Nisus Finance BSE SME IPO review (Apply)

•    The company is engaged primarily in providing transaction advisory services, fund and asset management related services. 
•    It posted robust growth in its top and bottom lines in pre-IPO period/year, that raises concern.
•    It enjoys niche place in the segment and may generate first mover fancy post listing.
•    Based on FY25 annualized super earnings, the issue appears fully priced. 
•    Investors may park moderate fund for long term. 

ABOUT COMPANY:
Nisus Finance Services Co. Ltd. (NFSCL) is engaged in providing variety of finance related services with prime focus on transaction advisory services. The company along with its subsidiaries and associate companies is actively engaged in primary two segment; 1. Transaction Advisory Services and 2. Fund and Asset Management. Together with its subsidiaries, stepdown subsidiaries and associates, it operates under the "Nisus Finance Group"/ "NiFCO" brand. The company is mainly engaged in the business of Transaction Advisory services, while its subsidiaries, stepdown subsidiaries, namely Nisus BCD Advisors LLP, Nisus Finance & Investment Managers LLP, Nisus Finance International Advisors IFSC LLP, Nisus Finance Investment Consultancy FZCO and associate company namely Dalmia Nisus Finance Investment Managers LLP which are engaged in Real Estate and Urban Infrastructure Fund and Asset Management. 

The other subsidiary i.e. Nisus Fincorp Private Limited, an NBFC company is having main object of financing. It has recently invested in an entity named Microsafe Projects LLP as an Associate of the company which is engaged in the business of acquiring residential properties constructed and/or under construction. Following the success of its Transaction Advisory vertical, the Company through its subsidiaries, stepdown subsidiaries and associate Companies diversified its business to include Real Estate and Urban Infrastructure Fund & Asset Management and a Non-Banking Finance Company under "Nisus Finance Group"/ "NiFCO" brand over the past decade.

Its Transaction Advisory business requires working closely with developer partners, to ensure it crafts solutions that align with long-term business plan of its advisory clients. It has been assigned "Care AIF 1" grading by Care Analytics & Advisory Private Limited (CareEdge) to one of its scheme i.e. Real Estate Special Opportunities Fund - I which defines the Investment related processes for the scheme are expected to be Excellent.

NFSCL's asset portfolio in India provides it with valuable real-time, proprietary market data that enables it to identify and act on market conditions and trends more rapidly than competitors. Its extensive network allows to attract more customers, especially for Real Estate and Urban Infrastructure Asset and Fund Management, and Transaction Advisory services, where increased profitability and ROE are based upon increased scale of business.

The company posted roller-coaster ride in its revenue from top 10 customers. (as disclosed in its financial KPI info.). Its business model is distinctive and deeply integrated, placing a strong emphasis on customer satisfaction across the entire spectrum of real estate, urban infrastructure, and related asset classes. This integration allows it to leverage synergies throughout the value chain via investment solutions. As of June 30, 2024, it had 34 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route combo IPO of 6346400 equity shares of Rs. 10 each to mobilize Rs. 114.23 cr. (at the upper cap). It has announced a price band of Rs. 170 - Rs. 180 per share. The issue consists of 5645600 fresh equity shares (worth Rs. 101.62 cr. at the upper cap), and an Offer for Sale (OFS) of 700800 shares (worth Rs. 12.61 cr. at the upper cap). The issue opens for subscription on December 04, 2024, and will close on December 06, 2024. The minimum number of shares to be applied is for 800 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 26.58% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, the company will utilize Rs. 12.46 cr. for augmenting fund setup, additional licenses, fund management infra etc., Rs. 35.91 cr. for fund raising cost, distribution and placement of fee to third party distributors or agents. Rs. 25.00 cr. for investment in subsidiary company Nisus Fincorp Pvt. Ltd., and the rest for general corporate purposes. 

As per RHP, the company has reserved 24000 equity shares for its eligible employees and it has allocated 351200 shares for the Market Maker, from the rest, not more than 50% for QIBs, not less than 15% for HNIs and not less than 35% for Retail investors. (Surprisingly, its IPO price band ad is missing info on employees' reservation data.)

The IPO is solely lead managed by Beeline Capital Advisors Pvt. Ltd., and Skyline Financial Services Pvt. Ltd. is the registrar to the issue. While Beeline Group's Spread X Securities Pvt. Ltd. is the Market Maker for the company, as well as a syndicate member. 

The company has issued entire equity shares at par value so far, and has also issued bonus shares in the ratio of 16 for 1 in May 2024. The average cost of acquisition of shares by the promoters is Rs. 0.59, and Rs, 2.06 per share. 

Post-IPO, company's current paid-up equity capital of Rs. 18.23 cr. will stand enhanced to Rs. 23.88 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 429.81 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a consolidated basis) posted a total income/net profit of Rs. 7.50 cr. / Rs. 1.29 cr. (FY22), Rs. 11.54 cr. / Rs. 3.02 cr. (FY23), and Rs. 42.25 cr. / Rs. 23.05 cr. (FY24). For Q1 of FY25 ended on June 30, 2024, it earned a net profit of Rs. 8.36 cr. on a total income of Rs. 15.01 cr. Thus the sudden boost in its top and many fold jump in bottom lines from FY24 onwards raises eyebrows. While its top line is up by 2.66 times, its bottom line is up by 6.63 times for FY24 in compare to FY23 and in percentage terms its net earnings are at 54.3% against 26.55% for FY23. The trend continues for Q1 of FY25. According to the management, due to their cost effectively planned funding and asset managing abilities including advisory, they are in a position to post robust earnings and with their plans afoot, the trends are likely to continue going forward. The Transaction advisory business brings around 65% revenue and the rest from Fund and Asset Management. Both these segments are high margin business for the company. 

For the last three fiscals, the company has reported an average EPS of Rs. 4.97 (based on simple average) and an average RoNW of 50.55%. The issue is priced at a P/BV of 8.47 based on its NAV of Rs. 21.26 as of June 30, 2024, and at a P/BV of 3.06 based on its post-IPO NAV of Rs. 58.79 per share (at the upper cap).

If we attribute FY25 annualized super earnings on post-IPO fully diluted equity capital, then the asking price is at a P/E of 12.86, and based on its FY24 super earnings it is at a P/E of 18.65. The issue relatively appears fully priced.

For the reported periods, the company has posted PAT margins of 17.75% (FY22), 26.55% (FY23), 54.30% (FY24), 61.19% (Q1-FY25), and RoCE margins of 15.79%, 23.48%, 101.63%, 24.30% respectively for the referred periods. 

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

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

MERCHANT BANKER'S TRACK RECORD:
The BRLM associated with this issue has handled 49 issues in the last three fiscals (including the ongoing one), out of which 2 issues closed below the offer price on listing date.