Net Pix Shorts BSE Startup SME IPO review (Avoid)

•    NPSD is a technology-based entertainment startup.
•    It has shown just 12 months of financial data for two fiscals.
•    Based on all parameters, the issue is exorbitantly priced.
•    It has posted losses for Q1 of FY21.
•    Issue expenses indicate fully structured model of this issue with arranged funding.

ABOUT COMPANY:
Net Pix Shorts Digital Media Ltd. (NPSD) got incorporated only in June 2019. Before that, it was run as a proprietorship concern as First Step Entertainment Capital.

NPSD is a technology-based entertainment company operating in the niche segment of online short film contents and publishing the same on various digital online portals and OTT platforms. The online digital media industry is a continuously evolving technological industry and the company endeavours to exploit these technological advances to reach audiences in India and globally with entertaining, socially relevant and heartfelt content.

Company's objective is to offer a platform for enabling digital online entertainment by creating and/or procuring short content in order to make its platform a preferred choice for short content audiences. It started online content distribution through the internationally renowned 'YouTube' portal and its channel - 'Net Pix Shorts' went live on January 08, 2018. Currently, it has released 10 titles consisting of 12 videos on YouTube channel aggregating to 154.94 minutes of content, which has received approximately 314.68 lakhs aggregate views as on November 06, 2020.

As on the date of this Prospectus, NPSD also has 8 short films which are under production aggregating to approximately 155.84 minutes of content. Besides, some of its videos are also uploaded on various other digital online portals like Hungama Play, Sony Liv, Mx Player, Shorts TV and Hotstar, either directly or through media partners.

It has recently launched its own music channel on YouTube - 'Net Pix Raw Music' which went live August 14, 2020.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its plans of acquiring workshop and godown on a long term lease (Rs. 1.00 cr.), augment digital media content library (Rs. 0.80 cr.) and general corpus fund (Rs. 0.37 cr.) needs,  NPSD is coming out with a maiden public issue of 900000 shares at a fixed price of Rs. 30 per share to mobilize Rs. 2.70 cr. This issue opens for subscription on November 18, 2020, and will close on November 23, 2020. Minimum application is to be made for 4000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE Startup SME platform. The issue constitutes 28.12% of the post issue paid-up capital of the company. The company is spending Rs. 0.53 cr. for this issue process (refer page 58 of the offer documents), which indicates that this is a fully structured IPO with funding arrangements tied up in advance.

This issue is solely lead managed by Aryaman Financial Services Ltd. and Cameo Corporate Services Ltd. is the registrar to the issue. Aryaman Capital Markets Ltd. is acting as a Market Maker for this issue

Having issued initial equity at par, the company raised further equity by way of rights issue of 700000 shares at Rs. 30 per share in August 2020. The average cost of acquisition of shares by the promoters is Rs. 16.09 per share.

Post issue, NPSD's current paid-up equity capital of Rs. 2.30 cr. will stand enhanced to Rs. 3.20 cr. NPSD is looking for a market cap of Rs.9.60 cr. post this issue.

FINANCIAL PERFORMANCE:
On the financial performance front, NPSD has posted a total revenue of Rs. 0.18 cr. with a net profit of Rs. 0.02 cr. for FY20. For Q1 of current FY21, it has reported a net loss of Rs. -(0.02) cr. on total revenue of Rs. 0.01 cr. thus it has a very short period of financial data of around 12 months in total and that too with a loss for the first quarter of current fiscal.

For FY20 and Q1-FY21 the company has reported EPS of Rs. 0.14 and Rs. - (0.11) cr., and RoNW of 1.40% and - (1.09) %. Thus based on the latest financial data, the issue is priced at a negative P/E. The issue is priced at a P/BV of 2.96 based on its NAV of Rs. 10.14 as on March 31, 2020, and at a P/BV of 1.50 on the basis of post-issue NAV of Rs. 20.02. It has not paid any dividend so far.

If we consider FY20 earnings, the issue is priced at a P/E of around 214 based on its current paid-up equity capital and at a P/E of around 298 based on fully diluted equity post issue.

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

MERCHANT BANKER'S TRACK RECORD:
On the merchant banker's front, this is the 24th mandate from its stable in the last three fiscals (including the ongoing one). Out of last 10 listings, 3 opened at a discount of 2.5% to 10% and the rest with a premium ranging from 0.06% to 2.16%. LM has average track records,