V R Infra NSE SME IPO review (Avoid)

•    VRIL is Vadodara centric reality developers focusing on residential and commercial projects.
•    Its financial performances so far have been average.
•    The sudden boost in its bottom line for FY23 appears to be the window dressing to pave the way for fancy pricing of the IPO. 
•    Based on FY24 annualized earnings, the issue appears exorbitantly priced. 
•    There is no harm in skipping this "High Risk/Low Return" bet. 

ABOUT COMPANY:
V R Infraspace Ltd.(VRIL) is a construction and real estate development company, focused primarily on construction and development of residential and commercial projects, in and around Vadodara, Gujarat. 

It has developed projects catering to the middle income and high-income group. Its residential apartment portfolio consists of various types of accommodation of varying sizes. The company has concentrated on developing luxury, yet affordable, housing in the residential segment. Its residential buildings are designed with a variety of amenities such as security systems, sports and recreational facilities, play areas and electricity back-up. As on date of this Prospectus, all of its Projects are constructed and proposed to constructed are on own land of Company. VRIL is currently offering residential and commercial projects under the name "VR". As of August 31, 2023, it had just 9 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden IPO of 2400000 equity shares of Rs. 10 each at a fixed price of Rs. 85 per share to mobilize Rs. 20.40 cr. The issue opens for subscription on March 04, 2024, and will close on March 06, 2024. The minimum application to be made is for 1600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 27.03% of the post-IPO paid-up capital of the company. The company is spending Rs. 0.50 cr. for this IPO process, and from the net proceeds, it will utilize Rs. 15.00 cr. for investment in its subsidiary and part financing construction of VR Vivanta, Rs. 3.50 cr. for working capital, and Rs. 1.40 cr. for general corporate purposes. 

The issue is solely lead managed by Beeline Capital Advisors Pvt.  Ltd., and Link Intime India Pvt. Ltd. is the registrar of the issue. Beeline Group's Spread X Securities Pvt. Ltd. is the market maker for the company. 

The company has issued initial equity capital at par and additional equity shares at a price of Rs. 116 per share in June 2019. It has also issued bonus shares in the ratio of 19 for 1 in July 2020. The average cost of acquisition of shares by the promoters is Rs. 9.99, and Rs. 10.00 per share

Post-IPO, company's current paid-up equity capital of Rs. 6.48 cr. will stand enhanced to Rs. 8.88 cr. Based on the upper IPO price band, the company is looking for a market cap of Rs. 75.48 cr.  

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a consolidated basis) posted a total income/net profit of Rs. 13.49 cr. / Rs. 0.72 cr. (FY21), Rs. 13.88 cr. / Rs. 0.80 cr. (FY22), and Rs. 18.76 cr. / Rs. 2.62 cr. (FY23). For H1 of FY24 ended on September 30, 2023, it earns a net profit of Rs. 0.90 cr. on a total income of Rs. 7.32 cr. Thus its top lines posted growth for the reported periods, but bottom line marked sudden growth in FY23 indicating some window dressing. The bottom lines include profits from associates, thus the company has not shown the data on the post-tax basis net profits. (Refer page 48).

For the last three fiscals, it has reported an average EPS of Rs. 2.62, and an average RONW of 15.01%. The issue is priced at a P/BV of 6.23 based on its NAV of Rs. 13.65 as of September 30, 2023, and at a P/BV of 2.27 based on its post-IPO NAV of Rs. 37.50 per share.

If we attribute annualized FY24 earnings to its post-IPO fully diluted paid-p capital, then the asking price is at a P/E of 42.08. 

For the reported periods, the company has posted PAT margins of 5.37% (FY21), 5.80% (FY22), 14.29% (FY23), 12.33% (H1-FY24.  

DIVIDEND POLICY:
The company has not declared any dividends in the last five fiscals. It will adopt a prudent dividend policy based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Samor Reality, and Laxmi Goldorna as their listed peers. They are trading at a P/E of NA, and NA (as of February 29, 2024). However, they are not comparable on an apple-to-apple basis. Both these peers are trading at a negative P/E and their compare is totally misguiding. 

MERCHANT BANKER'S TRACK RECORD:
This is the 31st mandate from Beeline Capital in the last two fiscals, out of the last 10 listings, all opened at premiums ranging from 2.67% to 200.00% on the date of listing. However, the offer document is missing its year-wise tally info.