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Review By Dilip Davda on September 14, 2024
• The company is engaged in LED display systems and related products manufacturing and marketing.
• It posted growth in its top and bottom lines from FY22 to FY24.
• The sudden boost in bottom line for FY24 raise eyebrows and concern over its sustainability.
• The company is operating in a highly competitive and fragmented segment.
• Based on FY24 earnings, the issue relatively appears fully priced.
• Well-informed investors may park moderate funds for medium term.
ABOUT COMPANY:
Osel Devices Ltd. (ODL) is driven by a passion for innovation and a commitment to excellence. As a provider of technology solutions, Osel specializes in creating transformative products that empower individuals, businesses, and communities to thrive in a rapidly evolving digital world. The Company manufactures a comprehensive range of LED display systems and the latest hearing aids, including all major components, at its ultra-modern plant.
ODL manufactures comprehensive range of LED display systems. It is equipped with software and hardware capabilities. Its LED display systems are enabled with content management system which allows it to connect to phone or computer and display on screen. Equipped with the latest technology and adhering to rigorous quality control standards, it produces a wide range of high-performance components and systems. This vertical integration ensures consistency and excellence in every product it delivers. The LED display systems manufactured by the company has been used by corporate for commercial usage such as advertising media, billboards, corporate meeting rooms, presentations, display promotions, command control centre and front sign boards.
It also manufactured latest hearing aids commonly known as assisted healthcare devices. Its hearing aids are designed to support individuals with disabilities, elderly person and chronic patients, who are having low hearing level, in performing everyday activities more effectively to enhance quality of life. Company's major customer for hearing aids is Artificial Limbs Manufacturing Corporation of India. It manufactures Digital Programable and Non-Programmable Hearing Aids.
As of March 31, 2024, it had 68 employees on its payroll and additional 20 contract workers in manufacturing facility.
ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 4416000 equity shares of Rs. 10 each to mobilize Rs. 70.66 cr. at the upper cap of the price band. It has announced a price band of Rs. 155 - Rs. 160 per share. The issue opens for subscription on September 16, 2024, and will close on September 19, 2024. The minimum application to be made is for 800 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 27.38% of the post-IPO paid-up capital of the company. From the net proceeds of the issue, the company will utilize Rs. 6.00 cr. for repayment/prepayment of certain borrowings, Rs. 44.00 cr. for working capital, and the rest for general corporate purposes.
The issue is solely lead managed by Horizon Management Pvt. Ltd., and MAS Services Ltd. Is the registrar to the issue. Giriraj Stock Broking Pvt. Ltd. Is 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. 120 per share in June 2024. It has also issued bonus shares in the ratio of 52 for 10 in February 2024. The average cost of acquisition of shares by the promoters is Rs. 1.61 per share.
Post-IPO, company's current paid-up equity capital of Rs. 11.71 cr. will stand enhanced to Rs. 16.13 cr. Based on the upper cap of IPO price band, the company is looking for a market cap of Rs. 258.07 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total revenue/net profit of Rs. 65.56 cr. / Rs. 2.12 cr. (FY22), Rs. 81.96 cr. / Rs. 4.66 cr. (FY23), and Rs. 132.69 cr. / Rs. 13.05 cr. (FY24). Sudden boost in bottom line for FAY24 raise eyebrows and concern over its sustainability.
For the last three fiscals, it has reported an average EPS of Rs. 7.31 and an average RoNW of 43.03%. The issue is priced at a P/BV of 7.29 based on its NAV of Rs. 21.96 as of March 31, 2024, and at a P/BV of 2.69 based on its post-IPO NAV of Rs. 59.52 per share (at the upper cap).
If we attribute FY24 super earnings to its post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 19.78. Based on FY23 earnings, the P/E stands at 55.36. Thus the issue is relatively fully priced discounting all near term positives.
The company reported PAT margins of 3.25% (FY22), 5.69% (FY23), 9.87% (FY24), and RoCE margins of 25.13%, 26.91%, 43.17% for the referred periods, respectively. Surprisingly, RoCE margins data differs on page 97 and page 126 of the offer document.
DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy based on financial performance and future prospects.
COMPARISION WITH LISTED PEERS:
As per the offer document, the company has no listed peers to compare with.
MERCHANT BANKER'S TRACK RECORD:
This is the 8th mandate from Horizon Management in the last two fiscals (including the ongoing one). Out of the last 7 listings, 2 opened at discount, 1 at par and the rest with premiums ranging from 8.47% to 141.23% on the date of listing.
Review By Dilip Davda on September 14, 2024
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 Osel Devices Limited offers an early investment opportunity in Osel Devices Limited. A stock market investor can buy Osel Devices IPO shares by applying in IPO before Osel Devices Limited shares get listed at the stock exchanges. An investor could invest in Osel Devices IPO for short term listing gain or a long term.
Read the Osel Devices IPO recommendations by the leading analyst and leading stock brokers.
Osel Devices IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Osel Devices IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.
Our recommendation for Osel Devices 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 Osel Devices IPO.
The Osel Devices IPO allotment status will be available on or around September 20, 2024. The allotted shares will be credited in demat account by September 23, 2024. Visit Osel Devices IPO allotment status to check.
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