MOS Utility NSE SME IPO review (May apply)

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Review By Dilip Davda on March 27, 2023

•    MUL is in the business of providing technology-based digital products and services.
•    It operates on a B2C and B2B model across the service-related industry.
•    It has reported fluctuations in its top and bottom lines for the reported periods. 
•    Based on recent earnings, the issue is fully priced discounting near-term positives. 
•    Well-informed/risk seeker, cash surplus investors may consider parking of funds. 

ABOUT COMPANY:
MOS Utility Ltd. (MUL) is a technology-enabled provider of digital products and services in the B2C, B2B and financial technology arena through an integrated business model via its online portal i.e. www.biz-solutionz.com. It provides business opportunities for shopkeepers, retailers, students, housewives, professionals, and insurance agents to start their own futuristic online e-commerce business with the intention to promote the government's "Vocal for Local" campaign. 

MUL organizes its business under seven primary business segments, (i) banking, (ii) travel, (iii) insurance, (iv) utility services, (v) entertainment services, (vi) franchisee and (vii) other services. It focuses on the convergence of financial exchange channels, and processes and is a comprehensive platform, where it aims to serve customers' needs, bringing together the advantages of B2B, B2C and B2B2C models within a single platform. 

MUL's diversified exchange platform allows it to harness synergies and provides cross-selling and upselling opportunities to both consumers and businesses. It has a "phygital" strategy (i.e. physical and digital) that combines over 1,68,018 network partners which include agents, distributors and master distributors for payment solutions, remittance, utility, travel and insurance products, etc. throughout PAN India as of September 30, 2022, with a digital online platform for its offerings. This results in a business model which is intended to provide a smooth customer experience regardless of product, service or location. Its network size and diversity, converging front-end distribution channels with back-end technology function provide it with a competitive edge. As of the date of filing this offer document, it had 91 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden IPO of 6574400 equity shares of Rs. 10 each via book-building route with a combo issue of fresh equity shares (5774400 shares worth Rs. 43.89 cr. at the upper cap) and an OFS (800000 shares worth Rs. 6.08 cr. at the upper cap). It has announced a price band of Rs. 72 - Rs.76 per share and at the upper cap, it mulls mobilizing Rs. 49.97 cr. The issue opens for subscription on March 31, 2023, and will close on April 06, 2023. The minimum application to be made is for 1600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.37% of the post-issue paid-up capital of the company. From the net quota (excluding the market maker portion) it has allocated not more than 50% for QIBs, not less than 15% for HNIs and not less than 35% for Retail investors. From the net proceeds of the fresh shares issue, it will utilize Rs. 26.00 cr. for working capital and the rest for general corporate purposes. 

Unistone Capital Pvt. Ltd. is the sole BRLM and Skyline Financial Services Pvt. Ltd. is the registrar of the issue. Rikhav Securities Ltd. is the market maker for the company. 

Having issued initial equity shares at par, the company issued further equity shares at a price of Rs.75 - Rs. 255.40 between March 2020 and March 2023. It has also issued bonus shares in the ratio of 50 for 1 in June 2022. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. 0.20, Rs. 5.00, and Rs. 8.49 per share. 

Post-IPO, MUL's current paid-up equity capital of Rs. 19.16 cr. will stand enhanced to Rs. 24.94 cr. Based on the upper cap of the price band, the company is looking for a market cap of Rs. 189.51 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, MUL has posted a total income/net profit of Rs.91.57 cr. / Rs. 0.58 cr. (FY20), Rs. 67.92 cr. / Rs. 0.85 cr. (FY21), and Rs. 80.96 cr. / Rs. 1.58 cr. (FY22). For H1 of FY23 ended on September 30, 2022, it earned a net profit of Rs. 1.96 cr. on a total income of Rs. 54.35 cr. It suffered a setback for FY21 due to the pandemic in line with the general trends. However, for the reported periods, its RoE and RoCE have posted wild fluctuations. 

For the last three fiscals, MUL has reported an average EPS of Rs. 0.64 and an average RoNW of 15.04%. The issue is priced at a P/BV of 7.15 based on its NAV of Rs. 10.63 as of September 30, 2022. The post-IPO NAV data is missing from the IPO ads. 

If we annualized FY23 earnings and attribute them to post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 48.41 and on the basis of FY22 earnings it stands at 120.63. Thus the issue is fully priced discounting all near-term positives. 

DIVIDEND POLICY:
The company has not declared any dividends since incorporation. It will adopt a prudent dividend policy post-listing, based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Easy Trip Planners as their listed peer. It is quoting at a P/E of 52.97 (as of March 27, 2023). However, they are not truly comparable on an apple-to-apple basis.  

MERCHANT BANKER'S TRACK RECORD:
The BRLM associated with the issue has handled seven public issues in the past three years (including the ongoing one). Out of which one issue closed below the issue price on the listing date.

MOS Utility IPO FAQs