C. E. Info Systems IPO review (May apply)

•    CEISL is engaged in providing digital maps under MaaS, SaaS and PaaS platforms.
•    For FY20 it marked dwindling profits on static turnovers.
•    Since the last 18 months, it is reporting hectic performance with super-profits.
•    Sustainability of such margins going forward remains a major concern.
•    The issue is aggressively priced to encase the first mover tag.

ABOUT COMPANY:
C E Info Systems Ltd. (CEISL) is a data and technology products and platforms company, offering proprietary digital maps as a service ("MaaS"), software as a service ("SaaS") and platform as a service ("PaaS"). As per the F&S Report, it is India's leading provider of advanced digital maps, geospatial software and location-based IoT technologies. Having pioneered digital mapping in India in 1995, it has earned a market leadership position in this industry and built a strong moat by capitalizing on its early mover advantage, developing proprietary and integrated technologies, full-stack product offerings, continuous innovation and a robust sustainable business model. (Source: F&S Report).

CEISL provides products, platforms, application programming interfaces ("APIs") and solutions across a range of digital map data, software and IoT for the Indian market under the (MapmyIndia) brand, and for the international market under the (Mappls) brand. As of September 30, 2021, the company has serviced over 2,000 enterprise customers since its inception. During Financial Year 2021 and the six-month period ended September 30, 2021, it had over 500 customers on SaaS, PaaS and MaaS platforms. CEISL's customers include marquee and renowned global tech giants, new-age consumer internet technology companies, leading automotive manufacturers, large businesses across industry segments such as BFSI, telecom, FMCG, industrials, logistics and transportation, and key government organizations. Some of its customers include PhonePe, Flipkart, Yulu, HDFC Bank, Airtel, Hyundai, MG Motor, Avis, Safexpress and Goods and Service Tax Network ("GSTN").

The adoption of its solutions by new-age companies and start-up companies across consumer tech, last-mile delivery, shared mobility and e-commerce is helping the company scale rapidly. A growing number of use cases of its products across multiple functions within organizations including sales, distribution, marketing, analytics, engineering, IT, logistics, call centre and support services provide it with growth opportunities. Increased adoption of its navigation, connected, autonomous, shared and electric mobility technologies in the automotive sector, and IoT and telematics technologies in the mobility, transportation and logistics sectors also help in the company's business growth.

ISSUE DETAILS/CAPITAL HISTORY:
To avail listing benefits and provide an exit to some of its current stakeholders, CEISL is coming out with a maiden IPO of a secondary issue as an offer for sale of 10063945 equity shares via book building route to mobilize Rs. 1039.61 cr. (at the upper cap). It has fixed a price band of Rs. 1000.00 to Rs. 1033.00 per share having a face value of Rs. 2 per share. Minimum application is to be made for 14 shares and in multiples thereon, thereafter. The issue opens for subscription on December 09, 2021, and will close on December 13, 2021. Post allotment, shares will be listed on BSE and NSE. The issue constitutes 18.90% of the post issue paid-up capital of the company. The company has allocated 50% for QIBs, 15% for HNIs and 35% for the Retail investors. 

The joint Book Running Lead Managers (BRLMs) to this offer are Axis Capital Ltd., JM Financial Ltd., Kotak Mahindra Capital Co. Ltd., and DAM Capital Advisors Ltd. while Link Intime India Pvt. Ltd. is the registrar to the issue. 

Having issued initial equity shares at par, the company raised further equity in the price range of Rs. 16.20 to Rs. 123.39 per share (based on FV of Rs. 2 per share). It has also issued bonus shares in the ratio of 2 for 1 in February 2000, 10 for 1 in March 2006 and 1 for 3 in October 2021. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. 0.17. Rs. 64.11 / Rs. Negligible, Rs. 0.05, Rs. 0.17, Rs. 7.46, Rs. 8.45, Rs. 10.64, Rs. 11.12, Rs. 12.75, Rs. 52.20 and Rs. 94.50 per share. 

Being an OFS, post this issue, CEISL's current paid-up capital of Rs. 10.65 cr. will remain the same. Based on the IPO pricing, the company is looking for a market cap of Rs. 5500 cr. (at the upper price band)

FINANCIAL PERFORMANCE: 
On the financial performance front, for the last three fiscals, CEISL has (on a consolidated basis) posted turnover/net profits of Rs. 163.34 cr. / Rs. 33.57 cr. (FY19), Rs. 163.48 cr. / Rs. 23.20 cr. (FY20) and Rs. 192.27 cr. / Rs. 59.43 cr. (FY21). For FY19 and FY20, its top-line remained static but the bottom line marked downtrends. For the first half-year of FY22 ended on September 30, 2021, the company has earned a net profit of Rs. 46.77 cr. on a turnover of Rs. 122.58 cr. Thus for FY21 and H1FY22, it has posted super growth. 

For the last three fiscals, it has posted an average EPS of Rs. 7.95 and an average RoNW of 12.86%. The issue is priced at a P/BV of 13.54 based on its NAV of Rs. 76.28 as of September 30, 2021, as well as post issue NAV.

If we annualize FY22 earnings and attribute it to its post-issue paid-up equity capital, then the asking price is at a P/E of around 58.79. Based on its FY21 earnings, the issue is priced at a P/E of 93.99.  Thus the issue is aggressively priced.  Perhaps under the pre-text of first-mover, the company is trying to extract higher valuations. 

DIVIDEND POLICY:
The company has paid a dividend of 140% for FY20 only so far. For FY19, FY21 and FY22 till the filing of RHP, it has not paid any dividend. 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, the company has no listed peers to compare with. 

MERCHANT BANKER'S TRACK RECORDS:
The four BRLMs associated with the offer have handled 58 public issues in the past three years, out of which 21 issues closed below the issue price on the listing dates.