Pramara Promotions NSE SME IPO review (May apply)

•    PPL is providing all services under one roof for promotional products and gift items. 
•    It has posted steady growth in its top and bottom lines for the reported periods. 
•    Based on FY23 earnings, the issue appears fully priced. 
•    It claims to be the first mover in the segment to get listed. 
•    Well-informed investors may consider parking funds for the medium to long term. 

PREFACE:
The IPO of this company is opening on September 01, 2023, but it filed its final prospectus with regulators on August 28, 2023. However, the offer document was missing from the websites of the Lead Manager and the company till 10:45 a.m. on August 30, 2023. The final offer document was uploaded on the designated exchange by August 30, 2023, and was accessed. In such an event, how the investors/analysts will study the documents to prepare their plans for investment/reviews?  There appears to be some lacuna on the compliance part. 

ABOUT COMPANY:
Pramara Promotions Ltd. (PPL) is engaged in the business of ideation, conceptualization, designing, manufacturing and marketing of promotional products and gift items for its clients across sectors, such as FMCG, QSR, pharma, beverage companies non-alcoholic and alcoholic, cosmetic, telecom, media and others. It helps clients in promoting their products and services to their customers and PPL is playing a vital role in their brand promotion and sales. 

Based on the inputs from customers, PPL conceptualizes and develops merchandise or products that help these brands connect with their consumers. Its services and product offerings include the manufacturing of plastic promotional products and toys and the designing and manufacturing of non-plastic items from approved vendors across categories. As claimed by the company, it offers the largest portfolio of corporate gifting items and promotional products across categories like plastic, steelware, silicon rubber, paper printed, glassware, toys of all kinds, tin products, apparel and accessories, etc. Since its inception, it has designed and manufactured around 5000 products. 

Services are an integral part of its manufacturing process and are in the nature of ideation, conceptualization and designing. The selling price of the product is inclusive of the following charges, namely, designing charges, development charges and expenses with respect to the ideation of toys and products. It has also expanded its product offerings by launching the brand "Toyworks" with an aim to foray into the toy retail space. Further, the company has also launched the brand "Tribeyoung", a private label exclusively for eCommerce with product offerings of toys, sporting goods and accessories. As of the date of filing this offer document, it had 83 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden IPO of 2424000 equity shares of Rs. 10 each at a fixed price of Rs. 63 per share to mobilize Rs. 15.27 cr. The issue opens for subscription on September 01, 2023, and will close on September 05, 2023. The minimum application to be made is for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.83% of the post-IPO paid-up capital of the company. PPL is spending Rs. 2.50 cr. for this IPO process and from the net proceeds, it will utilize Rs. 9.75 cr. for working capital, and Rs. 3.02 cr. for general corporate purposes. Issue expenses of 16.37% indicate a fully structured mode of the IPO.  

Fedex Securities Pvt. Ltd. is the sole lead manager and Bigshare Services Pvt. Ltd. is the registrar of the issue. Pure Broking Pvt. Ltd. is the market maker for the company. 

Having issued initial equity shares at par value, the company issued/converted further equity shares in the price range of Rs. 40 - Rs. 50 between March 2016 and December 2016. It has issued bonus shares in the ratio of 4.5 for 1 share in December 2022. The average cost of acquisition of shares by the promoters is Rs. 1.64, and Rs. 5.44 per share. 

Post-IPO, PPL's current paid-up equity capital of Rs. 6.61 cr. will enhanced to Rs. 9.04 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 56.92 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, PPL has (on a consolidated basis) posted a turnover/net profit of Rs. 40.96 cr. / Rs. 0.33 cr. (FY21), Rs. 49.43 cr. / Rs. 1.35 cr. (FY22), and Rs. 51.19 cr. / Rs. 2.23 cr. (FY23). 

For the last three fiscals, PPL has reported an average EPS of Rs. 2.45 and an average RoNW of 10.65%. The issue is priced at a P/BV of 2.59 based on its NAV of Rs. 24.28 as of March 31, 2023, and at a P/BV of 3.55 based on its post-IPO NAV of Rs. 17.77 per share. There appears to be some mismatch in post-IPO NAV data.

The PAT margins of the company were 0.81% (FY21), 2.74% (FY22), and 4.45% (FY23) and its RoCE margins were 11.39% (FY21),15.79% (FY22), and 15.20% (FY23). 

If we attribute FY23 earnings to the post-IPO fully diluted paid-up equity capital of the company, then the asking price is at a P/E of 25.61. 

DIVIDEND POLICY:
The company has not declared any dividends since incorporation. It will adopt a prudent dividend policy based on its financial performance and future prospects. 

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

MERCHANT BANKER'S TRACK RECORD:
This is the 17th mandate from Fedex Securities in the last four fiscals (including the ongoing one). Out of the last 10 listings, 2 opened at discount, 1 at par and the rest with premiums ranging from 0.21% to 108.93% on the date of listing.