PRO FX NSE SME IPO review (May apply)

•    The company is engaged in the distribution of audio-video products, with related services and devices.
•    It generates over 71% revenue from distribution of products.
•    The company posted growth in its top and bottom lines for the reported periods.
•    Based on its recent financial data, the issue appears fully priced.
•    Well-informed investors may park funds for medium to long term.

ABOUT COMPANY:
PRO FX Tech Ltd. (PFTL) is engaged in the distribution of AV (Audio-Video) products, including but not limited to amplifiers & processors, turn-tables, audio streamers, speakers, subwoofers, sound bars, and cables. In addition to distribution, it excels in designing and implementing customized AV solutions for home theatres, premium home automation, multi-room audio systems, and bespoke AV solutions for corporate customers. Its association with global suppliers/manufacturers of renowned brands such as Denon, Polk, Definitive Technology, KEF, Theory, Pro Audio Technology, JBL, and Revel provide it with distribution rights, ensuring customers have access to the latest AV innovations and the highest quality international products. Moreover, it offers extensive after-sales support services to ensure optimal product performance and customer satisfaction.

It caters to the specialized needs of affluent households and corporate entities by providing AV and automation solutions designed to meet individual preferences and diverse user requirements. The company operates six showrooms and two experience Centres across five cities in India, including Ernakulum, Mysore, Bangalore, Coimbatore and Chennai, showcasing extensive range of products and solutions. Its experience Centres serve as immersive environments where clients can engage with AV products and automation solutions first-hand. These live-in-person experiences allow clients to interact with the technology, test its functionality, and visualize its integration into their living or working spaces. 

Its showrooms offer a wide selection of AV products and automation solutions. PFTL’s tailored residential solutions, such as home theatre systems (including projectors, amplifiers, processors, source equipments, speakers, subwoofers, sound bars, and cables) and automation solutions, are crafted to meet the unique lifestyle requirements of affluent consumers seeking premium AV and automation solutions, along with seamless installation, connectivity, programming, and reliable after-sales support. For corporate customers, it provides end-to-end AV and automation solutions for boardrooms, corporate lobbies, retail spaces, F&B establishments, hospitals, educational institutions, hospitality venues, places of worship, and beyond. Additionally, it has recently ventured into digital signage solutions. Digital signage is emerging as a powerful tool for communication, branding, and engagement across various industries, and the company is well-equipped to deliver innovative solutions such as professional displays, active LEDs, projectors, and interactive displays customized to customers' requirements.

Its association with renowned AV brands, along with brands like Crestron, Lutron, and Unilumin, give it an edge in offering unique solutions that address customer needs. Its business is driven by an experienced sales and technical team that ensures proficient handling of all aspects, from installation and connectivity to programming and after-sales services. PFTL also maintains sourcing arrangements for projectors, screens, LED displays, automation controllers, cables, and more, ensuring comprehensive solutions for customers. As of March 31, 2025, it had 117 employees on its payroll

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 4632000 equity shares of Rs. 10 each to mobilize Rs. 40.30 cr. at the upper cap. It has announced a price band of Rs. 82 – Rs. 87 per share. The issue opens for subscription on June 26, 2025, and will close on June 30, 2025. The minimum number of shares to be applied is for 1600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.46% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, it will utilize Rs. 1.50 cr. for repayment of certain borrowings, Rs. 7.47 cr. for capex on setting up of 3 new showrooms, Rs. 19.00 cr. for working capital, and the rest for general corporate purposes. 

The IPO is solely lead managed by Hem Securities Ltd., and Cameo Corporate Services Ltd., is the registrar to the issue. HEM Group’s Hem Finlease Pvt. Ltd. is a market maker, as well as a syndicate member.

The company has converted initial equity shares at par value, and issued further equity capital in the price range of Rs. 4345.31 – Rs. 7082.15 between March 2008, and March 2011. It has also issued bonus shares in the ratio of 900 for 1 in March 2024. The average cost of acquisition of shares by the promoters is Rs. 0.00, and Rs. 0.01 per share. per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 12.87 cr. will stand enhanced to Rs. 17.50 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 152.28 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 96.26 cr. / Rs. 6.35 cr. (FY23), Rs. 110.94 cr. / Rs. 9.44 cr. (FY24), Rs. 130.05 cr. / Rs. 12.24 cr. (FY25). Its 71+% revenue comes from distribution segment.

For the last three fiscals, the company has reported an average EPS of Rs. 8.02 and an average RoNW of 36.18%. The issue is priced at a P/BV of 3.03 based on its NAV of Rs. 28.68 as of March 31, 2025, but its post-IPO NAV data is missing from offer documents.

If we attribute FY25 super earnings on post-IPO fully diluted equity capital, then the asking price is at a P/E of 12.45. Based on FY24 earnings, the P/E stands at 16.14. The issue relatively appears fully priced.

For the reported periods, the company has posted PAT margins of 6.60% (FY23), 8.515% (FY24), 9.41%, (FY25), and RoCE margins of 52.73%, 45.55%, 43.58%, 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, 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. It may witness first mover fancy post listing.

MERCHANT BANKER’S TRACK RECORD:
This is the 51st mandate from Hem Securities in the last three fiscals including the ongoing one.  From the last 10 listings, 1 listed at par and the rest with a premium ranging from 2.30% to 90.00%, on the listing date.