Vivaa Tradecom BSE SME IPO review (Avoid)

•    VTL is in the business of trading textile fabrics and readymade garments.
•    It is operating in a highly competitive and fragmented segment.
•    The company posted a roller-coaster rise in its financial performance.
•    Based on FY23 earnings, the issue is exorbitantly priced. 
•    Just stay away from such pricey and dicey issues.

ABOUT COMPANY:
Vivaa Tradecom Ltd. (VTL) was initially engaged in the trading of Textile Fabrics and Readymade Garments. In year2013, it acquired the ongoing manufacturing business of Readymade Garments under the Slump Sale Agreement from M/s. Parikh Impex Private Limited along with goodwill, brand name and know-how, and the entire assets and liabilities along with their trained laborer.

The Company is engaged in the manufacturing as well as trading of clothes and Garments. The company was selling readymade garments to various reputed clients on a Pan India basis. Lifestyle International Pvt. Ltd., Aditya Birla Fashion and Retail Ltd., Lajja Polyfab Pvt. Ltd., Nandan Denim Limited, Bajaj Impex, Reliance Retailers Limited, etc. were some of its reputed clients. Denim jeans garments and denim clothes were one of its prime traded segments. The company directly purchases readymade garments and cotton and Jeans garments from the market and sells them to customers. From April 2022 its major business is with the Ahmedabad-based buyer and seller.

Its major trading activities are now a day is concentrated within Gujarat. On March 31, 2022, the company sold the Factory under the Business undertaking as a going concern basis, by way of slump sale to Globe Textiles (India) Ltd. at a consideration of Rs.26.43 cr. The Factory was sold under slump sale. Thus it has turned into an Assets Light Model while selling the manufacturing units. As of August 31, 2023, it had just 4 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden IPO of 1566000 equity shares of Rs. 10 each at a fixed price of Rs. 51 per share to mobilize Rs. 7.99 cr. The issue opens for subscription on September 27, 2023, and will close on October 04, 2023. The minimum application to be made is for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 39.77% of the post-IPO paid-up capital of the company. VTL is spending Rs. 1.09 cr. for this IPO process and from the net proceeds, it will utilize Rs. 5.18 cr. for working capital, and Rs. 1.72 cr. for general corporate purposes.

Interactive Financial Services Ltd. is the sole lead manager and Bigshare Services Pvt. Ltd. is the registrar of the issue. Asnani Stock Broker Pvt. Ltd. is the market maker for the company. 

Having issued initial equity shares at par, the company issued further equity shares in the price range of Rs. 100 - Rs. 3766 per share between February 2020 and November 2022. It has also issued bonus shares in the ratio of 50 for 1 in December 2022. The average cost of acquisition of the shares by the promoters is Rs. 42.48 per share. 

Post-IPO, VTL's current paid-up equity capital of Rs. 2.37 cr. will stand enhanced to Rs. 3.94 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 20.08 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. 147.35 cr. / Rs. - (0.07) cr. (FY21), Rs. 247.29 cr. / Rs. 0.44 cr. (FY22), and Rs. 134.03 cr. / Rs. 0.26 cr. (FY23). It has posted a roller-coaster rise for its top and bottom lines for the reported periods. 

For the last three fiscals, VTL has reported an average EPS of Rs. 1.12 and an average RoNW of 2.10%. The issue is priced at a P/BV of 1.00 based on its NAV of Rs. 51.09 as of March 31, 2023, and at a P/BV of 1.00 based on its post-IPO NAV of Rs. 51.06 per share. Thanks to the fancy premium collected for the issue of shares that has helped in showing higher NAV as of March 31, 2023.

If we attribute FY23 earnings to the post-IPO fully diluted paid-p equity capital of the company, then the asking price is at a P/E of 78.46. Thus the issue is exorbitantly priced. 

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 documents, the company has shown Thomas Scott and Bang Overseas as their listed peers. They are trading at a P/E of 17.48 and 00 (as of September 25, 2023). However, they are not comparable on an apple-to-apple basis.  

MERCHANT BANKER'S TRACK RECORD:
This is the 12th mandate from Interactive Financial in the last three fiscals (including the ongoing one). Out of the last 10 listings, 2 opened at discount, 2 opened at par, and the rest with premiums ranging from 0.79% to 20.74% on the day of listing. It has a poor track record so far.