Moxsh Overseas NSE SME IPO review (Avoid)

•    MOEL is engaged in offering learning solutions, counselling, and mobility services to students for medical studies. 
•    Its financial performance so far does not match the asking price. 
•    Based on its latest earnings, the issue is aggressively priced. 
•    The company operates in a highly competitive and fragmented segment.
•    There is no harm in skipping this pricy issue.

ABOUT COMPANY:
Moxsh Overseas Educon Ltd. (MOEL) is an Edu-Medi Tech company engaged in the business of offering diverse and cohesive learning solutions, counselling, and mobility services to students aspiring to pursue medical studies (MBBD) in India or abroad under its brand "Moksh". The company also advises students on their medical career planning and execution. MOEL is a digitally native, technology-led business, providing an online learning program for medical entrance examinations, NEET-UG, and for medicos to appear for medical licensing examinations such as USMEL, PLAB, DHA, NeXT, FMGE, etc. under its brand "Moksh Academy". 

As of August 31, 2022, it has a presence across 23 touch points in India, of which it has a presence in 18 cities through franchisee arrangements and with its own 5 offices including a registered office located in Mumbai, Pune, Delhi, Bhopal, and Ahmedabad. During the last three fiscals, it has recruited over 685 students to various foreign medical universities and for healthcare academy services, it served over 580 students. As of the same date, it has 115 employees on its payroll. 

The current disturbing global environment brings more challenges and concern for the prospects of MOEL going forward.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden IPO of 680800 equity shares of Rs. 10 each at a fixed price of Rs. 153 per share of Rs. 10 each to mobilize Rs. 10.42 cr. The issue opens for subscription on December 21, 2022, and will close on December 23, 2022. The minimum application to be made is for 800 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 30.38% of the post-issue paid-up capital of the company. MOEL is spending Rs. 2.19 cr. for this IPO process. This is indicating for a fully structured process for IPO funding. From the residual funds, the company will spend Rs. 2.50 cr. for working capital, Rs. 3.18 cr. for brand awareness, and Rs. 2.55 cr. for general corporate purposes. 

Fedex Securities Pvt. Ltd. is the sole lead manager and Bigshare Services Pvt. Ltd., is the registrar of the issue. Pure Broking Pvt. Ltd. is the market maker for the company. 

Having issued initial equity shares at par, the company raised further equity shares at the price of Rs. 40 - Rs. 125 per share between May 2020 and April 2022. It has also issued bonus shares in the ratio of 5 for 1 in February 2022, and 3 for 1 in August 2022. The average cost of acquisition of shares by the promoters is Rs. 0.42 per share. 

Post-IPO, MOEL's current paid-up equity capital of Rs. 1.56 cr. will stand enhanced to Rs. 2.24 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 34.28 cr.  

FINANCIAL PERFORMANCE:
On the financial performance front, on a consolidated basis, MOEL posted a total income/net profit of Rs. 10.09 cr. / Rs. 1.11 cr. (FY22) and for Q1 of FY23 ended on June 30, 2022, it earned a net profit of Rs. 0.17 cr. on a total income of Rs. 2.28 cr. 

On a standalone basis, for the last three fiscals, MOEL posted a total income/net profit of Rs. 8.18 cr. / Rs. 0.22 cr. (FY20), Rs.3.87 cr. / Rs. 0.05 cr. (FY21), and Rs. 10.09 cr. / Rs. 1.11 cr. (FY22). For Q1 of FY23, it earned a net profit of Rs. 0.18 cr. on a total income of Rs. 2.28 cr. 

For the last three fiscals, MOEL has reported an average EPS of Rs. 4.25 and an average RoNW of 55.87%. The issue is priced at a P/BV of 11.81 based on its NAV of Rs. 12.96 as of June 30, 2022, and at a P/BV of 2.76 based on its post-IPO NAV of Rs. 55.49 per share. 

If we annualize FY23 (consolidated) earnings and attribute it to post-IPO fully diluted paid-up equity capital then the asking price is at a P/E of around 50 and based on FY22 earnings, the P/E comes to 30.91. Thus the issue is aggressively priced discounting all near-term positives. The segment is witnessing high competition and is also fragmented. 

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

COMPARISON WITH LISTED PEERS:
As per the offer document, MOEL has no listed peers to compare with. 

MERCHANT BANKER'S TRACK RECORD:
This is the 13th mandate from Fedex Securities in the last three fiscals (including the ongoing one). Out of the last 10 listings, 2 opened at par and the rest with premiums ranging from 0.08% to 108.93% on the date of listing.