Encompass Design NSE SME IPO review (Not Rated)

•    The company is engaged in the business of trading and manufacturing primarily home and lifestyle products, and also trades in agro products.
•    It is selling its products under the brand name “ScaleSauce”.
•    The company has posted dicey financial performance.
•    Based on its recent financial data, the issue appears greedily priced.
•    Investors may stay away from this pricey and dicey issue.

ABOUT COMPANY:
Encompass Design India Ltd. (EDIL) is operating under the brand name ‘ScaleSauce’, is engaged in building and scaling consumer brands in India, with a focus on the home & living and food segments tailored to the modern urban Indian consumer. The Company was incorporated in 2010 as a trading enterprise and commenced the trading of fabrics. In response to emerging market opportunities, the company subsequently expanded its operations to include e-commerce support services, which it operated alongside trading activities.

The Company’s core business activities include the manufacturing of home and lifestyle products, such as bed sheets, curtains, comforters, table linens, and pillow covers, as well as food products, with a primary focus on sauces, marketed under its own brands. In addition to its manufacturing operations, the Company is also involved in the trading of agro-based products, cotton, and fabrics. It further undertakes the sale of various other goods, primarily through gated market platforms, enabling access to niche buyers.

In addition to its product-based operations, the Company offers a comprehensive range of digital and e-commerce support services designed to enable the growth of consumer brands in the online space. These services provide end-to-end solutions across marketing, technology, and operations, catering to both direct-to-consumer (D2C) businesses and corporate clients. Through these offerings, it assists brands in enhancing visibility, expanding their digital presence, and driving sales growth.  As of September 30, 2025, it had 89 employees on its payroll.

ISSUE DETAILS/ CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 3758400 equity shares of Rs. 10 each to mobilize Rs. 40.21 cr. at the upper cap. The company has announced a price band of Rs. 101 – Rs. 107 per share. The minimum application to be made is for 2400 shares and in multiples of 1200 shares thereon, thereafter. The issue opens for subscription on December 05, 2025, and will close on December 09, 2025. The IPO constitute 26.50% of the post-IPO paid-up capital of the company. The shares will be listed on NSE SME Emerge. From the net proceeds of the IPO, it will utilize Rs. 7.29 cr. for working capital, Rs. 11.00 cr. for repayment/prepayment of certain borrowings, Rs. 11.49 cr. for capex for purchasing office, interior and refurbishment, and the rest for general corporate purposes. 

The IPO is solely lead managed by 3Dimension Capital Services Ltd., and MUFG Intime India Pvt. Ltd. is the registrar to the issue. Alacrity Securities Ltd. is the market maker. The issue is underwritten to the tune of 15% by 3Dimension Capital, and 85% by Aftertrade Broking.

Having issued initial equity capital at par, the company issued further equity shares in the price range of Rs. 1230.00 – Rs. 1912.00 per share between May 2024, and February 2025. It has also issued bonus shares in the ratio of 25.75 for 1 in May 2025. The average cost of acquisition of shares by the promoters is Rs. 0.37, Rs. 1.57, and Rs. 6.42 per share.

Post-IPO, company’s current paid-up equity capital of Rs. 10.43 cr. will stand enhanced to Rs. 14.18 cr. Based on the upper band of the IPO pricing, the company is looking for a market cap of Rs. 151.76 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted total income / net profit, - (loss), of Rs. 21.69 cr. / Rs. – (1.30) cr. (FY23), Rs. 40.15 cr. / Rs. 6.88 cr. (FY24), Rs. 55.01 cr. / Rs. 10.79 cr. (FY25). For H1 of FY26 ended on September 30, 2025, it earned a net profit of Rs. 5.05 cr. on a total income of Rs. 28.17 cr. 

For the last three fiscals, the company has reported an average EPS of Rs. 7.21, and an average RoNW of 32.50%. The issue is priced at a P/BV of 29.64 based on its NAV of Rs. 3.61 per share as of September 30, 2025, and at a P/BV of 2.00 based on its post-IPO NAV of Rs. 53.45 per share (at the upper cap).

If we attribute FY26 annualized super earnings to its post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 15.03, and based on FY25 earnings, the P/E stands at 14.06. The IPO appears to be greedily priced. 

For the reported periods, the company has posted PAT margins of – (5.99) % (FY23), 17.18% (FY24), 19.75% (FY25), 17.92% (H1-FY26), and RoCE margins of – (8.47) %, 55.36%, 40.49%, 16.33%, respectively for the referred periods.

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

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Neelam Linens, N R Vandana, as its listed peers. They are currently trading at a P/E of 8.27, and 15.5 (as of December 03, 2025). However, they are not truly comparable on an apple-to-apple basis. This comparison appears to be an eyewash.

MERCHANT BANKER’S TRACL RECORD:
This is the 4th mandate from 3Dimension Capital in the ongoing fiscal. Out of the last 3 listings, 3 opened at discount and the rest with premium of 9.27% on the listing date. The lead manager has a poor track record.