Riddhi Corporate Services BSE SME IPO review (Avoid)

Riddhi Corporate Services Ltd (RCSL) commenced its business activities by rendering services to Telecommunication service providers. RCSL provides services of Data Management, Collection and Handling of Customer Application Form (CAF), Audit of CAF, order entry of CAF, CAF Barcoding, Inward, Storage and Retrieval of Data, Temporary Indexing, Data Entry, Scanning, uploading and Sample image Audit at Spoke Level. In addition, the company is rendering services of Collection of Dues, Retention, Bill Delivery management Services along with over dues amount from subscriber by way Tele calling, Field visit, Address the Customer's Issue and retain the Customer, Escalation Management while collecting Overdue Amount. The company has also started rendering services to Banking sector. It does Address Verification (AV) and Credit Verification (CV) - Verification of Residence and Office of borrower and/or co borrowers or/and Guarantors (if any). Visit the applicant’s residence and office and office address and confirm the residential and employment status of the applicant. The visit to address provided should be unannounced and without prior intimation to the applicant. Assess the details as mentioned by applicant to Bank while applying for a loan, standard of living of the applicant. Assess the ease of approaching the address. Identify the name and the relationship of the person met at the applicant’s address. At present, RCSL is engaged in Business Process Outsourcing (BPO) to serve the needs of Telecom, Banking, Govt. Institutions, Insurance Companies rendering services to Telecommunication Service provider, Banking Sector, Non Banking Financing Institutions, E-Wallet Service provider etc.

To part finance acquisitions and other strategic initiatives, Capital Expenditure and general corpus fund needs, the company is coming out with a maiden IPO of 950000 equity share of Rs. 10 each at a fixed price of Rs. 130 per share to mobilize Rs. 12.35 crore. Issue opens for subscription on 12.06.17 and will close on 15.06.17. Minimum application is to be made for 1000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue is solely lead managed by Gretex Corporate Services Pvt Ltd and Purva Sharegistry (India) Pvt Ltd is the registrar to the issue. After raising Rs. 0.01 crore for equity at par, it issued bonus as consideration other than cash for Rs. 2.29 crore. Post issue its current paid up capital of Rs. 2.30 crore will stand enhanced to Rs. 3.25 crore.

On performance front, the company has posted turnover/net profits of Rs. 23.17 cr. / Rs. 0.90 cr. (FY14), Rs. 27.59 cr. / Rs. 2.73 cr. (FY15), Rs. 42.25 cr./ Rs. 3.12 cr. (FY16). For first nine months ended 31.12.16 it has earned net profit of Rs. 1.92 crore on a turnover of Rs. 45.02 crore. If we annualize the latest earnings and attribute to fully diluted equity post issue, then asking price is at a P/E of 16 plus and at a P/BV of 3.04. Its average RoNW for last three is 46.06. Its peers are trading in the range of 5.7 to 28.6 P/E.

On merchant banker’s front, this is the 4th mandate from its stable and from the last three issues only one issue gave positive return on the listing date.

Conclusion: Issue is aggressively priced, merchant banker has poor track record. Considering these, there is no harm giving this offer a miss.