Pulz Electronics NSE SME IPO review (Apply)

Pulz Electronics Ltd. (Pulz) is in the business of developing and manufacturing audio systems and solutions that capitalize on the emergence of new co-axial technology and line array based speaker systems for the cinema, pro-audio, studio and home audio industries since last 35 years. Pulz manufacturers an array of world class products specifically designed to cater to object based and channel based futuristic immersive audio formats like Dolby Atmos, DTSX or Auro 3D. With thousands of cinema and audio installations in some of the leading chains, Pulz is one of the industry leaders with innovative products and advanced engineering skills.

The Pulz manufacturing base is built over 40,000 sq ft of state of the art manufacturing facilities in the outskirts of Mumbai, India. The key components are manufactured in Germany, Italy and Spain. A 100 plus dedicated team of highly skilled professionals work relentlessly towards innovation, product development, precision assembly, and stringent quality control. The Pulz facility is also designed to build customized products for special venue requirements, giving the company a unique ability to provide the perfect solution for technically challenging projects and venues. Pulz audio systems are offered in three ranges Platinum, Premium and Classic. Platinum assures the highest level of technology, sound quality and refinement, whereas the Classic offers an optimum solution without any compromise in performance and quality.

To part finance its acquisitions and other strategic initiatives plans, general corpus fund needs etc., Pulz is coming out with a maiden IPO of 726000 equity shares of Rs. 10 each via book-building route with a price band of Rs. 51-54 to mobilize Rs.3.7 to Rs. 3.92 crore (based on lower and upper price bands). Issue opens for subscription on 14.11.17 and will close on 16.11.17. Minimum application is to be made for 2000 shares and in multiples thereon, thereafter. Post allotment shares will be listed on NSE SME Emerge. Issue is solely lead managed by Sarthi Capital Advisors Pvt. Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue. Issue constitutes 26.62% of the total post issue paid up capital of the company. Pulz has issued entire equity at par and has also issued bonus shares in the ratio of 1 for 1 in March 2011 and 3 for 1 in March 2017. Post issue, company’s current paid up equity capital of Rs. 2.00 crore. will stand enhanced to Rs. 2.73 crore.

On performance front, Pulz has reported turnover/net profits of Rs. 9.26 cr. / Rs. 0.10 cr. (FY14), Rs. 11.91 cr. / Rs. 0.01 cr. (FY15), Rs. 13.07 cr. / Rs. 0.30 cr. (FY16) and Rs. 13.85 cr. / Rs. 1.34 cr. (FY17). For Q1 of current fiscal, it has posted net profit of Rs. 0.40 crore on a turnover of Rs. 3.86 crore. Sudden jump in bottom lines for FY17 is surprising even when top line remained at the same level that of FY16. It has reported average EPS of Rs. 3.86 and average RoNW of 21.60% for last three fiscals (on a weighted average basis on paid up equity capital base of Rs. 2.00 crore) . Issue is priced at a P/BV of 2.55 (based on valuations as on 30.06.17). However, believing company’s performance if we annualize latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 9.22 which augurs well. It has no listed peers to compare with.

On merchant banker’s front, this is the 36th mandate (including 1 main board IPO of Salasar) from its stable so far. Out of last 10 listings, 2 IPOs opened at discount, one at par and the balance 7 with a premium ranging from 3% to 131% premium on offer price on the day of listing. 131% rewards were from its main line IPO.

Conclusion: Issue is priced justifiably. Investors may consider investment for medium to long term. (Subscribe).