Wherrelz IT BSE Startup IPO review (Avoid)

•    WISL group is engaged in web-centric, multi-spectrum IT products developments and maintenance.
•    So far the company has posted minuscule performances.
•    Based on its financial parameters, the issue is exorbitantly priced.
•    Very small post-IPO paid-up equity indicates longer gestation for mainboard migration.
•    There is no harm in ignoring this pricy IPO.

ABOUT COMPANY:
Wherrelz IT Solutions Ltd. (WISL) including its subsidiary Company, Infinitybeam IOT Labs Private Limited is engaged in the business of web-centric, multi-spectrum IT Product development and maintenance and provision of IT Consultancy. It provides a wide range of services such as Enterprise Risk Management (ERM), Enterprise Resource Planning (ERP), E-Commerce, Application programming interface (API), Cyber Security, Internet of Things (IoT), cloud-based tools, etc. through standard software development model or through customized software development model depending upon the requirement of the clients which is backed by advanced technology and efficient team of software developers who tend to keep themselves abreast by undergoing continuous R&D activity.

WISL's objective is to develop and maintain all in all software solutions to every enterprise in various sectors such as E-commerce, Education, Fintech, Healthcare, Social Networking, and other industries to enable ease of doing business. customer-centric solutions. The Information Technology industry is a continuously evolving technological industry and the company's endeavours to exploit these technological advances to reach audiences in India and globally to provide growth, efficiency and advancement in the business objectives.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its needs for working capital (Rs. 1.14 cr.) and general corporate purpose (Rs. 0.45 cr.), WISL is coming out with a maiden IPO of 117600 equity shares of Rs. 10 each at a fixed price of Rs. 171 per share to mobilize Rs. 2.01 cr. The issue opens for subscription on December 16, 2021, and will close on December 21, 2021. Minimum application is to be made for 800 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on the BSE SME Startup platform. The issue constitutes 30.18% of the post issue paid-up capital of the company. WISL will spend Rs. 0.42 cr. for this IPO process. The issue expenses indicate that IPO is fully structured with funding arrangements.

The issue is solely lead managed by Fedex Securities Pvt. Ltd., and Bigshare Services Pvt. Ltd. is the registrar to the issue while Gretex Share Broking Pvt. Ltd. is the market maker for this company.  

Having issued initial equity shares at par, the company raised further equity at a fixed price of Rs. 95 per share in May 2021, and has also issued bonus shares in the ratio of 7 for 1 in May 2021. The average cost of acquisition of shares by the promoters is Rs. 1.25 per share. 

Post issue, WISL's current paid-up capital of Rs. 0.27 cr. will rise to Rs. 0.39 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 6.66 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, WISL has (on a consolidated basis) posted turnover/net profits of Rs. 0.20 cr. / Rs. 0.01 cr. (FY19), Rs. 0.22 cr. / Rs. 0.03 cr. (FY20) and Rs. 0.20 cr. / Rs. 0.01 cr. (FY21). For the first three months of FY22 ended on June 30, 2021, it has posted a loss of Rs. - (0.15) cr. on a turnover of Rs. 0.07 cr. Thus Q1 of FY22 has wiped out its previous three years' earnings and is having carried forward losses. 

For the last three fiscals, the company has posted an average EPS of Rs. 2.47 and an average RoNW of 31.64%. The issue is priced at a P/BV of 22.38 based on its NAV of Rs. 7.64 as of June 30, 2021, and at a P/BV of 3.09 based on its post-issue NAV of Rs. 55.29. 

Based on FY21 earnings, the issue is priced at a P/E of 462.16 and due to negative earnings for Q1 FY22, its P/E cannot be ascertained.  Thus the issue is priced exorbitantly. 

COMPARISON WITH LISTED PEERS:
As per offer documents, WISL has shown Tera Soft., Megri Soft, Alphalogic Techsys as its listed peers. They are currently trading at a P/E of 366.79, 123.02 and 103.79 (as of December 14, 2021). However, they are not truly comparable on an apple-to-apple basis. 

DIVIDEND POLICY:
The company has not declared any dividend since its inception. It will adopt a prudent dividend policy based on its financial performance and future prospects. 

MERCHANT BANKER'S TRACK RECORDS:
This is the 15th mandate from Fedex Securities in the last four fiscals (including the ongoing one). Out of the last 10 listings, 1 opened at discount 1 at par and the rest with a premium ranging from 0.08% to 16.67% on the day of listing. Thus the Lead Manager has an average track record.