Nirmitee Robotics BSE SME Startup IPO review (Avoid)

•    NRIL is in providing robotic HVAC services.
•    Its financial performance indicates inconsistency.
•    Superb performance in Pre-IPO year raises concern.
•    LM has average track records.
•    Based on the latest financial performance, the issue appears exorbitantly priced.

ABOUT COMPANY:
Nirmitee Robotics India Ltd. (NRIL) is a tech-based company making robots using robotic technology and is also engaged in providing HVAC (Heating, Ventilation and Air Conditioning) Duct Cleaning and Ozone sterilization services with these robots. The Company makes custom- made robots- operated by machines that clean the inside of HVAC Air Ducts - by scrubbing, polishing, sucking, scraping and removal of the accumulated contaminants like dust, debris, bacteria, mold and even dead pests and rodents and provides the Ozone treatment to the ducts from the inside and thus sanitizes it for many more months to come. NRIL has its own fleet of patented, duct cleaning robots, which are employed in its service to do the inspection, cleaning and post-cleaning operations. All these robots are fitted with an advanced controller mechanism and a high-resolution camera. Over time these HVAC Air Ducts accumulate the above-mentioned contaminants and if left unclean, these contaminants clog the air ducts and circulate airborne diseases throughout the facility. With a professional management team and a culture of innovation, learning, quality and deep service orientation; it provides professional cleaning services to provide fresh clean air so that the people can live a healthier life.
 
NRIL's purpose-built; duct cleaning robots can clean the most difficult to reach corners in any air duct, and give super clean and healthy air, which is not possible by any other physical cleaning process. Bad Indoor Air Quality (IAQ) affects the health of the employees and other visitors and the majority of one's time is spent breathing indoor air. It offers service to offices, convention centres, hospitals, train and specializes in Buildings that house Sensitive Equipment like Data Centers.
 
ISSUE DETAILS/CAPITAL HISTORY:
To meet its plans for the redemption of preference shares (Rs. 1.75 cr.), Security Deposit towards the acquisition of registered office, R & D Facility, assembling unit (Rs. 1.00 cr.) and general corpus fund (Rs. 0.08 cr.) needs, NRIL is coming out with a maiden IPO of 175200 equity shares of Rs. 10 each at a fixed price of Rs. 185 per share to mobilize Rs. 3.24 cr. The issue opens for subscription on 31.03.20 and will close on 09.04.20. Minimum application is to be made for 600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME Startup platform. Issue constitutes 29.19% of the post-issue capital of the company. NRIL is spending Rs. 0.41 cr. for this IPO process.
 
The issue is solely lead managed by Aryaman Financial Services Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue. Aryaman Capital Markets Ltd. is acting as a market maker for this IPO.
 
Having issued entire equity at par, NRIL has also issued bonus shares in the ratio of 14 shares for every 1 share held in February 2020. The average cost of acquisition of shares by the promoters is Rs. 5.06 per share. Post issue, company's current paid-up equity capital of Rs. 0.43 cr. will stand enhanced to Rs. 0.60 cr. With this IPO company is looking for a market cap of Rs. 11.10 cr.
 
FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, NRIL has posted turnover/net profits of Rs. 0.06 cr. / Rs. 0.01 cr. (FY17), Rs. 0.70 cr. / Rs. 0.02 cr. (FY18) and Rs. 2.04 cr. / Rs. 0.21 cr. (FY19). For the first six months of FY20, it has earned a net profit of Rs. 0.03 cr. on a turnover of Rs. 1.00 cr. Superb performance in pre-IPO year raises concern. With such small operations, NRIL coming out with IPO in March 2020 with FY20 financial performance for the 1st half (i.e. six months period ended on 30.09.19) also raises concern.
 
For the last three fiscals, NRIL has posted an average EPS of Rs. 4.70 and an average RoNW of 13.63%. The issue is priced at a P/BV of 1.05 based on its NAV of Rs. 175.61 as on 30.09.19 and at a P/BV of 3 based on post issue NAV of Rs. 61.72.
 
If we annualize latest earnings and attribute it on fully diluted post issue equity then asking price is at a P/E of around 185, thus IPO appears exorbitantly priced.
 
COMPARISION WITH LISTED PEERS:
As per offer documents, NRIL has no listed peers to compare with.
 
MERCHANT BANKER'S TRACK RECORD:
On merchant banker's front, this is the 38th mandate from its stable in the last three fiscals including the ongoing one. Out of last 10 listings, 2 opened at discount and the rest with premiums ranging from 0.02% to 2.00% on the day of listing. Thus it has average track records.