Happy Square NSE SME IPO review (May apply)

•    The company is engaged in tech-based staffing and consultancy business.
•    It posted growth in its top and bottom lines for the reported periods.
•    The company is operating in a highly competitive and fragmented segment.
•    Boosted bottom lines from FY24 onwards raise eyebrows and concern over its sustainability.
•    Based on its recent financial data, the issue appears fully priced.
•    Well-informed investors may park moderate funds for long term.

ABOUT COMPANY:
Happy Square Outsourcing Services Ltd. (HSOSL) – (White Force) is a technology-based consulting firm, involved in Tech based human resource outsourcing business which focuses on end-to-end solution. 

Driven by the passion for building an integrated staffing company, backed by their experience, have built a strong value system for the Company. Human Resource database is the key asset for industry. As on March 31, 2025, it has 5802 personnel deployed at various locations for clients. It offers a wide array of services such as Recruitment, Payroll, Onboarding and flexible staffing. HSOSL’s comprehensive network, structured processes, professionalism and strong work ethics ensure that it remains at the top on the domestic scale. The company satisfy firms’ staffing, and recruitment needs in India through this specialised rich knowledge.

Its substantial talent pool and deep understanding of the hiring industry has helped it achieve significant strides in the HR market. In FY 2022, the company focused on major expansions across key sectors such as E-commerce & Retail, Logistics, and Government (PSUs). In FY 2023, the Company expanded into government projects, with revenue from PSUs accounting for 19% of the total revenue. Notably, 18% of the said contribution from PSUs, which is stemmed from newly added government projects, highlighting the company’s focus into this sector. In FY 2024 whilst the Company was getting repeat orders from PSUs, the Company expanded into Logistics sector which accounted for 28% of the total revenue of FY 2024. As of March 31, 2025, it had 142 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 3190400 equity shares of Rs. 10 each to mobilize Rs. 24.25 cr. at the upper cap. It has announced a price band of Rs. 72 – Rs. 76 per share. The issue opens for subscription on July 03, 2025, and will close on July 07, 2025. The minimum number of shares to be applied is for 3200 shares and in multiples of 1600 shares, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 27.50% of the post-IPO paid-up capital of the company. From the net proceeds of the fresh equity shares, it will utilize Rs. 19.00 cr. for working capital, and the rest for general corporate purposes. 

The IPO is solely lead managed by Corpwis Advisors Pvt. Ltd., and Purva Sharegistry (India) Pvt. Ltd., is the registrar to the issue. Giriraj Stock Broking Pvt. Ltd. is a market maker. The issue is underwritten to the tune of 15.05% by Corpwis Advisors and 84.95% by Share India Capital. 

Having issued initial equity shares at par value, the company has issued bonus shares in the ratio of 840 for 1 in September 2024. The average cost of acquisition of shares by the promoters is Rs. 0.01 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 8.41 cr. will stand enhanced to Rs. 11.60 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 88.16 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 52.80 cr. / Rs. 1.79 cr. (FY23), Rs. 69.54 cr. / Rs. 4.39 cr. (FY24), Rs. 97.68 cr. / Rs. 5.90 cr. (FY25). 

For the last three fiscals, the company has reported an average EPS of Rs. 5.61 and an average RoNW of 88.50%. The issue is priced at a P/BV of 5.12 based on its NAV of Rs. 14.84 as of March 31, 2025, and at a P/BV of 2.40 based on its post-IPO NAV of Rs. 31.66 per share (at the upper cap). 

If we attribute FY25 super earnings on post-IPO fully diluted equity capital, then the asking price is at a P/E of 14.93. Based on FY24 earnings, the P/E stands at 20.05. The issue relatively appears fully priced.

For the reported periods, the company has posted PAT margins of 3.39% (FY23), 6.34% (FY24), 6.06%, (FY25), and RoCE margins of 56.78%, 66.34%, 57.75%, respectively for the referred periods. 

DIVIDEND POLICY:
The company has not paid any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy, based on its financial performance and future prospects.

COMPARISION WITH LISTED PEERS:
As per the offer document, the company has shown Spectrum Talent as their listed peer. It is trading at a P/E of 38.5 (as of July 01, 2025). However, they are not truly comparable on an apple-to-apple basis. 

MERCHANT BANKER’S TRACK RECORD:
This is the 5th mandate from Corpwis Advisors in the last two fiscals including the ongoing one.  From the last 4 listings, 1 listed at discount, 1 at par and the rest with a premium ranging from 5% to 10.53%, on the listing date. Thus, it has an average track record so far.