Patil Automation NSE SME IPO review (May apply)

•    The company is emerging leader in automation solutions serving automotive and other industrial needs.
•    It posted steady growth in its top and bottom lines for the reported periods.
•    Over 80% revenue comes from its OEM customers as repeat orders.
•    The company hopes to outperform post is ongoing expansion plans.
•    Based on its recent financial data, the issue appears aggressively priced.
•    Well-informed investors may park funds for medium to long term.

ABOUT COMPANY:
Patil Automation Ltd. (PAL) is an automation solutions provider serving industrial clients, primarily in the automotive sector. It is engaged in designing, manufacturing, testing and installation of customized automation systems such as welding lines (spot welding, MIG and TIG), assembly lines, material handling machineries and special-purpose machineries, tailored to meet the specific requirements of clients' production facilities. PAL’s client base primarily comprises of Automotive Original Equipment Manufacturers (OEMs), Tier I suppliers to Automotive OEMs and manufacturers of automotive components and sub-components, who seek to establish, expand, upgrade, modify or
repair their production setup. 

Its automation solutions focus on optimizing manufacturing processes and reducing manual intervention at clients' facilities. Its product offerings also include assembly fixtures, welding fixtures, robotic cells, testing and inspection systems and auxiliary items. These products and items support the automation systems and provide integrated solutions to the operational requirements of clients. PAL’s testing and inspection systems include leak testing machines and inspection jigs and gauges to ensure product performance with industry standards. In addition, the company also provides support services to its clients, including repair and maintenance services, modification services and manpower support services so as to support system operations.

According to the D&B Report, Industrial automation has become a driving force behind economic transformation, reshaping industries, and economies worldwide. With advancements in technology and the adoption of automation solutions, industries across various sectors are experiencing increased efficiency, productivity, and competitiveness. (Source: D&B Report). As per the D&B Report, Industrial automation has become a cornerstone of the automotive sector, revolutionizing production efficiency, precision, and scalability. Automated systems, including robotic welding lines and assembly
lines, reduce operational costs by enhancing production speed, minimizing material waste, and lowering labour expenses. (Source: D&B Report)

As of March 31, 2025, it had 244 permanent full-time employees. Additionally, the company employed approximately 256 contract laborers in various departments. During the Fiscal 2025, it has sold products in India to around 10 states including Maharashtra, Haryana, Karnataka, Gujarat, Madhya Pradesh, Rajasthan and Tamil Nadu. As at March 31, 2025, its sales and marketing team comprised 17 employees, responsible for managing client relationships and overseeing sales operations across India.

According to the management, it is the emerging leader in automation solutions and has over 80% repeat orders from renowned customers. It hopes to outperform in coming years post completion of ongoing expansion plan. It is also adding new customer base in automotive as well as non-automotive segments with tailor made solutions.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 5800800 equity shares of Rs. 10 each to mobilize Rs. 69.61 cr. at the upper cap. It has announced a price band of Rs. 114 – Rs. 120 per share. The issue opens for subscription on June 16, 2025, and will close on June 18, 2025. The minimum number of shares to be applied is for 1200 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.58% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, it will utilize Rs. 62.01 cr. capex on setting up of new manufacturing facility, Rs. 4.00 cr. for repayment of certain borrowings., and the rest for general corporate purposes. 

The IPO is solely lead managed by Seren Capital Pvt. Ltd., and Purva Sharegistry (I) Pvt. Ltd., is the registrar to the issue. Mansi Share & Stock Broking Pvt. Ltd.is the market maker as well as a syndicate member.

The company has issued initial equity shares at par value, and issued further equity capital at a fixed price of Rs. 112.50 per share in December 2024. It has also issued bonus shares in the ratio of 2 for 1, in November 2024. The average cost of acquisition of shares by the promoters is Rs. 0.00, Rs. 3.33, and Rs. 3.51 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 16.02 cr. will stand enhanced to Rs. 21.82 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 261.85 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 82.36 cr. / Rs. 4.20 cr. (FY23), Rs. 118.72 cr. / Rs. 7.84 cr. (FY24), Rs. 122.04 cr. / Rs. 11.70 cr. (FY25). Improved performance from FY24 onwards is attributed to introduction of new tailor-made solutions to OEMs.

For the last three fiscals, the company has reported an average EPS of Rs. 6.00 and an average RoNW of 21.92%. The issue is priced at a P/BV of 3.43 based on its NAV of Rs. 34.96 as of March 31, 2025, but the offer document is missing its post-IPO NAV data.

If we attribute FY25 super earnings on post-IPO fully diluted equity capital, then the asking price is at a P/E of 22.39. Based on FY24 earnings, the P/E stands at 33.43. The issue relatively appears aggressively priced.

For the reported periods, the company has posted PAT margins of 5.40% (FY23), 6.80% (FY24), 9.91%, (FY25), and RoCE margins of 12.60%, 24.52%, 21.62%, 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 post listing, based on its financial performance and future prospects. 

COMPARISION WITH LISTED PEERS:
As per the offer document, the company has shown Affordable Robotic, as their listed peer. It is trading at a P/E of NA (as of June 11, 2025). However, they are not truly comparable on an apple-to-apple basis. This compare appears to be an eyewash.

MERCHANT BANKER’S TRACK RECORD:
This is the 1st mandate from Seren Capital so far and has no past track records.