LGT Business BSE SME IPO review

•    The company is engaged in the business of travel and tourism for B2B segment.
•    It posted growth in its top and bottom lines amidst all odds.
•    The company is operating in a highly competitive and fragmented segment.
•    Based on its recent financial data, the issue appears aggressively priced. 
•    Well-informed/cash surplus investors may park moderate funds for medium term.

ABOUT COMPANY:
LGT Business Connextions Ltd. (LBCL) is engaged in business of travel and tourism industry providing comprehensive MICE packages and other tour and travel services. Its sales of services are majorly concentrated in the Southern States of India which total accounts for 69.32% and 79.73% for the financial year March 31, 2025 and March 31, 2024 respectively. Telangana, in particular which accounts for a significant proportion of business operations being 29.71%, 37.98%, and 50.37%, for the Financials Years ended March 31, 2025, March 31, 2024 and March 31, 2023 respectively.

LBCL primarily earns revenue from the customers directly. In addition, it also earns revenue from convenience fee, cancellation service charges, rescheduling charges, commission etc. However, a substantial portion of its revenue is from MICE Packages which alone accounts for 77.72% and 81.95% for the financial year ended March 31, 2025 and March 31, 204 respectively. Also, the company is vulnerable to market fluctuations and operational disruptions within that specific vertical, sudden increase in prices of these services, or any regulatory changes affecting the industry could disproportionately impact revenue and profitability. 

However, it has not encountered any issue where its business operations are materially affected due to disruption in providing these services to clients for the last 3 financial years. Diversification of revenue streams across multiple verticals can mitigate these risks. While diversification is a strength, its inability to effectively manage these diversified operations can have adverse effects on business, results of operations, financial condition, and cash flows. Any lapses in these areas can lead to inefficiencies, delays, and increased operational costs. Furthermore, LBCL’s failure to improve the diversification of revenue streams exposes it to the risk of revenue concentration.

LBCL operates as a service aggregator in the travel and tourism industry. It connects and aggregate supply from third party hotels, airlines, car rentals, cruise companies and other travel service directly or through third-party aggregator wherever required and offer a wide range of services to customers as per their desired requirements. The company offers comprehensive range of travel services and tourism packages to customers including MICE travel as well as cruise bookings, hotel bookings, in-transit arrangements, local sightseeing, and other tour and travels related services viz., customizing travel plans, travel arrangements for trade fairs, etc. As of March 31, 2025, it had 81 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden IPO of 2625600 equity shares of Rs. 10 each at a fixed price of Rs. 107 per share to mobilize Rs. 28.09 cr. at the upper cap. The issue consists of 2362800 fresh equity shares worth Rs. 25.28 cr. and an Offer for Sale (OFS) of 262800 equity shares worth Rs. 2.81 cr. The IPO opens for subscription on August 19, 2025, and will close on August 21, 2025. The minimum application to be made is for 2400 shares and in multiple of 1200 shares thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 28.01% of post-IPO paid-up equity capital of the company. The company is spending Rs. 3.36 cr. (13.28%) for the fresh equity issue process, and from the net proceeds of the issue, the company will utilize Rs. 10.44 cr. for capital expenditure, Rs. 7.70 cr. for working capital, and Rs. 3.79 for general corporate purposes.

The IPO is solely lead managed by Mark Corporate Advisors Pvt. Ltd., while Skyline Financial Services Pvt. Ltd. is the registrar to the issue. Asnani Stock Broker Pvt. Ltd. is the market maker. 

The company has issued entire initial equity shares at par, and issued bonus shares in the ratio of 700 for 1 in December 2024. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. NA, Rs. 2.46, Rs. 7.13 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 7.01 cr. will stand enhanced to Rs. 9.37 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 100.29 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted total Revenue/Net Profit of Rs. 61.18 cr. / Rs. 2.97 cr. (FY23), Rs. 89.53 cr. / Rs. 3.63 cr. (FY24), and Rs. 100.81 cr. / Rs. 5.22 cr. (FY25). 

For the last three fiscals, the company has reported an average EPS of Rs. 6.15, and an average RoNW of 51.44%. The issue is priced at a P/BV of 6.02 based on its NAV of Rs. 17.76 as of March 31, 2025, and at a P/BV of 2.66 based on its post-IPO NAV of Rs. 40.26 per share. 

If we attribute its FY25 super earnings on post-IPO expanded equity base, then the asking price is at a P/E of 19.25, and based on its FY24 earnings, the P/E stands at 27.65. Thus, based on its recent financial data, the issue appears aggressively priced.

The company has posted PAT margins of 4.88% (FY23), 4.06% (FY24), 5.19% (FY25), and RoCE Margins of 90.36%, 62.09%, 45.19%, respectively for the referred periods. 

DIVIDEND POLICY:
The company has not declared any dividends for any financial year. It will adopt a prudent dividend policy, based on its financial performances and future prospects.

COMPARISON WITH LISTED PEERS:
As per offer document, the company has shown International Travel House Ltd., as its listed peer. It is trading at a P/E of around 13.8 (as of August 14, 2025). However, they are not truly comparable on an apple-to-apple basis. This comparison appears to be an eyewash.

MERCHANT BANKER’S TRACK RECORDS:
This is the 4th mandate from Mark Corporate Advisors in the last four fiscals (including the ongoing one). Out of the last 3 listings, 1 opened at par, and the rest with premium ranging from 1.64% to 90% on the date of listing.