Visaman Global NSE SME IPO review (Avoid)

•    The company is trading with third party supply chain for pipes, coils, sheets of various metals and sizes.
•    Its business depends on third party support, which carries high risk.
•    Its financial data shows high volume with low margins.
•    It posted average earnings for the reported periods.
•    Based on FY24 annualized earnings, the issue appears aggressively priced.
•    There is no harm in skipping this high risk pricey issue. 

ABOUT COMPANY:
Visaman Global Sales Ltd. (VGSL) is engaged in the business of supply of round pipes, square pipes, rectangle pipes, various specification of structural steels, BGL coils, GP(GI) coils, HR coils, CR coils, colour coated coils, MS sheets, GP and GC sheets, CR sheets, HR sheets and plates, colour coated sheets, roofing PUF panel, wall PUF panel etc. Further, the company also provides the credit facility to existing customers as value added service. It provides facility to pay later to the existing customers with good financial record in this case if the customers had paid all the outstanding amount in a proper time frame, then we fix their credit worthiness via fix amount of credit limit and the credit days which varies with customers to customers.

In addition, it provides the facility of customization to meet the specific requirement of customers w.r.t specific size, length, breadth, thickness etc. of its products. VGSL sends the requisition to manufacturer for customization of specified products. Further, in certain cases, if the manufacturer is unable to do the specified customization, then, the same will be get done by the third-party process houses. The Company outsources the process of modification and alteration to the third party. It outsources the process of modification and alteration to the third party. Additionally, the company facilitates onsite delivery of products to the customers. It is one of the dealers of APL Apollo Tubes Limited. As of March 15, 2024, it had 41 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden IPO of 3732000 equity shares of Rs. 10 each at a fixed price of Rs. 43 per share to mobilize Rs. 16.05 cr. The issue opens for subscription on June 24, 2024, and will close on June 26, 2024. The minimum application to be made is for 3000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 27.02% of the post-IPO paid-up capital of the company. The company is spending Rs. 1.61 cr. for this IPO process, and from the net proceeds, it will utilize Rs. 7.22 cr. for capex on new manufacturing facility, Rs. 7.00 cr. for working capital, and Rs. 0.22 cr. for general corporate purposes. 

The issue is solely lead managed by Shreni Shares Ltd., and Link Intime India Pvt. Ltd. is the registrar to the issue. Shreni Shares Ltd. is also 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.11.09 in January 2021. It has also issued bonus shares in the ratio of 11 for 25 in March 2024. The average cost of acquisition of shares by the promoters is Rs. 7.29, and Rs. 7.46 per share. 

Post-IPO, company's current paid-up equity capital of Rs. 10.08 cr. will stand enhanced to Rs. 13.81 cr. Based on the upper IPO price band, the company is looking for a market cap of Rs. 59.39cr.  

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 136.36 cr. / Rs. 0.34 cr. (FY21), Rs. 324.07 cr. / Rs. 0.95 cr. (FY22), and Rs. 376.05 cr. / Rs. 1.13 cr. (FY23). For 9M of FY24 ended on December 31, 2023, it earned a net profit of Rs. 1.02 cr. on a total income of Rs. 206.91 cr. 

For the last three fiscals, it has reported an average EPS of Rs. 1.03, and an average RoNW of 11.46%. The issue is priced at a P/BV of 3.96 based on its NAV of Rs. 10.87 as of December 31, 2023, and at a P/BV of 2.34 based on its post-IPO NAV of Rs. 18.38 per share.

If we attribute annualized FY24 earnings to its post-IPO fully diluted paid-up capital, then the asking price is at a P/E of 43.87. Thus the issue appears aggressively priced. 

For the reported periods, the company has posted PAT margins of 0.25% (FY21), 0.29% (FY22), 0.30% (FY23), 0.49% (9M-FY24), and RoCE margins of 11.62%, 13.24%, 11.43%, 8.02% respectively for the referred periods. 

DIVIDEND POLICY:
The company has not declared any dividends since incorporation. 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 Shree Marutinandan Tubes, Swastik Pipe, and Hi-Tech Pipes, as their listed peers. They are trading at a P/E of 35.1, 32.3 and 47.4 (as of June 20, 2024). However, they are not comparable on an apple-to-apple basis.

MERCHANT BANKER'S TRACK RECORD:
This is the 29th mandate from Shreni Shares in the last three fiscals (including the ongoing one), out of the last 10 listings, 1 opened at par and the rest with premiums ranging from 11.11% to 141.94% on the date of listing.