Safe Enterprises NSE SME IPO review (May apply)

•    The company is engaged in the business of merchandising solutions and related services.
•    It posted growth in its top and bottom lines for reported periods.
•    Boosted margins for FY24 and FY25 raise eyebrows and concern over its sustainability going forward.
•    Based on its recent financial data, the issue appears aggressively priced.
•    Well-informed/cash surplus investors may park moderate funds for medium term.

ABOUT COMPANY:
Safe Enterprises Retail Fixtures Ltd. (SERFL) is engaged in the business of designing, manufacturing, supplying and installation of shop fittings and retail fixtures, offering a wide range of customized in-store solutions across multiple retail segments such as fashion & apparels, electronics, departmental store etc. It is merchandising solution providers addressing challenges that retailers and brand marketers face in the rapidly evolving retail industry for display, placements, storage and safety of the products, thus, providing shop fitting solutions from conceptual design and prototyping to manufacturing and installation, tailored to meet the specific needs of customers. SERFL also offers the innovative shop fittings solutions including modular, electrified shop fittings that integrate seamlessly with various digital technologies such as LED lighting, digital screens, display stands etc. for retail outlets.

It has 15 designs registered under the Designs Act 2000. Design and Development is an integral part of its business enabling the company to provide innovative and functionally appealing shop fitting components which are used within customised retail fixtures to create unique retail experiences. As of March 31, 2025, the company have 15 experienced employees in design and project team. Its manufacturing units are fully equipped to carry out processes such as prototyping, metal fabrication, wood working, powder coating, painting, assembling, testing, dismantling & packing etc. Its revenue from Maharashtra and Gujarat has diminished in the last three fiscals. In other states it witnessed inconsistency. As of March 31, 2025, it had 266 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 12300000 equity shares of Rs. 5 each to mobilize Rs. 169.74 cr. at the upper cap. It has announced a price band of Rs. 131– Rs. 138 per share. The issue opens for subscription on June 20, 2025, and will close on June 24, 2025. The minimum number of shares to be applied is for 1000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.39% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, it will utilize Rs. 65.89 cr. capex on setting up of new manufacturing unit, Rs. 6.99 cr. for investment in subsidiary for additional plant and machinery installation, Rs. 30.00 cr. for working capital, Rs. 10.00 cr. for investment in subsidiary for its working capital, and the rest for general corporate purposes. 

The IPO is solely lead managed by Hem Securities Ltd., and Maashitla Securities Pvt. Ltd., is the registrar to the issue. HEM group’s Hem Finlease Pvt. Ltd. is the market maker and also a syndicate member. 

The company has issued initial equity shares at par value, and issued further equity capital at a fixed price of Rs. 324903 per share (FV Rs. 5 per share) in October 2024. It has also issued bonus shares in the ratio of 1650 for 1 in November 2024. The average cost of acquisition of shares by the promoters is Rs. 1.32, and Rs. 1.33 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 17.15 cr. will stand enhanced to Rs. 23.30 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 643.14 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 77.35 cr. / Rs. 12.09 cr. (FY23 – standalone)), Rs. 101.38 cr. / Rs. 20.35 cr. (FY24 – consolidated), Rs. 139.78 cr. / Rs. 36.50 cr. (FY25 – consolidated). It posted growth in its top and bottom lines for the reported periods. The sudden boost in bottom lines from FY24 onwards raise eyebrows and concern over its sustainability going forward.

For the last three fiscals, the company has reported an average EPS of Rs. 8.54 and an average RoNW of 67.31%. The issue is priced at a P/BV of 6.57 based on its NAV of Rs. 21.01 as of March 31, 2025, but its post-IPO NAV data is missing from the 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 17.62. Based on FY24 earnings, the P/E stands at 31.58. The issue relatively appears aggressively priced.

For the reported periods, the company has posted PAT margins of 15.66% (FY23), 22.88% (FY24), 28.33%, (FY25), and RoCE margins of 115.98%, 104.94%, 69.10%, respectively for the referred periods. 

DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy post listing, based on its financial performance and future prospects. 

COMPARISION WITH LISTED PEERS:
As per the offer document, the company has shown Naman In-store, as their listed peer. It is trading at a P/E of 22.3 (as of June 18, 2025). However, they are not truly comparable on an apple-to-apple basis. This compare appears to be an eyewash.

MERCHANT BANKER’S TRACK RECORD:
This is the 50th 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.