Mindpool Technologies NSE SME IPO review (May apply)

•    MTL is IT solution and staffing Segment Company having niche play.
•    For FY18 despite slide in top line, it posted growth in bottom line.
•    FY18 and first half of FY19 indicate stagnancy in top line.
•    Issue is priced at a P/E of just around 5 thus makes it reasonable offer.
•    After debacle, LM is coming out with a lucrative IPO.

ABOUT COMPANY:
Mindpool Technologies Ltd. (MTL) is engaged in the business of providing Oracle Consultancy Services including Oracle EBS, Oracle SCM and Oracle SOA covering upgrade & support solutions., IT staffing solutions including manpower recruitment and outsourcing for its clients, comprising permanent staffing solutions and flexi staffing solutions and Corporate Training Services including assisting the employees of the clients in building their IT skill sets, to improve their technological knowledge, enhance their soft skills etc. across various industries including viz. banking and financial services, automotive and engineering, telecom, healthcare, retail and entertainment in India and US.

IT staffing & recruitment market comprises of software vendors, RPO companies, other third party service providers and end users. Software vendors are those companies that provide the software solutions to the IT enterprises for their in-house recruitment process, solutions to the RPO vendors and other third party service providers. IT enterprises either buy the software solution for their recruitment process or outsource their recruitment functions to other companies. RPO companies provide either specific recruitment services or complete end to end service package to the enterprises. Other third party service companies provide services including employment placement, staffing services, etc.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its repayment of certain bank loans, working capital and general corpus fund needs, MTL is coming out with a maiden IPO of 1200000 equity shares of Rs. 10 each at a fixed price of Rs. 30 per share to mobilize Rs. 3.60 cr. Issue opens for subscription on 14.02.19 and will close on 20.02.19. Minimum application is to be made for 4000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. Issue is solely lead managed by Hem Securities Ltd. while Bigshare Services Pvt. Ltd. is the registrar to the issue. Issue constitutes 28.32% of post issue paid up capital of the company. MTL has raised entire equity at par and has also issued bonus shares in the ratio of 300 shares for every 1 share held on 19.03.2018. Average cost of acquisition of shares by the promoters is Rs. 0.03 per share. Post issue, MTL's current paid up equity capital of Rs. 3.04 will stand enhanced to Rs. 4.24 cr.


FINANCIAL PERFORMANCE:
On financial performance front, for last three fiscals, MTL has posted turnover/net profits (loss) of Rs. 20.78 cr. / Rs. – (0.33) cr. (FY16), Rs. 25.38 cr. / Rs. 1.29 cr. (FY17) and Rs. 20.43 cr. / Rs. 1.63 cr. (FY18). For first half of FY19 it has earned net profit of Rs. 1.46 cr. on a turnover of Rs. 10.81 cr. For FY18, though top line has shown decline, bottom line has shown improved margins.

For last three fiscals, it has posted an average EPS of Rs. 3.96 and an average RoNW of 12.17%. Issue is priced at a P/BV of 0.77 based on its NAV of Rs. 39.18 as on 30.09.18 and at a P/BV of 0.82 based on post issue NAV of Rs. 36.58. If we annualize latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of 5 thus issue appears reasonably priced. FY18 and first half of FY19 indicates towards stagnancy in top line that remains concern.

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

MERCHANT BANKER'S TRACK RECORDS:
This is the 41st mandate from this merchant banker in last four fiscals. Out of last 10 listings, 2 issues opened at discount and the rest 8 with a premium ranging from 0.16% to 20% on the day of listing. Having faced debacle for main board IPO of Dinesh Engineering, LM is coming out with a lucrative offer.