PlatinumOne Business BSE SME IPO review (May apply)

•    PBSL is engaged in providing business process management services.
•    It has posted inconsistency in its top and bottom lines for the last three years.
•    Based on IPO expenses, the issue is fully structured.
•    The company is facing competition from many big corporates.
•    Cash surplus/risk seekers may consider investment for the long term.

ABOUT COMPANY:
PlatinumOne Business Services Ltd. (PBSL) is in the business of providing Business Process Management Services that covers customer acquisition, the process for lead conversion, customer care, channel management, lead generation, loyalty programme through call centres. Currently, many corporates are outsourcing such services to minimize their spending for effective cost controls.

According to PBSL, they have provided such services to Godrej Properties, Godrej Interio, Edelweiss Tokio Life, Tally, Lodha group, Hafele, Reliance Nippon, Capital Foods etc. It has 421 employees on the roll as of the date of filing this offer documents.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its needs for working capital (Rs. 2.55 cr.) and general corpus funds (Rs. 0.84 cr.), PBSL is coming out with a maiden IPO of 422400 equity share of Rs. 10 each at a fixed price of Rs. 92 per share to mobilize Rs. 3.89 cr. The issue opens for subscription on September 02, 2021, and will close on September 07, 2021. Minimum application is to be made for 1200 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on the BSE SME platform. The issue constitutes 26.69% of the post issue paid-up capital of the company. The company will be spending Rs. 0.50 cr. for this entire IPO process. This indicates that the issue is already structured and pre-sold and is just following the formalities for listing purposes.

The issue is solely lead managed by Gretex Corporate Services Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue. Gretex Share Broking Pvt. Ltd. will be the market maker for this issue.

The company has issued entire equity at par so far and has also issued bonus shares in the ratio of 115 for 1 in June 2020. The average cost of acquisition of shares by the promoters is Rs. NA and Rs. 0.09 per share.

Post issue, PBSL's current paid-up equity capital of Rs. 1.16 cr. will stand enhanced to Rs. 1.58 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 14.56 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, PBSL has posted turnover/net profits of Rs. 18.9 cr. / Rs. 1.76 cr. (FY19), Rs. 26.18 cr. / Rs. 2.04 cr. (FY20) and Rs. 20.21 cr. / Rs. 1.08 cr. (FY21).

For the last three years, the company has posted an average EPS of Rs. 13.03 and an average RoNW of 29.15%. The issue is priced at a P/BV of 1.63 based on its NAV of Rs. 56.51 per share as of March 31, 2021, and at a P/BV of 1.39 on the basis of its post issue NAV of Rs. 65.99. There is a garble in NAV data calculations on page 63 of the offer documents.

If we attribute FY21 earnings on post IPO fully diluted equity, then the asking price is at a P/E of 13.45, making the issue fully priced.

COMPARISON WITH LISTED PEERS:
As per offer documents, the company has shown Allsec Techno, Firstsource Solu and eClerx as its listed peers. They are currently trading at a P/E of 7.07, 31.14 and 29.12 (As of August 27, 2021). However, they are not truly comparable on an apple to apple basis. Comparison with bigwigs appears as an eyewash to impress investors.

DIVIDEND POLICY:
The company has not paid any dividends since its inception. However, it will follow a prudent dividend policy post listing based on its financial performance and future prospects.

MERCHANT BANKER'S TRACK RECORDS:
This is the 13th mandate from Gretex Corp in the last four fiscals (including the ongoing one). Out of the last 10 listings, 1 opened at discount and the rest opened with premiums ranging from 0.62% to 7.97% on the day of listings. Thus it has an average track record.