Navoday Enterprices BSE SME IPO review (Avoid)

• IPO Details
• Stock Price
• Docs
  • RHP
  • DRHP
• Reviews
• Subscription
• Calculator
• News
• GMP
• Allotment
• BoA
• Messages

Review By Dilip Davda on June 9, 2021

•    NEL is engaged in diverse activities like marketing/advertising/consultancy etc.
•    It has shown inconsistency in its financial performance.
•    The company is operating in highly competitive segments.
•    Nearly 60% equity dilution is taking place.
•    Issue appears highly-priced based on financial parameters/listed peers.

ABOUT COMPANY:
Navoday Enterprises Ltd. (NEL) is engaged in diverse activities like marketing support and advertising services, management and financial consultancy services and component supply and support services to manufacturers of packaging and allied machines. It is also engaged in event management services.

NEL is in a highly competitive market and competition is based primarily on the quality, design, pricing of such products and services. To remain competitive in the market it strives to improve design capability, reduce procurement and production cost and improve operating efficiencies. With growing competition between the products and services, effective and efficient advertising seems to be the need of the hour and this need has resulted in new and innovative changes in OOH (Out of Home) advertising media. Gradually, electronic LED Billboards, mobile displays, roll-ups, vehicle wraps, skywalks, building wraps, flyover panels and interactive screens are changing the trends in Indian OOH advertising in a massive way. Even in financial services too it is facing cutthroat competition from well-established players.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its need for working capital (Rs. 3.60 cr.) and general corpus fund (Rs. 0.61 cr.), NEL is coming out with a maiden IPO of 2304000 equity shares of Rs. 10 each at a fixed price of Rs. 20 per share to mobilize Rs. 4.61 cr. Minimum application is to be made for 6000 shares and in multiples thereon, thereafter. The issue opens for subscription on June 14, 2021, and will close on June 17, 2021. Post allotment, shares will be listed on BSE SME.  The issue constitutes 59.78% of the post issue paid-up capital of the company. NEL is spending around Rs. 0.40 cr. for this IPO process.

The issue is solely lead managed by Inventure Merchant Banker Services Pvt. Ltd. and Satellite Corporate Services Pvt. Ltd. is the registrar to the issue. NNM Securities Pvt. Ltd. is the market maker for this company.

Having issued initial equity at par, the company has issued bonus shares in the ratio of 30 for 1 in July 2019 and 4 for 1 in February 2020. The average cost of acquisition of shares by the promoters is Rs. 0.06 and Rs. 2.00 per share. After the issue, promoters' holding will come down from 99.9% to just around 40.2%, which raises concern. Post issue, company's current paid-up equity capital of Rs. 1.55 cr. will stand enhanced to Rs. 3.85 cr. At the IPO price, the company is looking for a market cap of Rs. 7.71 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, NEL has posted turnover/net profit of Rs. 23.12 cr. / Rs. 0.56 cr. (FY18), Rs. 16.52 cr. / Rs. 0.35 cr. (FY19) and Rs. 48.27 cr. / Rs. 1.13 cr. (FY20). For the first nine months of FY21 ended on December 31, 2020, it has posted a net profit of Rs. 0.39 cr. on a turnover of Rs. 14.84 cr. Thus there is no consistency in its top as well as the bottom line.


For the last three fiscals, the company has posted an average EPS of Rs. 4.99 and an average RoNW of 32.99%. The issue is priced at a P/BV of 0.95 based on its NAV of Rs.21.07 as of December 31, 2020, and at a P/BV of 0.98 based on its post-issue NAV of Rs. 20.43.

If we annualize FY21 (pandemic period) earnings and attribute it to fully diluted post issue equity, then the asking price is at a P/E of 14.81. Thus the offer appears highly-priced.

COMPARISON WITH LISTED PEERS:
As per the offer documents filed, NEL has shown Pressman Advertising, Hi-Klass Trading and VLS Finance as its listed peers. They are currently trading at a P/E of 10.77, 00 and 2.71 (as of June 08, 2021). However, they are not truly comparable on an apple to apple basis.

MERCHANT BANKER'S PERFORMANCE:
This is the third mandate from Inventure Merchant Banker in the last four fiscals (including the ongoing one). Out of the last two listings, both opened with premiums ranging from 1.89% to 2.70%. Thus it has an average track record.

Navoday Enterprises IPO FAQs