Bodhi Tree NSE SME IPO review (Avoid)

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Review By Dilip Davda on October 6, 2020

•    BTML is engaged in entertainment content providing business.
•    Till August 31, 2020, it has a negative net worth.
•    Last seventeen month's super earnings raise concern.
•    Huge outstanding for receivables and payables are major alerts.
•    The issue is priced aggressively compared to its financial performance.

ABOUT COMPANY:
Bodhi Tree Multimedia Ltd. (BTML) is created with the main objects of -' to carry on in India and abroad the business of making of Small or Big Films either for General Public Viewing or Television, TV Serials for any TV Channels in India or abroad either alone or in collaboration with others, Creation, Manufacturing, Consultants etc. of different type of Contents like Text, Audio, Video Content used in all types of communication carriers, develop, create, conceptualize, advise any commercial dissemination of Content/information (Content Films and/or Serials etc.) by various types of modes available now and in future based on Telephone, T.V., Cable, Mobile network and any other types of media available in India or abroad either for itself or for any other client'.

BTML is working on a B2B model and provides the content to entertainment channels, websites, digital media in Hindi and other multiple regional languages. Since its inception, it has produces 30+ shows with 1000+ hours' content. BTML's production list includes serials like' Nisha aur Uska Cousin', 'Yeh Hai Ashiqui', 'Tedhi Medhi Family'. 'Aapke Aa Janese', 'Fear Files', 'Marzi', 'Raikar Case', 'Nati Pinki ki Lambi Love Story' etc.

ISSUE DETAILS/CAPITAL HISTORY:
To meet its plans for working capital (Rs. 2.50 cr.) and general corpus fund (Rs. 0.50 cr.), BTML is coming out with a maiden IPO of 390000 equity shares of Rs.10 each at a fixed price of Rs. 95 per share to mobilize Rs. 3.71 cr. The issue opens for subscription on October 09, 2020, and will close on October 13, 2020. Minimum application is to be made for 1200 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge platform.

Issue constitutes 31.20% of the post issue paid-up capital of the company. The company will be spending Rs. 0.71 cr. for this IPO process. This indicates a fully structured model of this issue proceedings.

The issue is solely lead managed by Shreni Shares Pvt. Ltd. while Bigshare Services Pvt. Ltd. is the registrar to the issue. Shreni Shares Pvt. Ltd. is also acting as a Market Maker for this company. Having issued initial equity at par, it allotted on preferential basis 600000 shares at par in August 2020. The company has issued 250000 rights shares at a price of Rs. 100 per share in March 2020.

The average cost of acquisition of shares by the promoters is Rs. 10.00 and Rs. 36.32 per share. Post issue, BTML's current paid-up equity capital of Rs. 0.86 cr. will stand enhanced to Rs. 1.25 cr. With this IPO, the company is looking for a market cap of Rs. 11.88 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last four fiscals, BTML has posted turnover/net profits / - (Loss) of Rs. 11.31 cr. / Rs. - (2.22) cr. (FY17), Rs. 17.29 cr. / Rs. - (3.34) cr. (FY18), Rs. 38.63 cr. / Rs. 0.36 cr. (FY19) and Rs. 27.47 cr. / Rs. 3.66 cr. (FY20). Super profits of FY20 can be attributed to higher other income, inventories and lower employees costs and sustainability of the same trends going forward is a major concern.

On a consolidated basis, for the first five months of the current fiscal, BTML has reported a net profit of Rs. 0.32 cr. on a turnover of Rs. 4.86 cr. As on August 31, 2020, trade receivables and payables outstanding were Rs. 4.65 cr. and Rs. 5.32 cr. that indicates some window dressing in the accounting data.

For the last three fiscals, BTML has posted an average negative EPS and an average negative RoNW.  The issue is priced at a P/BV of 9.83 based on its NAV of Rs. 9.66 as on August 31, 2020, and at P/BV of 2.61 based on post issue NAV of Rs. 36.39., thus the issue appears highly-priced.

If we annualize FY21 earnings and attribute it on fully diluted post issue equity capital, then asking price is at a P/E of around 15.42, making it aggressively priced issue.

COMPARISION WITH LISTED PEERS:
As per offer documents, BTML has shown VR Films, Balaji Tele and BAG Films as its listed peers. They are currently trading at a P/Es of around 5.43, 13.04 and 00 (as on October 06, 2020). However, they are not strictly comparable on an apple to apple basis.

MERCHANT BANKER'S TRACK RECORDS:
On merchant banker's performance front, this is the 3rd mandate from its stable in the last three fiscals (including the ongoing one). Out of the last two listings, one opened at par while the other at a mere premium of 1.95% on the day of listing. Thus the Lead Manager has average track records.

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