed a Letter of Intent ("LoI) on September 10, 2019, with Revolt Intellicorp Private Limited. As of April 30, 2022, it has 94 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its plans for working capital (Rs. 8.00 cr.) and general corporate purposes (Rs. 2.35 cr.), JJTL is coming out with a maiden IPO of 3000000 equity shares of Rs. 10 each at a fixed price of Rs. 36 per share to mobilise Rs. 10.80 cr. The issue opens for subscription on August 26, 2022, and will close on August 30, 2022. Minimum application is to be made for 3000 shares and in multiples thereon, after that. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.95% of the post-issue paid-up capital of the company. JJTL is spending Rs. 0.45 cr. for this IPO process. 

The issue is solely lead managed by Beeline Capital Advisors Pvt. Ltd. and Link Intime India Pvt. Ltd. is the registrar to the issue. Sunflower Broking Pvt. Ltd. is the market maker for this company. 

Having issued initial equity at par, the company issued further equity at a price of Rs. 37.00 per share in March 2022 and has also issued bonus shares in the ratio of 2 for 1 in April 2022. The average cost of the acquisition of shares by the promoters is Rs. 11.64 per share. 

Post-IPO, JJTL's current paid-up equity capital of Rs. 8.13 cr. will stand enhanced to Rs. 11.13 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 40.07 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last four fiscals, JJTL has reported turnover/net profits - (loss) of Rs. 95.77 cr. / Rs. - (0.06) cr. (FY19), Rs. 95.23 cr. / Rs. 0.03 cr. (FY20), Rs. 122.25 cr. / Rs. 0.29 cr. (FY21) and Rs. 165.56 cr. / Rs. 0.87 cr. (FY22). 

For the last four fiscals, JJTL has posted an average EPS of Rs. 5.30 and an average RoNW of 23.29%. (This data appears to be on a pre-bonus basis). The issue is priced at a P/BV of 0.91 based on its NAV of Rs. 39.40 as of March 31, 2022, and at a P/BV of 1.91 based on its post-IPO NAV of Rs. 18.89 per share. 

If we attribute FY22 earnings on a fully diluted post-IPO equity capital base, then the asking price is at a P/E of 46+, making this IPO a costly bet.  

COMPARISON WITH LISTED PEERS:
As per the offer documents, JJTL has shown Bhatia Communication as its listed peer. It is currently trading at a P/E of 65.56 (as of August 19, 2022). However, they are not truly comparable on an apple-to-apple basis. 

DIVIDEND POLICY:
The company has not paid/declared any dividend for the reported periods of the offer documents. It will adopt a prudent dividend policy post-listing based on its financial performance and future prospects. 

MERCHANT BANKER'S TRACK RECORD:
This is the first mandate under the new name and entity of merchant banker as Beeline Capital Advisors Pvt. Ltd. and hence has no track record. The promoter of Beeline Capital is an ex-promoter/director of Beeline Broking Ltd. However, their website has no information on this aspect.