Pelatro NSE SME IPO review (May apply)

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Review By Dilip Davda on September 13, 2024

•    The company has global presence for its comprehensive customer engagement platform.
•    It has 38 telecom network in 30 countries and witnessing rising demand.
•    Based on consolidated numbers, the issue has negative P/E, but based on standalone numbers it is at a 38.46 P/E, that makes it a aggressively priced issue. 
•    It is poised for bright prospects ahead and can be seen as mini Affle in the making. 
•    Well-informed investors may park moderate funds for the medium to long term. 

ABOUT COMPANY:
Pelatro Ltd. (PL) is a global technology business and has developed a comprehensive Customer Engagement Platform, i.e., mViva that empowers customer-centric interactions between enterprises or brands and its end users. Its platform empowers enterprises to understand the behaviour and needs of their customers deeply with a view to enhance their engagement with end users. PL's Customer Engagement Platform mViva collects and processes large amounts of data for each enterprise on a daily basis across almost a billion consumers in 30 countries. 

Its mViva platform helps enterprises undertake marketing operations on their end users through behavioural analysis of their end users. The platform provides end-to-end capability and experience starting with collection of data, analysis, intelligence gathering, audience selection, configuration, execution and reporting. The entire approach of its Customer Engagement Platform is customer-centric in nature, offering distinctive features. In addition to that, mViva is a very user friendly platform that has been built for marketers who may not be tech savvy. It empowers the marketers to innovate and constantly push the envelope on customer engagement. 

mViva's extensive capabilities enable marketers to orchestrate elaborate journeys over the entire life cycle of their end use consumers. The Customer Engagement Platform is capable of weaving micro journeys into long term journeys thereby leveraging the intelligence gleaned on specific consumer behaviour along the way. Its Customer Engagement Platform aims to enhance returns on marketing spend by delivering contextual campaigns, while proactively addressing consumer privacy expectations. While doing so, it also ensures privacy to customers as the Company does not download or save data pertaining to its customers on its data base.

The products of the Company are installed within the firewalls and the computer systems of the customers and therefore handle the data within the computer data base and environment of the customers. The Company uses its own servers to only develop software and does not use it for data storage, therefore any service provided to the customers is done only on the servers of the customers. Further, it does not use third party servers for any activity.

As on May 31, 2024, its Customer Engagement Platform has been implemented or is under implementation in 38 telecom networks spread across 30 countries, including India. Out of these networks, 16 are in Asia, 5 are in Middle East, 15 are in Africa, 1 in the Caribbean and 1 in Europe.

Apart from providing the Customer Engagement Platform, the Company offers a wide range of managed services covering business consulting, business operations and IT operations. These services enable better and more efficient utilization of the Customer Engagement Platform by customers so that their return on investment increases materially while improving the quality of consumer engagement considerably. Its revenue is sourced from (i) licensing of its products to customers, on payment of a one-time fee or a recurring fee; (ii) offering services for managing the platform viz., business consulting, business operations and IT operations; (iii) implementation of the platform; (iv) multiple levels of support (L1, L2 and L3) to ensure smooth operation; and (v) customization of services in the form of change requests to add specific features and capabilities. As of May 31, 2024, it had 296 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 2799000 equity shares of Rs. 10 each to mobilize Rs. 55.98 cr. at the upper cap of the price band. It has announced a price band of Rs. 190 - Rs. 200 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 600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.90% of the post-IPO paid-up capital of the company. From the net proceeds of the issue, the company will utilize Rs. 10.12 cr. for capex funding, Rs. 10.00 cr. for investment in subsidiary, Rs. 15.00 cr. for working capital, and the rest for general corporate purposes. 

The company has reserved 49800 equity shares for its eligible employees, 140400 shares for the market maker and from the rest, it has allocated 1303200 shares for QIBs (including Anchor), 392400 shares for HNIs and 913200 shares for Retail investors. 

The issue is solely lead managed by Cumulative Capital Pvt. Ltd., and Bigshare Services Pvt. Ltd. Is the registrar to the issue. Shree Bahubali Stock Broking Ltd. Is the market maker for the company. 

Having issued initial equity shares at par, the company issued further equity shares in the price range of Rs. 100 - Rs. 132 between March 2024, and April 2024. It has also issued bonus shares in the ratio of 34 for 1 in March 2024. The average cost of acquisition of shares by the promoters is Rs. 2.86, Rs. 3.01, and Rs. 5.38 per share. 

Post-IPO, company's current paid-up equity capital of Rs. 7.61 cr. will stand enhanced to Rs. 10.41 cr. Based on the upper cap of IPO price band, the company is looking for a market cap of Rs. 208.13 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a standalone basis) posted a total revenue/net profit/ - (loss) of Rs. 40.88 cr. / Rs. 3.57 cr. (FY22), Rs. 49.05 cr. / Rs. 4.64 cr. (FY23), and Rs. 59.15 cr. / Rs. 5.42 cr. (FY24).  

On a consolidated basis, it has posted a loss of Rs. 1.96 cr. on a total income of Rs. 55.37 cr. for FY24. According to the management, setback seen in consolidated numbers is on account of just two months' contribution from the subsidiary coupled with some accounting adjustments. The standalone performance for the last three fiscals can be taken as base and the subsidiary will also contribute with the same trends from the current fiscal onwards.

For the last three fiscals, it has reported an average EPS of Rs. 13.25 and an average RoNW of 32.56%, on a standalone basis and posted negative EPS of Rs.  - (5.15), and RoNW of - (15.48) % for FY24 on a consolidated basis. 

The issue is priced at a P/BV of 11.64 based on its NAV of Rs. 17.18 (on a consolidated basis) as of March 31, 2024, but the RHP and IPO price band ad is missing its post-IPO NAV details.

While based on consolidated FY24 performance, the issue price is with a negative P/E, but if we attribute FY24 super standalone earnings to its post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 38.46. Based on FY23 earnings, the P/E stands at 44.84. Thus the issue is priced aggressively. 

The company reported PAT margins of 8.76% (FY22), 9.47% (FY23), 9.21% (FY24) on stand along basis, and - (3.56) % (FY24 on consolidated basis), and RoCE margins of 41.59%, 23.37%, 3.85% for the referred periods, respectively.

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 its financial performance and future prospects.

COMPARISION WITH LISTED PEERS:
As per offer document, the company has no listed peers to compare with. However, Affle is the most closer peers for this company. It can be termed as a mini Affle in the making.

MERCHANT BANKER'S TRACK RECORD:
This is the first mandate from Cumulative Capital and has no track record for past mandates.

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