Meta Infotech BSE SME IPO review (May apply)

•    The company is engaged in providing cybersecurity solutions to its customers across India.
•    It is operating in a highly competitive and fragmented segment.
•    The company posted growth in its top and bottom lines, but boosted bottom lines for FY24 and FY25 raise eyebrows. 
•    Based on its recent financial data, the issue appears aggressively priced.
•    The IPO has only 25% fresh component and the rest is an OFS.
•    Well-informed/cash surplus investors may park moderate funds for medium term.

ABOUT COMPANY:
Meta Infotech Ltd. (MIL) is involved in the business of providing cybersecurity solutions to various organizations across India. Founded in 1998 and transitioned into the cybersecurity domain in 2010. The company delivers comprehensive cybersecurity solutions and services for protection and maintaining integrity of information and systems. At Meta Infotech, it works for safeguarding the digital infrastructures of companies belonging to diversified industries such as Banking, Capital Market, NBFC, IT/ITES, Cybersecurity, Automobile, Insurance, Pharmaceutical, FMCG, Real Estate, Hospitality, Manufacturing and Other conglomerates etc. Leveraging its domain expertise, MIL provides end-to-end cybersecurity solutions designed to address the challenges faced by these sectors. By optimizing and securing network resources it enables organizations to manage their digital infrastructure effectively, ensuring reliable and scalable connectivity to support their evolving network needs.

The company procures the cybersecurity products from various international OEMs who develop solutions to ensure secure access, defense for web applications, cloud workload protection etc. It has entered into agreements as authorized resellers with a various OEMs for distribution of cybersecurity products, software along with its licenses and subscriptions etc. It offers a holistic suite of services ranging from consulting to implementation, along with annual maintenance and sustenance, catering exclusively to the cybersecurity needs of clients. Moreover, MIL also provides on-site resources along with training services to the organizations. Its Order Book as on April 30, 2025 is Rs. 573+ cr. in aggregate to be executed in a period of 5 years. Its business operations are, currently, concentrated in India and revenues are predominantly generated from India. As of March 31, 2025, it had 265 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book-built route combo IPO of 4980000 equity shares of Rs. 10 each to mobilize Rs. 80.18 cr. The issue opens for subscription on July 04, 2025, and will close on July 08, 2025. The IPO consists of 1245000 fresh equity shares (worth Rs. 20.05 cr. at the upper cap) and an Offer for Sale of 3735000 equity shares (worth Rs. 60.13 cr. at the upper cap). The minimum number of shares to be applied is for 1600 shares and in multiples of 800 shares, thereafter. The company has announced a price band of Rs. 153 – Rs. 161 per share. Post allotment, shares will be listed on BSE SME. The issue constitutes 26.38% of the post-IPO paid-up capital of the company. From the net proceeds of the fresh equity share issue, the company will utilize Rs. 16.70 cr. for repayment of certain borrowings, Rs. 1.20 cr. for capex on new office premises, Rs. 0.91 cr. for setting up an interactive experience center at registered office, working capital, and the rest for general corporate purposes. 

The company has reserved 50400 shares for its eligible employees and offering them a discount of Rs. 10 per share. From the rest, it has allocated not more than 50% for QIBs, not less than 15% for HNIs and not less than 35% for Retail investors.

The IPO is solely lead managed by Hem Securities Ltd., and KFin Technologies Ltd., is the registrar to the issue. HEM Group’s Hem Finlease Pvt. Ltd. is the market maker and also a syndicate member.

The company has issued initial equity shares at par value, and issued further equity shares in the price range of Rs. 20 – Rs. 671.00 per share between 2001, and September 2021. It has also issued bonus shares in the ratio of 22 for 1 in November 2024. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. NIL per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 17.64 cr. will stand enhanced to Rs. 18.88 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 303.99 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 109.54 cr. / Rs. 6.54 cr. (FY23), Rs. 153.05 cr. / Rs. 10.51 cr. (FY24), Rs. 220.02 cr. / Rs. 14.50 cr. (FY25). The company posted growth in its top and bottom lines for the reported periods. But sustainability of boosted profits from FY24 onwards remains a major concern. 

For the last three fiscals, the company has reported on a simple average EPS of Rs. 6.72 and an average RoNW of 33.51%. The issue is priced at a P/BV of 6.37 based on its NAV of Rs. 25.26 as of March 31, 2025, but its post-IPO NAV data is missing from the offer document.

If we attribute FY25 super earnings on post-IPO fully diluted equity capital, then the asking price is at a P/E of 20.96. Based on FY24 earnings, the P/E stands at 28.90. The issue relatively appears aggressively priced. 

For the reported periods, the company has posted PAT margins of 6.04% (FY23), 6.91%, (FY24), 6.63% (FY25), and RoCE margins of 33.39%, 48.43%, 37.81%, respectively for the referred periods.

DIVIDEND POLICY:
The company has not paid any dividends for the reported periods of the offer document. It has already adopted a formal dividend policy, based on its financial performance and future prospects. 

COMPARISION WITH LISTED PEERS:
As per the offer document, the company has shown TAC Infosec, Quick Heal Techno, Sattrix Info, as their listed peer. They are trading at a P/E of 88.2, 416.0, and 32.5 (as of July 02, 2025). However, they are not truly comparable on an apple-to-apple basis. This compare appears to be an eyewash.

MERCHANT BANKER’S TRACK RECORD:
This is the 52nd mandate from Hem Securities in the last three fiscals including the ongoing one.  From the last 10 listings, 1 listed at par and the rest with a premium ranging from 2.30% to 90.00%, on the listing date.