Viviana Power NSE SME IPO review (Apply)

• VPTL is engaged in the business of power transmission/distribution and industrial EPC projects.
• Except for FY21, it has posted steady growth and has good orders on hand.
• Due to the pandemic, the company marked a minor setback for FY21.
• Based on its performance, the issue appears reasonably priced.
• Considering bright prospects for the segment, investment with a medium to long-term perspective may be considered.

ABOUT COMPANY:

Viviana Power Tech Ltd. (VPTL) is engaged in the business of Power transmission, Distribution, and Industrial EPC space projects (Engineering, Procurement, and construction). It provides a wide range of services such as Power Transmission, EHV substation, Testing and Commissioning of sub-station and Transmission, Power Distribution Network Establishment, Underground Cable laying, Upgradation, and modification of existing power systems. The company also undertakes turnkey jobs for Supply, Civil, Erection, Testing & Commissioning of all types of Electrical systems.

VPTL deals with state government power utilities, private power entities, and Renewable energy developers. Preferentially, the company opts for EPC projects. Company bags project work from government utilities through an open bidding process and from private power entities and renewable energy developers by way of open bidding or preferential basis in accordance with the company's merit and performance.

The company has set the business module to suit operational needs. Business operations mainly comprise two main tasks: Supply and service. For performing these tasks, various sequential activities are performed. It has to deploy quality manpower and developed resources.

As of March 31, 2022, it had 32 employees on its payroll. According to management, the company has current work in progress for 18 ongoing projects worth Rs. 46.65 cr. for FY23 and it has submitted bids for contracts worth Rs. 58.13 cr. The management is confident of getting sizable orders based on its track records.

ISSUE DETAILS/CAPITAL HISTORY:

To part finance its need for working capital (Rs. 7.00 cr.), general corporate purposes (Rs. 1.15 cr.), VPTL is coming out with a maiden IPO of 1600000 equity shares of Rs. 10 each at a fixed price of Rs. 55 per share to mobilize Rs. 8.80 cr. The issue opens for subscription on September 05, 2022, and will close on September 08, 2022. Minimum application is to be made for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.80% of the post-issue paid-up capital of the company. VPTL is spending Rs. 0.65 cr. for this IPO process.

The issue is solely lead managed by Beeline Capital Advisors Pvt. Ltd. and Skyline Financial Services Pvt. Ltd. is the registrar to the issue. Sunflower Broking Pvt. Ltd. is the market maker for this company.

The company has issued entire equity shares at par so far. It has also issued bonus shares in the ratio of 18 for 1 in April 2022. The average cost of acquisition of shares by the promoters is Rs. 0.53 per share.

Post this issue, VPTL's current paid-up equity capital of Rs. 4.37 cr. will stand enhanced to Rs. 5.97 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 32.84 cr.

FINANCIAL PERFORMANCE:

On the financial performance front, for the last three fiscals, VPTL has posted turnover/net profits of Rs. 20.10 cr. / Rs. 1.21 cr. (FY20), Rs. 22.62 cr. / Rs. 0.99 cr. (FY21) and Rs. 33.00 cr. / Rs. 2.90 cr. (FY22). It marked a minor setback in its financial performance for FY21 following the pandemic.

For the last three fiscals, VPTL has reported an average EPS of Rs. 4.54 and an average RoNW of 37.15%. The issue is priced at a P/BV of 3.56 based on its NAV of Rs. 15.43 as of March 31, 2022, and at a P/BV of 2.20 based on its post-IPO NAV of Rs. 24.95 per share.

If we attribute FY22 earnings to the post IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 11.29. This issue appears reasonably priced.

COMPARISON WITH LISTED PEERS:

As per the offer documents, the company has shown KEC International and Kalpataru Power as its listed peers. They are currently trading at a P/E of 20.38 and 16.60 (as of August 30, 2022). However, they are not truly comparable on an apple-to-apple basis.

DIVIDEND POLICY:

The company has not declared/paid any dividend in the last five years. It will adopt a prudent dividend policy post listing, based on its financial performance and future prospects.

MERCHANT BANKER'S TRACK RECORD:

This is the second mandate from this new entity of the Beeline group company within a week. Hence it has no track record for past mandates performance post listing.