Maks Energy NSE SME IPO review (Avoid)

•    The company is a dealer in Gensets, auto parts, and related servicing. 
•    It is in a highly competitive and fragmented segment. 
•    Based on its weak financial parameters, the issue is aggressively priced. 
•    There is no harm in skipping this pricy issue. 

PREFACE:
The company originally filed its first draft prospectus on March 25, 2021, and then it again filed a modified draft prospectus on September 27, 2021. As per both these documents, it planned to mobilize Rs. 4.00 cr. with an issue of 2000000 equity shares of Rs. 10 each at a fixed price of Rs. 20 per share. However, now it is coming with just 2000 shares lower than the original plans. This is attributed to the matching of a lot size of 6000 shares for 333 lots. 

ABOUT COMPANY:
Maks Energy Solutions India Ltd. (MESIL) is in the business of generator set dealers, assemblers, and related service providers. Having started its operations in 2010 as a dealer of gensets, it diversified into related services like assembling, installing, testing, servicing, spare supply, etc. Off late it has also entered into commercial vehicles auto parts dealing. As of July 31, 2022, it had 23 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its need for repayment/prepayment of certain borrowings (Rs. 3.00 cr.), general corporate purposes (Rs. 0.52 cr.), MESIL is coming out with a maiden IPO of 1998000 (333 lots) equity shares of Rs. 10 each at a fixed price of Rs. 20 per share to mobilize Rs. 4.00 cr. The issue opens for subscription on September 16, 2022, and will close on September 20, 2022. The minimum application is to be made for 6000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 28.81% of the post-issue paid-up capital of the company. MESIL is spending Rs. 0.48 cr. for this IPO process. This indicates the fully structured mode of this IPO. 

The issue is solely lead managed by Sun Capital Advisory Services Pvt. Ltd and Bigshare Services Pvt. Ltd. is the registrar to the issue. NNM Securities Pvt. Ltd. is the market maker for this IPO. NNM has underwritten 85% of the issue size.     

Having issued initial equity shares at par, the company issued further equity shares in the price range of Rs. 40.00 to Rs. 1082.25 per share between March 2012 and April 2019. It has also issued bonus shares in the ratio of 60 for 1 in December 2018. The average cost of acquisition of shares by the promoters is Rs. 18 per share. 

Post IPO, MESIL's current paid-up equity capital of Rs. 4.94 cr. will stand enhanced to Rs. 6.94 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 13.87 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, MESIL has (on a consolidated basis) posted a turnover/net profit - (loss) of Rs. 43.35 cr. / Rs. 1.69 cr. (FY20), Rs. 20.92 cr. / Rs. - (0.33) cr. (FY21), and Rs. 28.25 cr. / Rs. - (1.07) cr. (FY22). While it suffered a severe setback for FY21 following the pandemic and has also posted a loss for FY22 with the negative performance of the Joint Venture.  

For the last three fiscals, MESIL has reported an average EPS of Rs. - (0.73) and an average RoNW of - (3.35) %. The issue is priced at a P/BV of 0.86 based on its NAV of Rs. 23.22 as of March 31, 2022, and at a P/BV of 0.90 based on its post-IPO NAV of Rs. 22.29 per share. Thanks to hefty premiums collected by the company that helped it to have a positive NAV. 

Due to losses of FY22, its P/E stands negative. The issue is aggressively priced against its weak financial performance for the last two fiscals. 

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

COMPARISON WITH LISTED PEERS:
As per offer documents, MESIL has no listed peers to compare with. 

MERCHANT BANKER'S TRACK RECORD:
This is the first mandate from Sun Capital Advisory and hence it has no track record.