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Review By Dilip Davda on April 19, 2022
• FCIL is engaged in the online e-commerce services segment.
• It incurred losses from FY19 to FY21 and marked minuscule profits for 9N-FY22.
• Though the issue is at par, it has a high P/E ratio and a negative NAV.
• Carried forward losses are the major concern for a while.
• There is no harm in skipping this at par issue.
ABOUT COMPANY:
Fone4 Communications (India) Ltd. (FCIL) - An Online E-commerce Electronics outfit that commenced its business in the year 2014 headquartered in Cochin, Kerala. Inspired by the growth in the Online E-Commerce segment, particularly for electronics and electricals gadgets, the Company developed a robust Technological Platform www.fone4.in, wherein customers could buy their desired products through online E-Commerce with attractive offers and more particularly during festive and other seasons. FCIL has a wide range of offerings through both online as well as an offline platforms for electronic gadgets and accessories for Smart Phones, Laptops, Smart Television etc. on the likes of Apple, Samsung, Oppo, Vivo, Xiaomi, Nokia, Redmi, Techno, Karbonn, One Plus, Dell, Lenovo, Asus, HP, Acer, Avita, TCL, LG, Sansui etc.
To boost the online E-commerce sales in the State of Kerala, the company gradually started opening up retail stores at strategic locations and presently the company has 25 showrooms spread in: (Calicut (02), Cochin (06), Kollam (02), Kottayam (02), Malappuram (01), Palakkad (07), Thrissur (02), Trivandrum (03)). Whilst the retail stores are located at prominent locations to attract greater footfalls but the overall idea was to effectively deliver the products booked online. The company has emerged as one of the most trusted online platform outfits for the purchase of Electronics gadgets and accessories in the State of Kerala.
It has plans to expand the base to the entire Southern Region by either having its own Retail Stores or through a franchise model. The presence in the Southern Region will make FCIL as well as its E-Commerce model a One-Stop Techno Hub for buying leading brands of electronics gadgets and accessories.
It has tied up with several reputable brands under the sub-dealership arrangement, to showcase their products, both at Retail Outlets as well as on an online E-Commerce portal. The Company plans to expand the base through strategic acquisitions in a similar field and in the logistics arena. It also has plans to strengthen its Technological platform so that more and more innovative tools can be made available to customers at large at the most competitive pricing.
ISSUE DETAILS/CAPITAL HISTORY:
To part finance its needs for working capital (Rs. 6.00 cr.) and general corporate purposes (Rs. 0.30 cr.), FCIL is coming out with a maiden IPO of 6800000 equity shares of R. 10 each at par to mobilize Rs. 6.80 cr. The issue opens for subscription on April 25, 2022, and will close on April 27, 2022. Minimum application is to be made for 10000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. FCIL is spending Rs. 0.50 cr. for this IPO process. The issue constitutes 39.88% of the post issue paid-up capital of the company.
The issue is solely lead managed by Finshore Management Services Ltd. and Cameo Corporate Services Ltd. is the registrar to the issue. Nikunj Stock Brokers Ltd. is the market maker for this company.
The company has issued/converted entire equity at par value so far. The average cost of acquisition of shares by the promoters is Rs. 10 per share. Post-IPO, FCIL's current paid-up equity capital of Rs. 10.25 cr. will stand enhanced to Rs. 17.05 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 17.05 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, FCIL has posted a turnover/net profit (loss) of Rs. 152.43 cr. / Rs. - (1.55) cr. (FY19), Rs. 57.52 cr. / Rs. - (0.98) cr. (FY20) and Rs. 63.80 cr. / Rs. - (0.10) cr. Thus for all these years, it has posted losses with an inconsistent top line. For 9M of FY22 ended on December 31, 2021, it has earned a net profit of Rs. 0.09 cr. on a turnover of Rs. 42.13 cr. Considering carried forward losses, it may take about two years to clear the accumulated losses.
For the last three fiscals, it has posted an average negative EPS of Rs. - (3.63) and a negative RoNW of - (837.23%). The issue is priced at a P/BV of 1.41 based on its NAV of Rs. 7.08 as of December 31, 2021, and at a P/BV of 1.11 based on its post-IPO NAV of Rs. 8.95 per share. Based on FY21 earnings, the issue is at a negative P/E and if we annualize FY22 earnings and attribute it to fully diluted post-IPO paid-up equity capital, then the asking price is at a P/E of 142.86 thus hinting at the highest P/E despite being issued at par.
DIVIDEND POLICY:
The company has not declared any dividend for the reported periods of the offer documents. It will adopt a prudent dividend policy post listing based on its financial performance and future prospects.
COMPARISON WITH LISTED PEERS:
As per offer documents, FCIL has no listed peers to compare with.
MERCHANT BANKER'S TRACK RECORDS:
This is the 15th mandate from Finshore Management in the last four fiscals (including the ongoing one). Out of the last 10 listings, 1 opened at par and the rest with premiums ranging from 3.5% to 65.5% on the day of listings.
Review By Dilip Davda on April 19, 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 Fone4 Communications (India) Limited offers an early investment opportunity in Fone4 Communications (India) Limited. A stock market investor can buy Fone4 Communications IPO shares by applying in IPO before Fone4 Communications (India) Limited shares get listed at the stock exchanges. An investor could invest in Fone4 Communications IPO for short term listing gain or a long term.
Read the Fone4 Communications IPO recommendations by the leading analyst and leading stock brokers.
Fone4 Communications IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Fone4 Communications IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.
Our recommendation for Fone4 Communications IPO is to avoid.
As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the Fone4 Communications IPO.
The Fone4 Communications IPO allotment status will be available on or around May 2, 2022. The allotted shares will be credited in demat account by May 5, 2022. Visit Fone4 Communications IPO allotment status to check.
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