SecMarK Consultancy BSE SME IPO review (May apply)

•    SCL is offering a pack of services to financial market participants.
•    Its financial data is not matching the asking price.
•    The issue is priced at a P/E of around 48, making it an expensive offer.
•    Lead Manager has no track record as this is its first mandate.

ABOUT COMPANY:
SecMark Consultancy Ltd. (SCL) is offering services in the areas of compliance, operations, risk management, outsourcing, software development, and legal matters to financial market participants and others. Company's clients primarily include stock and commodity brokers, depository participants, stock exchanges, wealth managers, research analysts, insurance companies, insurance brokers, corporate agents, portfolio managers, investment advisors, NBFCs, banks etc.

SCL offered services to about 125 clients in the Financial Year 2015 which has increased to about 200 in the Financial Year 2019-20. Its Registered Office is situated at Mumbai, and team executes assignments all over India. The company has local representatives at various locations like New Delhi, Ahmedabad, Indore, Jaipur, Bangalore, Chandigarh, and Raipur etc.

ISSUE DETAILS/CAPITAL HISTORY:
To meet its plans for technology development/procurement/strategic acquisition (Rs. 4.60 cr.), Human resources (3.00 cr.), acquire the asset for business (Rs. 1.50 cr. ), repayment of the bank loan (Rs. 1.50 cr.) and general corpus find (Rs. 3.40 cr.) needs, SCL is coming out with a maiden IPO of 1114000 equity shares of Rs.10 each at a fixed price of Rs. 135 per share to mobilize Rs. 15.04 cr. The issue opens for subscription on September 18, 2020, and will close on September 23, 2020. Minimum application is to be made for 1000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME platform.

Issue constitutes 27.01% of the post issue paid-up capital of the company. The company will be spending Rs. 1.04 cr. for this IPO process. The issue is solely lead managed by Indorient Financial Services Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue. Vijeta Broking India Pvt. Ltd. is acting as a Market Maker for this company. Having raised initial equity at par, SCL issued bonus shares in the ratio of 300 shares for 1 share held in November 2019.

The average cost of acquisition of shares by the promoters is Rs.0.03 per share. Post issue, SCL's current paid-up equity capital of Rs. 3.01 cr. will stand enhanced to Rs. 4.12 cr. With this IPO, the company is looking for a market cap of Rs. 55.67 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, SCL has, on a consolidated basis, posted total revenue/net profits of Rs. 3.29 cr. / Rs. 0.87 cr. (FY18), Rs. 3.90 cr. / Rs. 0.97 cr. (FY19) and Rs. 5.75 cr. / Rs. 1.16 cr. (FY20). It has posted slow and steady growth in top and bottom lines.

For the last three fiscals, SCL has posted an average EPS of Rs. 3.47 and RoNW of 31.34%. The issue is priced at a P/BV of 9.64 on the basis of its NAV of Rs. 14 as on March 31, 2020, and at a P/BV of 2.89 on the basis of post-issue NAV of Rs. 46.68.

If we attribute FY20 earnings on fully diluted post issue equity, then asking price is at a P/E of around 47.87, making it an expensive offer.

COMPARISION WITH LISTED PEERS:
As per offer documents, SCL has no listed peers to compare with.  

MERCHANT BANKER'S TRACK RECORDS:
On merchant banker's performance front, this is the maiden mandate from its platform and has no track records.