Namo eWaste NSE SME IPO review (May apply)

•    The company is engaged in eWaste collection, disposal and recycling and related services.
•    The company posted growth in its top and bottom lines for the reported periods. 
•    It is operating in a highly competitive and fragmented segment.
•    Based on FY24 earnings, the issue relatively appears aggressively priced. 
•    Well-informed investors may park moderate funds for long term.

ABOUT COMPANY:
Namo eWaste Management Ltd. (NEML) is an E Waste collection, disposal and recycling company that offers comprehensive services for recycling of electrical and electronic equipment (EEE) waste like Air Conditioners, Refrigerator, Laptop, Phones, Washing Machine, Fans etc. It is an ISO 9001:2015, ISO 14001:2015, ISO 27001:2022 & ISO 45001:2018 certified company, complying with strict environmental regulations regarding handling hazardous products and disposing them safely to keep environment green. 

The company is committed towards managing large volume of electrical and electronic equipment waste and able to extract all of the components of an electrical item including precious and semi-precious metals like Copper, Aluminium, Iron etc. Electrical and electronic equipment comprises of many complex materials like batteries, plastics, glass, and ferrous and non-ferrous metals. These materials must be processed carefully to avoid releasing harmful chemicals into the environment. It takes steps to safely recover valuable commodities within e-waste for recycling and reuse.

Additionally, it organizes awareness campaigns, collection drives, and events to collect waste and promote public consciousness regarding its safe disposal. As authorized recyclers NEML enters into procurement service contracts with these manufacturers and producers to pick up e-waste from their service centres, warehouses and retail outlets. Apart from this E-waste is also sourced through waste aggregators who collect eWaste from consumers by going door to door. It has engaged aggregators across various places in India who form a support for its e-waste collection for EPR. 

The company reaches out to target audience for procurement of e-waste through various initiatives and marketing strategies like participation in various Events & Expos, conducting awareness campaigns at schools, Media Coverage etc. After procurement and processing the E-waste, it also issues a certificate of recycling/certificate of dismantling or green certificate (to producers/manufacturers who require to manage their obligation under E-waste Management Rule) which is authorized from the State Pollution Control Board(SPCB) and Central Pollution Control Board(CPCB). As of March 31, 2024, it had 48 employees on its payroll. It also employs contract labourers as and when required. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 6024000 equity shares of Rs. 10 each to mobilize Rs. 51.20 cr. at the upper cap. It has announced a price band of Rs. 80 - Rs. 85 per share. The issue opens for subscription on September 04 2024, and will close on September 06, 2024. The minimum application to be made is for 1600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.34% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, it will utilize Rs. 22.00 cr. for working capital, Rs. 11.20 cr. for capex for its subsidiary Techeco Waste Management, and the rest for general corporate purposes. 

The issue is solely lead managed by Hem Securities Ltd., and Maashitla Securities Pvt. Ltd. is the registrar to the issue. HEM group's Hem Finlease Pvt. Ltd. is the market maker for the company. 

Having issued initial equity shares at par value, the company issued further equity shares in the price range of Rs. 13 - Rs. 225 between September 2021 and October 2023. It has also issued bonus shares in the ratio of 16 for 10 in March 2024. The average cost of acquisition of shares by the promoters is Rs. 2.48, and Rs. 2.55 per share. 

Post-IPO, company's current paid-up equity capital of Rs. 16.84 cr. will stand enhanced to Rs. 22.87 cr. Based on the upper IPO price band, the company is looking for a market cap of Rs. 194.37 cr.  

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 45.09 cr. / Rs. 1.81 cr. (FY22), Rs. 58.56 cr. / Rs. 2.42 cr. (FY23), Rs. 101.08 cr. / Rs. 6.83 cr. (FY24). 

For the last three fiscals, it has reported an average EPS of Rs. 2.91, and an average RoNW of 13.72%. The issue is priced at a P/BV of 3.80 based on its NAV of Rs. 22.38 as of March 31, 2024, and at a P/BV of 2.25 based on its post-IPO NAV of Rs. 37.81 per share (at the upper cap). 

If we attribute FY24 earnings to its post-IPO fully diluted paid-up capital, then the asking price is at a P/E of 28.43. Thus the issue relatively appears aggressively priced. 

For the reported periods, the company has posted PAT margins of 4.04% (FY22), 4.13% (FY23), 6.77% (FY24), and RoCE margins of 8.17%, 11.31%, 20.71% respectively for the referred periods. 

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

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Eco Recycling, and Cerebra Integrated, as their listed peers. They are trading at a P/E of 102.0 and NA (as of August 30, 2024). However, they are not comparable on an apple-to-apple basis.

MERCHANT BANKER'S TRACK RECORD:
This is the 51st mandate from Hem Securities in the last three fiscals (including the ongoing one), out of the last 10 listings, all listed with premiums ranging from 16.35% to 165.22% on the date of listing.