Smarten Power NSE SME IPO review (May apply)

•    The company is engaged in power back-up and solar power products in designing and assembling.
•    The company posted growth in its top and bottom lines for the reported periods.
•    The surge in bottom lines from FY24 onwards raises eyebrows.
•    With tailor made products, the company will be above to maintain the margins going forward.
•    Based on its recent financial data, the issue appears fully priced.
•    Well-informed Investors may park funds for medium to long term. 

ABOUT COMPANY:
Smarten Power Systems Ltd. (SPSL) is engaged into designing and assembling of power back-up and advanced solar power products such as Home UPS systems, solar inverters, solar power conditioning units (PCUs), solar charge controllers. It is also engaged in the trading of solar panels and batteries. SPSL sells products through distributors within India. It also exports products except solar panels outside India. The company generates approximately 76.41% of revenue through domestic sales and 23.59% of our revenue through exports. Currently, our Company is operating in 23 states and 2 union territories within India and has also established global footprint in over 18 countries which includes Middle East, Africa, and South Asia region.

With a mission to propel society towards a sustainable energy future, the Company is committed to leveraging cutting-edge technology and innovative designs to provide affordable, efficient, and environmentally friendly energy solutions. The Company’s slogan is, “Fusion is the Future” = reflects its vision of harnessing the power of renewable energy sources, especially solar power, to meet the growing energy demands of households and industries alike. 

The Company aims to contribute significantly to the global shift towards renewable energy, particularly in developing regions where energy access is critical for economic development. As part of this vision, SPSL is committed to expanding its presence beyond India into global markets, focusing on Asia, Africa, and the Middle East. It carries out r assembling and trading business of its products under brand “SMARTEN” and the patent registered in the name of our Company. Its products cater to a wide variety of customer segments, from individual households to large-scale commercial solar projects, providing flexibility and adaptability to evolving market needs. As of May 31, 2025, it had 252 employees on its payroll. It also hires contractual employees as and when required.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden IPO of 5000400 equity shares of Rs. 10 each at a fixed price of Rs. 100 per share to mobilize Rs. 50.00 cr. The issue opens for subscription on July 07, 2025, and will close on July 09, 2025. The issue consists of 4000800 equity shares worth Rs. 40.01 cr. and an offer for sale (OFS) of 999600 shares worth Rs. 10.00 cr. The minimum number of shares to be applied is for 2400 shares and in multiples of 1200 shares, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.32% of the post-IPO paid-up capital of the company. The company is spending Rs. 3.71 cr. for fresh equity issue, and from the net proceeds, it will utilize Rs. 22.00 cr. for working capital, Rs. 4.19 cr. for purchase of movable assets of the production line, Rs. 0.95 cr. for repayment of certain outstanding, Rs. 4.46 cr. for capex, and Rs. 4.70 cr. for general corporate purposes. 

The IPO is solely lead managed by Arihant Capital Markets Ltd., and Maashitla Securities Pvt. Ltd., is the registrar to the issue. Arihant Capital Markets Ltd. is also a market maker. 

The company has issued entire initial equity shares at par value, and has issued bonus shares in the ratio of 14 for 1 in October 2024. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. 0.67 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 15.00 cr. will stand enhanced to Rs. 19.00 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 190.01 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 186.06 cr. / Rs. 5.16 cr. (FY23), Rs. 198.73 cr. / Rs. 11.29 cr. (FY24), Rs. 203.20 cr. / Rs. 12.77 cr. (FY25). 

For the last three fiscals, the company has reported an average EPS of Rs. 7.35 and an average RoNW of 37.11%. The issue is priced at a P/BV of 3.89 based on its NAV of Rs. 25.69 as of March 31, 2025, and at a P/BV of 2.42 based on its post-IPO NAV of Rs. 41.34 per share. 

If we attribute FY25 super earnings on post-IPO fully diluted equity capital, then the asking price is at a P/E of 14.88. Based on FY24 earnings, the P/E stands at 16.84. The issue relatively appears xxxx priced.

For the reported periods, the company has posted PAT margins of 2.77% (FY23), 5.68% (FY24), 6.28%, (FY25), and RoCE margins of 40.84%, 51.44%, 32.58%, respectively for the referred periods. 

DIVIDEND POLICY:
The company has not paid any dividends since incorporation. It has adopted a dividend policy in December 2024, based on its financial performance and future prospects.

COMPARISION WITH LISTED PEERS:
As per the offer document, the company has shown GP Eco, and Sungarner Energies, as their listed peer. They are trading at a P/E of 52.9, and 35.9 (as of July 02, 2025). However, they are not truly comparable on an apple-to-apple basis. This comparison is nothing but an eyewash.

MERCHANT BANKER’S TRACK RECORD:
This is the 4th mandate from Arihant Capital in the last two fiscals including the ongoing one.  From the last 3 listings, 1 listed at par and the rest with a premium ranging from 7.14% to 7.50%, on the listing date. Thus, it has an average track record so far.