Maagh Advertising BSE SME IPO review (Avoid)

•    MAMSL is in the business of offering media services including related matter solutions.
•    Its top line marked decline while margins witnessed pressure. 
•    The company is operating in a highly competitive segment. 
•    Based on its FY22 earnings, the issue is priced aggressively. 
•    There is no harm in skipping this pricy bet. 

ABOUT COMPANY:
Maagh Advertising & Marketing Services Ltd. (MAMSL) is engaged in the business of offering media services that include advertising campaigns, designing and printing services, media buying, public relations, product launch campaigns, etc. It highly depends on third-party providers of servicing and material suppliers.

As of the date of filing this offer document, it had 14 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its need for the purchase of software (Rs. 3.36 cr.), purchase of media inventory (Rs. 3.00 cr.), and general corporate purposes (Rs. 1.96 cr.), MAMSL is coming out with a maiden IPO of 1520000 equity shares of Rs. 10 each at a fixed price of Rs. 60 per share to mobilize Rs. 9.12 cr. The issue opens for subscription on September 26, 2022, and will close on September 29, 2022. The minimum application is to be made for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 46.34% of the post-IPO paid-up equity capital of the company. MAMSL is spending Rs. 0.80 cr. for this IPO. This indicates the fully structured model of this IPO. 

The issue is solely lead managed by Inventure Merchant Banker Services Pvt. Ltd., and Satellite Corporate Services Pvt. Ltd. is the registrar to the issue. NNM Securities Pvt. Ltd. is the market maker for the company. 

After issuing initial equity shares at par, the company issued bonus shares in the ratio of 175 for 1 in August 2021. The average cost of acquisition of shares by the promoters is Rs. 1.30 and Rs. 10.00 per share. 

Post this IPO, MAMSL's paid-up equity capital of Rs. 1.76 cr. will stand enhanced to Rs. 3.28 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 19.68 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, MAMSL has (on a consolidated basis) reported a turnover/net profit of Rs. 52.61 cr. / Rs. 0.82 cr. (FY20), Rs. 24.55 cr. / Rs. 0.76 cr. (FY21), and Rs. 21.80 cr. / Rs. 0.55 cr. (FY22). Thus it has posted declining trends in its top lines with falling margins that raise concerns.  The sustainability of such margins going forward is a major concern, as it is operating in a highly competitive segment. 

For the last three fiscals, MAMSL has posted an average EPS of Rs. 3.60 and an average RoNW of 16.94%. The issue is priced at a P/BV of 2.48 based on its NAV of Rs. 24.17 as of March 31, 2022, and at a P/BV of 1.47 based on its post-IPO NAV of Rs. 40.77 per share. 

If we attribute FY22 earnings on post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 37.5. Thus the issue is aggressively priced. 

COMPARISON WITH LISTED PEERS:
As per the offer documents, MAMSL has shown Pressman Advertising, Praveg Commu., Digicontent, and Brandbucket Media as its listed peers. They are currently quoting at a P/E of 27.32, 25.4, 00, and 32.82 (as of September 20, 2022).  However, they are not truly comparable on an apple-to-apple basis. 

DIVIDEND POLICY:
The company has not declared/paid any dividend since incorporation. It will adopt a prudent dividend policy post IPO, based on its financial performance and future prospects. 

MERCHANT BANKER'S TRACK RECORD:
This is the 7th mandate from Inventure Merchant Banker in the last four fiscals (including the ongoing one). Out of the last 6 listings, 3 opened at discount and the rest with premiums ranging from 0.50% to 57.14% on the day of listing.