Vilin Bio NSE SME IPO review (Avoid)

•    VBML is engaged in the manufacturing and marketing of pharma products.
•    It is not selling its products under any brand names.
•    For the last three fiscals, it marked declining trends for top and bottom lines.
•    Super profits for 9M of FY23 raises eyebrows and concern over its sustainability.
•    The issue is greedily priced considering its financial performance. There is no harm in skipping it.

ABOUT COMPANY:
Vilin Bio Med Ltd. (VBML) is engaged in the domestic business of manufacturing Pharmaceuticals products and the Manufacturing Unit is located in Roorkee, in the State of Uttarakhand. It has also set up R & D facility at the said plant. Its product profile includes solid oral dosage form, oral liquids, external preparations and dry powders.

Its Sales Strategy is to sell products in bulk to Pharmaceuticals Manufacturers, Marketers and Traders, who in turn provide the channel for sales to customers. VBML's products are primarily used by other pharmaceutical companies and traders, who ultimately market them to distributors and retail customers. The company does not sell products under any brand name. As of the date of filing this offer document, it had 61 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden IPO of 4000000 equity shares of Rs. 10 each at a fixed price of Rs. 30 per share to mobilize Rs. 12.00 cr. The issue opens for subscription on June 16, 2023, and will close on June 21, 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 28.67% of the post-IPO paid-up capital of the company. VBML is spending Rs. 1.00 cr. for this IPO process, and from the net proceeds, it will utilize Rs. 8.49 cr. cr. for working capital, Rs. 2.51 cr. for general corporate purposes. 

Inventure Merchant Banker Services Pvt. Ltd. is the sole lead manager and Bigshare Services Pvt. Ltd. is the registrar of the issue. Rikhav Securities Ltd. is the market maker for the company. 

Having issued initial equity shares at par, the company issued further equity shares at a price of Rs. 30.00 per share in February 2023. It also issued bonus shares in the ratio of 3 for 2 in the same month. The average cost of acquisition of shares by the promoters is Rs. 4.00 and Rs. 5.31 per share. 

Post-IPO, VBML's current paid-up capital of Rs. 9.95 cr. will stand enhanced to Rs. 13.95 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 41.85 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, VBML has posted a turnover/net profit of Rs. 16.82 cr. / Rs. 0.16 cr. (FY20Z), Rs. 11.72 cr. / Rs. 0.12 cr. (FY21), and Rs. 11.22 cr. / Rs. 0.03 cr. (FY22). For 9M of FY23, it earned a net profit of Rs. 1.28 cr. on a turnover of Rs. 9.03 cr. The sudden boost in its bottom line for 9M-FY23 is raising eyebrows and concern over sustainability. It appears to be a window dressing to get a fancy valuation for the proposed IPO. 

For the last three fiscals, VBML has reported an average EPS of Rs. 0.10 and an average RoNW of 1.15%. The issue is priced at a P/BV of 2.85 based on its NAV of Rs. 10.52 as of December 31, 2022, and at a P/BV of 1.84 based on its post-IPO NAV of Rs. 16.28 per share. 

If we annualize FY23 super earnings and attribute it to the post-IPO paid-up capital of the company, the asking price is at a P/E of 24.59 and based on FY22 earnings, the P/E stands at 1250. Thus the issue is exorbitantly priced.

DIVIDEND POLICY:
The company has not declared any dividends since incorporation. It will adopt a prudent dividend policy post-listing, based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown JFL Life, Vaishali Pharma, and Anuh Pharma as their listed peers. They are currently trading at a P/E of 16.47, 20.97, and 13.60 (as of June 12, 2023). However, they are not truly comparable on an apple-to-apple basis.  

MERCHANT BANKER'S TRACK RECORD:
This is the 7th mandate from Inventure Merchant in the last three fiscals (including the ongoing one). Out of the last 6 listings, 3 opened at discount and the rest listed at premiums ranging from 0.45% to 57.14% on the listing date.