SecUR Credentials NSE SME IPO review (May apply)

SecUR Credentials Ltd. (SCL) is engaged in the business of Background Screening (also known as BGC – Back Ground – check) and Due Diligence. SCL is the end-to-end screening services provider to various corporate in the country. It is a member of the prestigious US based National Association of Professional Back Ground Screeners (NAPBS), APAC Chapter, which is the umbrella body of the laegest BGC companies around the world. Thus SCL has scope to serve clients globally. Company’s products and service include Employee Back Ground Screening, Due Diligence Services and SecUR numbers. Its process is ISO/IEC 27001:2013 certified.

To part finance its working capital needs, expansion of business activities, purchase of Symphony 3.0 software along with data base, marketing and brand building and general corpus fund needs, SCL is coming out with a maiden IPO of 1467000 equity shares of Rs. 10 each at a fixed price of Rs. 205 per share to mobilize Rs. 30.07 crore. Issue opens for subscription on 01.11.17 and will close on 03.11.17. Minimum application is to be made for 600 shares and in multiples thereon, thereafter. Post allotment shares will be listed on NSE SME Emerge. Issue is solely lead managed by Inventure Merchant Banker Services Pvt. Ltd. and Skyline Financial Services Pvt. Ltd. is the registrar to the issue. Having issued initial equity at par, it raised further equity at a price of Rs. 47 per share on 05.08.2017. It has also issued bonus shares in the ratio of 99 for 1 on 25.04.2017, 1.0214 against every 1 share on 14.07.2017 and 0.474 shares for every 1 share held on 09.08.2017. Post issue its current paid up equity capital of Rs. 3.42 crore will stand enhanced to Rs. 4.89 crore. Issue constitutes 30.01% of the post issue paid up capital of the company. Cost of acquisition of shares by promoters is Rs. 0.94 per share.

On performance front, SCL has posted turnover/net profits of Rs. 4.41 cr. / Rs. 0.02 cr. (FY16), Rs. 10.16 cr. / Rs. 1.81 cr. (FY17). It has no operation for FY 15 and had just minuscule other income with working resulting in net loss of around Rs. – (0.09) cr. For Q1 of current fiscal it has reported net profit of Rs. 1.25 crore on a turnover of Rs. 5.90 crore. It has posted an average EPS of Rs. 4.12 and RoNW of 50.21% for last three fiscals on an equity base of Rs. 0.01 crore. Based on post issue NAV of Rs. 71 issue is priced at a P/BV of 2.88. If we annualize latest working and attribute it to fully diluted equity post issue, then asking price is at a P/E of 20 plus. It has no listed peers to compare with. Jump in bottom line for Q1 is most surprising.

On merchant banker’s front, this is 3rd mandate from its stable in last three fiscals. Previous 2 IPOs gave positive returns ranging from 2.2 to 20% in opening on the day of listing. However, they both closed on the same day with negligible gains.

Conclusion: Company’s equity has shot up from mere Rs. 0.01 crore to Rs. 4.89 crore between April 2017 – August 2017. Jump in Q1 profits is surprising. Although issue is priced around 20 P/E based on Q1 working, its turnover/profit ratios are dramatic. Risk savvy cash surplus investors may consider investment for long term. (Other).