Quadpro ITeS NSE SME IPO review (Avoid)

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

Review By Dilip Davda on September 16, 2021

•    QIL is in the highly competitive and fragmented segment of the service industry.
•    It has posted declining trends in its top line for the last three fiscals.
•    FY21 super performance in the pre-IPO years raises eyebrows.
•    The issue is aggressively priced and may be ignored. 

ABOUT COMPANY:
Quadpro ITeS Ltd. (QIL) is an Airan group company. It is providing Information Technology (IT) and Information Technology (IT) enabled services, cash management services (CMS), Cheque Truncation System (CTS), Doorstep Banking services, Software Development Services, Banking transaction processing services, Document management services for telecommunication companies, Non-Banking Finance companies, internet services providers, Database Management Services, Digital Document verification for payment banks, Supply of IT and ITeS Hardware, Skilled and unskilled manpower supply services etc.

The area-wise network created in each city facilitates the best doorstep banking services. Collection of cheques executed by field staff at customer pick-up points as well as from various bank branches on a daily basis. The cheques are carried in secured lockboxes/lock pouches which are inside a waterproof backpack.

The mode of transportation used is majorly private two-wheeler vehicles and in some distant cases, four-wheelers are used. The vehicles used are not owned by the company, it's owned by the employees or the person providing the services for which company reimburses the expenses for the vehicle used by the employee/person providing the services. The collected cheques are deposited for further processing at processing centres/bank branches /centralized service branches. QIL also provides E2E (End to End) service provider right from Know Your Customer (KYC) spot audit/pickup of forms from the distributor's point, thorough Know Your Client (KYC) audit at nearest spoke office, data entry of application form into the online portal, opening an account, verifying the voter ID / Aadhaar number from their web portal, and activating the SIM of the customer in a limited Turn Around Time (TAT), outward from spoke, transporting forms to the centralized HUB, inward at HUB, Bar Coding, Gumming Photograph, De-stapling, Scanning, Re-stapling, Image Splitting, File Naming, Batch preparing up to final warehousing.

The company is operating in a highly competitive and fragmented segment with many small players in the fray. 

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its plans for capital expenditure (Rs. 3.30 cr.), acquisition and other strategic initiatives (Rs. 6.20 cr.) and general corpus fund (Rs. 3.10 cr.), QIL is coming out with a maiden IPO of 7050000 equity shares of Rs. 2 each with a fixed price of Rs. 20 per share to mobilize Rs. 14.10 cr. Minimum application is to be made for 6000 shares and in multiples thereon, thereafter. IPO comprises 6300000 fresh equity shares (Rs. 12.60 cr.) and 750000 shares (Rs. 1.50 cr.) by way of offer for sale (OFS).  The issue opens for subscription on September 20, 2021, and will close on September 22, 2021. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 27.89% of the post issue paid-up capital of the company. 

Perhaps for the first time, we are witnessing that Promoter Selling stakeholders will be spending Rs. 0.40 cr. for this entire IPO process. Resultantly, fresh equity issue amount of Rs. 12.60 cr. is going to the company in full and promoter selling stakeholders will receive net of proceeds i.e. Rs. 1.10 cr. in their hands. 

The issue is solely lead managed by Beeline Broking Ltd. and KFin Technologies Pvt. Ltd. is the registrar to the issue. Beeline Broking Ltd. is also the market maker for this issue. 

Having issued initial equity at par, QIL raised further equity at a price of Rs. 4.80 per share (based on FV of Rs. 2 per share) in July 2021 and has also issued bonus shares in the ratio of 1 for 2 in October 2017 and again in the ratio of 1 for 2 in July 2021. The average cost of acquisition of shares by the promoters is Rs. - (0.72) and Rs. 3.20 per share. 

Post issue, QIL's current paid-up equity capital of Rs. 3.80 cr. will stand enhanced to Rs. 5.06 cr. Based on the issue price, the company is looking for a market cap of Rs. 50.55 CR. 

FINANCIAL PERFORMANCE: 
On the financial front, for the last three fiscals, QIL has posted turnover/net profit-(loss) of Rs. 15.07 cr. / Rs. - (0.66) cr. (FY19), Rs. 12.91 cr. / Rs. 0.21 cr. (FY20) and Rs. 10.35 cr. / Rs. 0.73. (FY21). While it posted declining trends for its top line, surprisingly it has posted growth in its bottom lines. 

For the last three fiscals, the company has posted an average EPS of Rs. 0.21 and an average RoNW of 10.29%. The issue is priced at a P/BV of 13.25 based on its NAV of Rs. 1.51 and at a P/BV of 1.80 based on its post-issue NAV of Rs. 11.13.

If we attribute FY21 super earnings on the post issue fully diluted paid-up capital, then the asking price is at a P/E of 68.96 making it an aggressively priced offer. 

DIVIDEND POLICY: 
The company does not have any formal dividend policy and has not paid any dividends so far. It will adopt a prudent dividend policy post listing based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per offer documents, QIL has shown Riddhi Corporate Services and Airan Limited as its listed peers. They are currently trading at a P/E of 58.6 and 42.27 (as of September 16, 2021). However, they are not truly comparable on an apple to apple basis.

MERCHANT BANKER'S TRACK RECORDS:
This is the 10th mandate from Beeline in the last four fiscals (including the ongoing one). Out of the last 9 listings, 2 opened at discount, 1 at par and the rest at the premiums ranging from 1.37% to 10% on the date of listings. 

Quadpro ITES IPO FAQs