Vertoz Advertising NSE SME IPO review (Apply)

Vertoz Advertising Ltd. (VAL) is a programmatic advertising Company that offers engaging and innovative advertising and monetization solutions which replaces the traditional methods of media buying and selling of advertisement. VAL’s proprietary technology, advanced capabilities and programmatic platform is a highly scalable software platform that powers and optimizes the marketplace for the real-time trading of digital advertising inventory between advertisers and publishers. Company defines its platforms a “Ingenious Plex - The Complete Advertising and Monetization Suite”. Its Ingenious Plex incorporates proprietary algorithms, sophisticated big-data storage and processing systems, detailed real-time analytics capability and a geographically distributed infrastructure. Its intelligent data-driven low latency system has transformed the complicated process of buying and selling digital advertising into a seamless automated process that optimizes results for both advertisers and publishers. VAL’s advertisers can run advertisement on publisher webpage’s across multiple devices like desktop, mobile and tablets. This helps both advertisers and publishers to achieve their respective goals. VAL’s Ingenious Plex enables the advertisers to get in front of their desired audiences, engage with them and create brand recognition by tapping into a large pool of quality publishers.

To part finance its working capital requirement and general corpus fund needs, VAL is coming out with a maiden IPO of 1584000 equity shares of Rs. 10 each at a fixed price of Rs. 108 per share to mobilize Rs. 17.11 crore. Issue opens for subscription on 14.11.17 and will close on 16.11.17. Minimum application is to be made for 1200 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. Issue is solely lead managed by Guiness Corporate Advisors Pvt. Ltd. and Karvy Computershare Pvt. Ltd. is the registrar to the issue. Issue constitutes 26.47% of the post issue paid up capital of the company. Its entire equity is issued at par. Loan too is converted into equity shares at par in August 2017. It has also issued bonus shares in the ratio of 103 shares for every 1 share held in July 2017. Post issue, its current paid up equity capital of Rs. 4.40 crore will stand enhanced to Rs. 5.98 crore. Average cost of acquisition of shares by promoters ranges from Rs. 5.37 to Rs. 6.84 per share.

On performance front, VAL has posted (on a consolidated basis) turnover/net profits of Rs. 11.96 cr. / Rs. 0.36 cr. (FY16), Rs. 20.48 cr. / Rs. 3.06 cr. (FY17). For Q1 of the current fiscal, it has reported net profit of Rs. 1.01 crore on a turnover of Rs. 9.99 crore. For last two fiscals, VAL has reported an average EPS of Rs. 1081.21 and average RoNW of 71.83% on an equity base of Rs. 0.02 crore. Asking price is at a P/BV of 2.67 on the basis of post issue NAV. If we annualize latest earnings and attribute it on fully diluted equity post issue, then issue is priced at a P/E of around 16. As per offer documents, it has no listed peers to compare with. However, the only main board listed company in advertising sector Pressman Advertising is trading at a P/E of around 21 plus (as on 09.11.17).

On merchant banker’s front, this is the 20th mandate from its stable in past three fiscals. Out of last 10 listings, 3 IPOs opened at discount to offer price,2 at par and balance 5 giving around 3 to 20% premium to offer price on listing day.

Conclusion: Considering track record, issue pricing and the prospects for the advertising sector in digital India, investment may be considered for medium to long term. (Subscribe)