Trident Techlabs NSE SME IPO review (May apply)

•    TTL is a niche player in custom built technology solutions.
•    It provides tailor made engineering and power system solutions to its customers.
•    The sudden growth in its top and bottom lines from FY23 onwards raise concern.
•    Based on its FY24 annualized super earnings, the issue appears fully priced. 
•    Well-informed investors may park funds for the medium to long term rewards. 

ABOUT COMPANY:
Trident Techlabs Ltd. (TTL) offers custom-built technology solutions to corporates in the aerospace, defence, automotive, telecom, semiconductor and power distribution sectors. It has two business verticals i.e. Engineering Solutions and Power System Solutions. The company delivers winning business outcomes through its deep industry experience and a 360-degree view of "Business through Technology" helping clients in creating successful and adaptive businesses.

Its engineering Solutions portfolio of products and related services encompass a diverse spectrum of solutions viz. system-level electronics design, chip-level electronics design, embedded design, hydraulics/ pneumatics system, system modeling, reliability and quality, design automation, power electronics, PCB designing and electromagnetic simulations. Its design services include consulting and engineering services that help companies innovate better, with services spanning the entire product development lifecycle, including strategy and user research, design and engineering, pre-launch testing and post-launch maintenance, and service delivery and optimization.

TTL's Power Solutions portfolio of products and related services help power distribution utilities who face new challenges due to the ever-changing nature of the industry and the increasing pressure on network reliability. Power distribution utilities need to constantly focus on (i) maximizing the capacity of aging transmission infrastructure; (ii) managing increasing amounts of intermittent, renewable generation; and (iii) deployment of Smart Grid technologies leading to increasing complexity in transmission investment decisions. 

Its Power Systems Solutions division has developed expertise in the areas of transmission planning and operations, power distribution solutions, integration and energy storage solutions, substation design solutions and power cable ampacity solutions. TTL's solutions and services dwell on the latest technology to enable clients in maximizing the reliability of their electric power facilities in the most economical manner. Tangible schemes for improved management of transmission networks and optimized strategies for future financial. As of the date of filing this offer document, it had about 84 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden book building route IPO of 4580000 equity shares of Rs. 10 each. It has announced a price band of Rs. 33 - Rs. 35 per share and mulls raising Rs. 16.03 cr. at the upper cap. The issue opens for subscription on December 21, 2023, and will close on December 26, 2023. The minimum application to be made is for 4000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.50% of the post-IPO paid-up equity capital of the company. From the net proceeds of the IPO funds, it will utilize Rs. 12.00 cr. for working capital, and the rest for general corporate purposes. 

The issue is solely lead managed by GYR Capital Advisors Pvt. Ltd. and Maashitla Securities Pvt. Ltd. is the registrar of the issue. Giriraj Stock Broking Pvt. Ltd. is the market maker for the company. 

Having issued initial equity shares at par value, the company issued further equity shares at a fixed price of Rs. 33 per share in September 2023. 2023. It has also issued bonus shares in the ratio of 3.5 for 1 in March 2006, and 16 for 5 in August 2023. The average cost of acquisition of shares by the promoters is Rs. 1.87, and Rs. 1.99 per share. 

Post-IPO, company's current paid-up equity capital of Rs. 12.70 cr. will stand enhanced to Rs. 17.28 cr. Based on the upper cap of the IPO price band, the company is looking for a market cap of Rs. 60.48 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit/ -(loss) of Rs. 28.34 cr. / Rs. - (0.33) cr. (FY21), Rs. 29.88 cr. / Rs. 0.65. (FY22), and Rs. 68.24 cr. / Rs. 5.55 cr. (FY23). For M7 of FY24 ended on October 31, 2023, it earned a net profit of Rs. 2.66 cr. on a total income of Rs. 21.14 cr. The sudden boost in top and bottom lines from FY23 onwards raise concern over its sustainability going forward.  

For the last three fiscals, the company reported an average EPS of Rs. 3.24 and an average RoNW of 16.47%. The issue is priced at a P/BV of 0.52 based on its NAV of Rs. 67.56 as of March 31, 2023, and at a P/BV of 1.48 based on its post-IPO NAV of Rs. 23.57 per share at the upper cap. The offer document is missing NAV data as of October 31, 2023. 

If we attribute super annualized earnings of FY24 on post-IPO fully diluted paid-up equity capital of the company, then the asking price is at a P/E of 13.26. The issue appears fully priced based FY24 earnings. 

For the reported periods, the company has posted PAT margins of 0.59% (FY21), 2.20% (FY22), 8.24% (FY23), 12.66% (M7-FY24), and RoCE margins of 8.85% 8.25%, 23.67% and 10.50% for the said periods respectively.  

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 performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per offer document, the company has no listed peers to compare with. 

MERCHANT BANKER'S TRACK RECORD:
This is 18th mandate from GYR Capital in the last three fiscals. Out of the last 10 listings, all listed with premiums ranging from 3.79% to 179.38% on the date of listing.