Sugs Lloyd BSE SME IPO review

•    The company is engaged in providing solutions and services for renewable energy sector. It primarily focuses on solar energy and related activities.
•    The company posted growth in its top and bottom lines for reported periods. 
•    Quantum jump in bottom lines from FY24 onward raise eyebrows and concern over its sustainability going forward.
•    Based on its recent financial data, the IPO appears fully priced.
•    Well-informed investors may park funds for medium to long term.

ABOUT COMPANY:
Sugs Lloyd Ltd. (SLL) operates in the renewable energy sector, with a primary focus on solar energy, electrical transmission and distribution, and civil EPC (Engineering, Procurement, and Construction) projects. It provides a wide range of services, including the development of power transmission and distribution infrastructure, construction of power substations, and the renovation, upgrading, and modification of existing power systems. Additionally, the company also engages in providing solutions for Outage Management Solutions (OMS) using fault passage indicators, auto reclosers, and Sectionalizer to various electricity DISCOM (Distribution Companies). 

In the civil construction domain, SLL offers turnkey solutions for civil building construction and electrical substation work, particularly for government clients, with a strong emphasis on serving power DISCOMs (Distribution Companies). The company also provides skilled manpower and staffing services to government organizations, specifically power DISCOMs, ensuring the efficient operation and maintenance of energy infrastructure.

SLL deals with state government power utilities, private power entities and Renewable energy developers. Preferentially, company opts for Renewable Energy and EPC projects. Company bags project work from government utilities through open bidding process and from private power entities and renewable energy developers by way of open bidding or preferential basis in accordance with company’s merit and performance. Company has set business module to suit operational needs. Business operations mainly comprises of two main tasks: Supply and service. For performing these tasks, various sequential activities are performed. It has to deploy quality manpower and developed resources. 

The Company owns adequate machineries but for specific requirements of machineries, it has to avail services on hire basis. At site, company sets up office and store facilities as per project requirement and deploy project team and hire labours on daily basis as per the site requirement. Its services help achieve results for clients. It adapts services to cater to the specific needs of business and assist in achieving the business goals. The company has a dedicated workforce, inherent strength and tie-ups. It is committed to provide services and products to its clients at attainable standard of safety and environment protection for its employees, contractors and other interested parties throughout all areas of its activities, in accordance with client expectations, demands and schedules, providing flexible performance and quick reactions to changes and meeting the quality requirements defined in standards and specifications. As of March 31, 2025, it had 206 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book-building route IPO of 6964000 equity shares of Rs. 10 each to mobilize Rs. 85.66 cr. at the upper cap. The company has announced the price band of Rs. 117 – Rs. 123 per share. The IPO opens for subscription on August 29, 2025, and will close on September 02, 2025. The minimum application to be made is for 2000 shares and in multiple of 1000 shares thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 29.99% of post-IPO paid-up equity capital of the company. From the net proceeds of the issue, the company will utilize Rs. 64.00 cr. for working capital, and the rest for general corporate purposes.

The company has allocated not more than 11% for QIBs, not less than 33% for Non-Institutional and HNI investors, not less than 56% for Retail investors, and up to 5.02% for market maker.

The IPO is solely lead managed by 3 Dimension Capital Services Ltd., while KFin Technologies Ltd. is the registrar to the issue. Aftertrade Broking Pvt. Ltd. is the market maker, as well as a syndicate member. The IPO is underwritten to the tune of 15% by 3 Dimension Capital and 85% by Prabhat Financial Services Ltd.

The company has issued entire initial equity shares at par, and issued bonus shares in the ratio of 2 for 1 in February 2024, and 2 for 3 in September 2024 2024. The average cost of acquisition of shares by the promoters is Rs. 1.85 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 16.25 cr. will stand enhanced to Rs. 23.21 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 285.53 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a consolidated basis) posted total Revenue/Net Profit of Rs. 36.36 cr. / Rs. 2.30 cr. (FY23), Rs. 68.75 cr. / Rs. 10.48 cr. (FY24), and Rs. 177.87 cr. / Rs. 16.78 cr. (FY25). FY25 top and bottom line boost raise eyebrows and concern over its sustainability.

For the last three fiscals, the company has reported an average EPS of Rs. 7.83, and an average RoNW of 41.05%. The issue is priced at a P/BV of 5.17 based on its NAV of Rs. 23.78 as of March 31, 2025, and at a P/BV of 2.57 based on its post-IPO NAV of Rs. 47.85 per share. 

If we attribute its FY25 super earnings on post-IPO expanded equity base, then the asking price is at a P/E of 17.01, and based on its FY24 earnings, the P/E stands at 27.21. Thus, based on its recent financial data, the issue appears fully priced.

The company has posted PAT margins of 6.41% (FY23), 16.10% (FY24), 9.52% (FY25), and RoCE Margins of 16.82%, 35.38%, 21.58%, 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, based on its financial performances and future prospects.

COMPARISON WITH LISTED PEERS:
As per offer document, the company has shown Rulka Electricals, Ganesh Green, as their listed peer. They are trading at a P/E of around 24.1, and 36.5 (as of August 25, 2025). However, they are not truly comparable on an apple-to-apple basis. This comparison appears to be an eyewash.

MERCHANT BANKER’S TRACK RECORDS:
This is the 2nd mandate from 3Dimention Capital in the last two fiscals (including the ongoing one). The only listing so far, is opened at a premium of 9.27% on the date of listing.