NIKS Techno BSE Startup SME IPO review (Avoid)

•    NIKS is engaged in IT solution services and mobile app developments.
•    The company has fared on an average with minuscule financial data.
•    The issue is exorbitantly priced based on all financial parameters.
•    Lead Manager has an average track record so far.
•    There is no harm in staying away from this costly issue.

ABOUT COMPANY:
NIKS Technologies Ltd. (NIKS) is an IT solution services enabling company to implement standard practices and maintaining quality services across all verticals; it is committed to delivering high-quality services like Digital Marketing, Software development, mobile app development, website development, moreover NIKS provides classroom training and certification courses to students during their summer and winter breaks. This training is being provided through online and offline mode.

NIKS combines a data-driven approach with knowledge gained from years in digital marketing to deliver outstanding results to clients. The company with its foundation pillars as Innovation, Information and Intelligence is exploring indefinitely as a Technology Service Provider and as a Training
Organization. Innovator of Technologies.

The company has been steadily diversifying as well as adding new products to its portfolio, besides adding additional infrastructure.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its needs for working capital (₹0.50 cr.) and general corpus funds (₹0.04 cr.), the company is coming out with a maiden IPO of 100200 equity shares of ₹10 each with a fixed price of ₹201 per share to mobilize ₹2.01 cr. The issue opens for subscription on March 19, 2021, and will close on March 23, 2021. Minimum application is to be made for 600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on the BSE Startup SME platform. The issue consists of 33200 as a fresh equity issue and 67000 as an offer for sale. It constitutes xx% of the post issue paid-up equity capital of NIKS. The issue constitutes 27.59% of the post issue paid-up capital of NIKS.

The issue is solely lead managed by Gretex Corporate Services Pvt. Ltd., Bigshare Services Pvt. Ltd. Is the registrar to the issue.  Gretex Share Broking Pvt. Ltd. is acting as a Market Maker for this issue.  The company will be spending ₹0.38 cr., as overall issue expenses. This is indicative that the issue is pre-sold and fully structured.  

Having issued initial equity at par, the company raised further equity at ₹13 per share in February 2021. It has also issued bonus shares in the ratio of 4 for 1 in December 2020 and 1 for 1 in February 2021. The average cost of acquisition of shares by the promoters is ₹3.82 per share.

Post issue NIKS's current paid-up equity capital of ₹0.33 cr. Will stand enhanced to ₹0.36 cr. Based on IPO pricing, the company is looking for a market cap of ₹7.30 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, NIKS has posted turnover/net profits - (loss) of ₹0.19 cr. / ₹- (0.001) cr. (FY18), ₹0.20 cr. / ₹- (0.001) cr. (FY19) and  ₹0.20 cr. / ₹0.08 cr. (FY20). For the ten months period ended on January 31, 2021, of the FY21, it has earned a net profit of ₹0.14 cr. On a turnover of ₹0.28 cr. Thus the company is in a nascent stage with minuscule working.

For the last three fiscals, NIKS has reported an average EPS of ₹1.95 and an average RoNW of 30.87%. The issue is priced at a P/BV of 18.94 based on its NAV of ₹10.61 as of January 31, 2021, and at a P/BV of 6.10 based on post issue NAV of ₹32.94 per share.

Based on FY20 financial data, the issue is priced at a P/E of 90.54 and if we annualize FY21 working and attribute it on fully diluted equity post issue, then the asking price is at a P/E of 119.64. Thus, this issue is exorbitantly priced. A major portion is by way of OFS and thus promoters are making hay at the cost of new investors.  

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

DIVIDEND POLICY:
NIKS has not paid any dividend so far. It may devise a prudent dividend policy going forward on the basis of its performance and future prospects.

MERCHANT BANKER'S TRACK RECORDS:
This is the 12th mandate from its stable in the last three fiscals (including the ongoing one). Out of the last 10 listings, 1 opened at a discount and the rest at premiums ranging from 0.06% to 4.75% on the day of listings. Thus it has an average track record.