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Review By Dilip Davda on September 23, 2022
• CCSL is engaged in the manufacturing and supply of Railway coach-related products.
• It has developed new products for improved performance of railways.
• Dependency on Government contracts is a major concern.
• Based on FY22 earnings, the issue appears fully priced.
• Cash surplus investors may consider an investment with a medium to long-term perspective.
ABOUT COMPANY:
Concord Control Systems Ltd. (CCSL) is engaged in the business of manufacturing and supply of coach-related and electrification products for Indian Railways and other Railway Contractors. It manufactures products required in railway coaches like Inter-Vehicular Coupler, Emergency Lighting System, Brushless DC carriage fan, Exhaust fans, Cable Jackets, Bellows, etc. and products required in the electrification of coaches and broad gauge network of Indian Railways like Battery Charger 200 AH, Battery Charger 40 AH, Tensile Testing Machine.
CCSL is an approved vendor by Research Design and Standards Organization ("RDSO") to manufacture and supply these products for the Indian Railways. The company started its operations in the year 2011 when it got approval to manufacture and supply battery chargers for traction systems of railway electrification. It further expanded its business in manufacturing products fitted in coaches of Indian Railways in the year 2013 and got approved for the Emergency Light Unit which is one of the most critical items of rolling stock application in coaches of Indian Railways for passenger safety. Emergency Light Unit switches on automatically in case of power failure or in case of accidents. Thereafter in the year 2014, it successfully received RDSO approval for manufacturing and supply of Tensile Load Testing machines for Porcelain & Composite Insulators before the installation of electrical lines. Eventually, it got approval to Supply Brushless Dc Carriage Fans to Indian railways when it changed its technology of fans from normal DC to Brushless DC.
Over the years the company has successfully developed and is supplying a wide range of products. Currently, it has two manufacturing units situated at Lucknow, Uttar Pradesh with a total size admeasuring over 1880 sq. mtrs. The Company has a research and development team dedicated to developing new products or improving existing products. Its R&D capabilities include product engineering, product simulation, prototyping, and testing which are mainly undertaken at manufacturing facilities. As of July 31, 2022, it had 73 employees on its payroll.
ISSUE DETAILS/CAPITAL HISTORY:
To part finance its needs for working capital (Rs. 7.00 cr.), and general corporate purposes, CCSL is coming out with a maiden IPO of 1512000 equity shares of Rs. 10 each via book building route with a price band of Rs. 53 to Rs. 55 per share to mobilize Rs. 8.32 cr. (at the upper price band). The issue opens for subscription on September 27, 2022, and will close on September 29, 2022. The minimum application is to be made for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 26.47% of the post-IPO paid-up equity capital of the company. The company has allocated the net issue (post-market maker portion) as 50% for QIBs, 15% for HNI, and 35% for retail investors.
The issue is solely lead managed by Hem Securities Ltd., and Bigshare Services Pvt. Ltd. is the registrar to the issue. Hem Securities Ltd. is also the market maker for the company.
Having issued initial equity shares at par, the company issued further equity shares at a fixed price of Rs. 75 per share in March 2018. It has also issued bonus shares in the ratio of 20 for 1 in June 2022. The average cost of acquisition of shares by the promoters is Rs. 2.02 per share.
Post this IPO, CCSL's paid-up equity capital of Rs. 4.20 cr. will stand enhanced to Rs. 5.71 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 31.42 cr. (at the upper cap).
FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, CCSL has (on a consolidated basis) reported a turnover/net profit of Rs. 15.89 cr. / Rs. 1.05 cr. (FY20), Rs. 17.61 cr. / Rs. 1.43 cr. (FY21), and Rs. 31.74 cr. / Rs. 2.59 cr. (FY22). Thus it has marked slow and steady progress in its performance.
For the last three fiscals, CCSL has posted an average EPS of Rs. 4.63 and an average RoNW of 31.78%. The issue is priced at a P/BV of 3.06 based on its NAV of Rs. 17.95 as of March 31, 2022, and at a P/BV of 1.98 based on its post-IPO NAV of Rs. 27.76 per share (at the upper cap).
If we attribute FY22 earnings on post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 12.14. Thus the issue is appearing fully priced.
COMPARISON WITH LISTED PEERS:
As per the offer documents, CCSL has no listed peers to compare with.
DIVIDEND POLICY:
The company has not declared/paid any dividend for the reported periods of the offer document. It will adopt a prudent dividend policy post IPO, based on its financial performance and future prospects.
MERCHANT BANKER'S TRACK RECORD:
This is the 13th mandate from Hem Securities in the last three fiscals (including the ongoing one). Out of the last 10 listings, 1 opened at discount and the rest with premiums ranging from 1.47% to 104.87% on the day of listing.
Review By Dilip Davda on September 23, 2022
DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. My reviews do not cover GMP market and operators game plans. Readers must consult a qualified financial advisor before making any actual investment decisions, based the on information published here. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the recent past, SME IPOs drew the attention of investors across the board and lead to seer madness. However, as SME issues have entry barriers and continued low preference from the broking community, any reader taking decisions based on any information published here does so entirely at their own risk. The above information is based on information available as of date coupled with market perceptions. The Author has no plans to invest in this offer.
About Dilip Davda
Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.
Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.
(Dilip Davda -SEBI registered Research Analyst-Mumbai,
Registration no. INH000003127 (Perpetual)
Email id: dilip_davda@rediffmail.com ).
The initial public offer (IPO) of Concord Control Systems Limited offers an early investment opportunity in Concord Control Systems Limited. A stock market investor can buy Concord Control Systems IPO shares by applying in IPO before Concord Control Systems Limited shares get listed at the stock exchanges. An investor could invest in Concord Control Systems IPO for short term listing gain or a long term.
Read the Concord Control Systems IPO recommendations by the leading analyst and leading stock brokers.
Concord Control Systems IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Concord Control Systems IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.
Our recommendation for Concord Control Systems IPO is to subscribe for long term.
As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the Concord Control Systems IPO.
The Concord Control Systems IPO allotment status will be available on or around October 4, 2022. The allotted shares will be credited in demat account by October 7, 2022. Visit Concord Control Systems IPO allotment status to check.
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