Prizor Viztech NSE SME IPO review (Avoid)

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Review By Dilip Davda on July 10, 2024

 •    The company is in the business of providing securities and surveillance solutions with third party products.
•    It posted growth in its top and bottom lines for the reported periods.
•    The sudden boost in top and bottom lines for FY24 raises eyebrows and concerns.
•    It is operating in a highly competitive and fragmented segment.
•    Based on FY24 super earnings, the issue appears aggressively priced.
•    There is no harm in skipping this pricey offer.

ABOUT COMPANY:
Prizor Viztech Ltd. (PVL) is engaged in the business of providing security and surveillance solutions by offering comprehensive range of CCTV cameras which serves different verticals like retail, government, educational and infrastructure, among others. The Company in the year 2022 expanded its product portfolio by selling different sizes and features of televisions, touch panels and monitors manufactured by third parties under its brand name. It also provides services including video management software which provides surveillance feature to customers in a single monitor and location.

As on the date of this Red Herring Prospectus, it has supplied its products across 17 states and 2 union territories in India i.e., Andhra Pradesh, Assam, Delhi, Goa, Gujarat, Haryana, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Punjab, Rajasthan, Sikkim, Tamil Nadu, Telangana, Uttar Pradesh, West Bengal, as well as the union territories of Andaman and Nicobar Islands and Jammu and Kashmir.

PVL's product portfolio is mainly segregated into two parts, namely: (i) Security and Surveillance Solutions (network cameras & high-definition analog cameras, network video recorders, digital video recorders); and (ii) LED televisions, Monitors & Touch Panels. As of the date of filing this offer document, it had 29 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 2891200 equity shares of Rs. 10 each to mobilize Rs. 25.15 cr. at the upper cap. It has announced a price band of Rs. 82 - Rs. 87 per share. The issue opens for subscription on July 12, 2024, and will close on July 16, 2024. 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 27.04% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, it will utilize Rs. 14.00 cr. for working capital, Rs. 4.19 cr. for capex on setting up of display centre and inventory storage, and the rest for general corporate purposes. 

The issue is solely lead managed by Shreni Shares Ltd., and Bigshare Services Pvt. Ltd. is the registrar to the issue. Rikhav Securities Ltd. is the market maker for the company. 

Having issued initial equity shares at par value, the company issued further equity shares at a price of Rs. 75 per share in May 2024. It has also issued bonus shares in the ratio of 11 for 2 in May 2024. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. 2.01, and Rs. 9.43 per share. 

Post-IPO, company's current paid-up equity capital of Rs. 7.80 cr. will stand enhanced to Rs. 10.69 cr.  Based on the upper IPO price band, the company is looking for a market cap of Rs. 93.01 cr.  

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 8.71 cr. / Rs. 0.04 cr. (FY22), Rs. 13.94 cr. / Rs. 0.21 cr. (FY23), and Rs. 35.70 cr. / Rs. 5.57 cr. (FY24). The sudden boost in its top and bottom line for pre-IPO year, i.e. FY24 raises eyebrows and concern over its sustainability going forward. 

For the last three fiscals, it has reported an average EPS of Rs. 0.64, and an average RoNW of 48.98%. The issue is priced at a P/BV of 9.67 based on its NAV of Rs. 9.00 as of March 31, 2024, and at a P/BV of 2.85 based on its post-IPO NAV of Rs. 30.56 per share (at the upper cap). 

If we attribute FY24 super earnings to its post-IPO fully diluted paid-up capital, then the asking price is at a P/E of 16.70, and based on FY23 earnings, the P/E stands at 435. Thus the issue appears aggressively priced. Pre-IPO year FY24 super earnings helped fancy valuation of the IPO. 

For the reported periods, the company has posted PAT margins of 0.41% (FY22), 1.53% (FY23), 15.63% (FY24), and RoE margins of 4.19%, 21.44%, 143.86% respectively for the referred periods. 

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

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Vintron Info, D-Link, and Dixon Techno, as their listed peers. They are trading at a P/E of 19.1, 24.9 and 202 (as of July 10, 2024). However, they are not comparable on an apple-to-apple basis. This peers compare is nothing but an eyewash.

MERCHANT BANKER'S TRACK RECORD:
This is the 31st mandate from Shreni Shares in the last three fiscals (including the ongoing one), out of the last 10 listings, 1 opened at par and the rest with premiums ranging from 4.88% to 141.94% on the date of listing. 

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