P. E. Analytics NSE SME IPO review (May apply)

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Review By Dilip Davda on March 18, 2022

•    PEAL is in the business of providing intelligence and analytics platform for the realty sector.
•    Currently it is operating on the B2B model and plans the B2C model in the near term.
•    It has posted erratic financial performances so far with super earnings from FY21 onwards.
•    Based on super earnings, the issue appears fully priced. 

ABOUT COMPANY: 
P E Analytics Ltd. (PEAL) is engaged in providing proprietary real estate business intelligence and analytics platform on B2B business model to various users such as Developers, construction industry, investors, banks, housing finance companies, equity research firms, real estate PE funds, REIT's, financial institutions, Mortgage Insurers, HNIs, Lenders and Investors in real estate etc. 

PEAL provides authenticate real estate data, analytics and market research reports in various formats and are priced on an annual subscription basis and also on ad-hoc reports requirement of users. So far the company has covered 42000 developers for over 136000 projects in India and over 9700000 units. As of January 31, 2022, it had 212 employees on its payroll. 

The Data Analytics industry is characterized by fragmented and highly competitive market participants. PEAL competes with other market players as well. As claimed by the management, the company is able to differentiate from local, domestic players, through its broad market reach and ability to service large enterprises, customers across multiple geographies.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its needs for technology up-gradation (Rs. 2.16 cr.), Retail initiative i.e. B2C expansion plan (Rs. 9.26 cr.) and general corporate purpose, PEAL is coming out with a maiden IPO via book building process. It is issuing 2772000 equity shares of Rs. 10 each in the price range of Rs. 111 - Rs. 114 and mulls mobilizing Rs. 31.60 cr. at the upper cap. The minimum application to be made is for 1200 shares and in multiples thereon, thereafter. It's a combo offer for 1452000 fresh equity shares and 1320000 shares by offer for sale (OFS). The issue opens for subscription on March 22, 2022, and will close on March 25, 2022. Post allotment, shares will be listed on the NSE SME Emerge platform. The issue constitutes 26.45% of the post issue paid-up capital of the company. Its B2C expansion includes a salary cost of Rs.7.14 cr. Thus it is asking for public money to pay salaries for its expansion plans. 

The company has allocated net offer (excluding market maker) as 50% for QIBs, 15% for HNIs and 35% for Retail investors. 

The issue is solely lead managed by Sarthi Capital Advisors Pvt. Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue. Rikhav Securities Ltd. is acting as a market maker for this company. 

Having issued initial equity at par, PEAL issued further equity in the price range of Rs. 114 to Rs. 6634.12 per share between January 2009, and February 2022. It has also issued bonus shares in the ratio of 270 for 1 in the month of February 2022. The average cost of acquisition of shares by the promoters is Rs. 15.31 per share. 

Post-IPO, PEAL's current paid-up equity capital of Rs. 9.03 cr. will stand enhanced to Rs. 10.48 cr. At the upper price band of the IPO, the company is looking for a market cap of Rs. 119.50 cr. 

FINANCIAL PERFORMANCE: 
On the financial performance front, for the last three fiscals, PEAL has posted turnover/net profits of Rs. 16.13 cr. / Rs. 3.48 cr. (FY19), Rs.17.24 cr. / Rs. 1.17 cr. (FY20) and Rs. 19.76 cr. / Rs. 6.92 cr. (FY21). For the first six months of FY22 ended on September 30, 2021, it has earned a net profit of Rs. 4.11 cr. on a turnover of Rs. 12.15 cr.  It has shown erratic trends for other expenses for the last three fiscal.  It marked inconsistency in its top and bottom lines for all these periods. Super earnings since FY21 raised eyebrows and concern over sustainability.  

The issue is priced at a P/BV of 0.012 based on its NAV of Rs. 9659.00 as of September 30, 2021, and at a P/BV of 2.32 based on its posit IPO NAV of Rs. 49.12. September 30, 2021, data is on pre-bonus and excluding further issued equity from October 2010 till February 2022. In fact, PEAL has emptied its coffer. 

If we annualize FY22 earnings and attribute it to fully diluted post IPO equity, then the asking price is at a P/E of around 14.56. Thus issue appears fully priced on the basis of its super earnings.  

COMPARISON WITH LISTED PEERS:
As per the offer documents, PEAL has shown Latent View Analytics as its listed peer. It is currently trading at a P/E of 128.75 (as of March 17, 2022). However, they are not truly comparable on an apple to apple basis. 

DIVIDEND HISTORY:
So far, the company has not declared any dividend. It will adopt a prudent dividend policy post listing on the basis of its financial performance and future prospects. 

MERCHANT BANKER'S TRACK RECORDS:
This is the 6th mandate from Sarthi Capital in the last three fiscals (including the ongoing one). Out of the last 5 listings, 2 opened at discount, 1 at par the rest with premium ranging from 0.71% to 333.05% on the day of listings.  

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