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Review By Dilip Davda on May 20, 2023
• VDL is in the business of marketing and distribution of dental products and related materials.
• It depends on third-party contract manufacturing for its business.
• The company sells products online portal "Dentalkart.com".
• It also sells its products via third-party online marketing portals.
• The issue is aggressively priced based on its FY23 super earnings.
• Well-informed/cash surplus risk seekers may park funds for the medium to long term.
ABOUT COMPANY:
Vasa Denticity Ltd. (VDL) is in the business of marketing and distributing a comprehensive portfolio of dental products including consumables, instruments, equipment, and accessories for diagnosing, treating and preventing dental conditions as well as improving the aesthetics of the human smile through its online portal "Dentalkart.com".
The same is operated through the company's website and mobile application "Dentalkart". It operates an online channel housing approximately 300 domestic and international brands with a comprehensive product range of more than 10,000 dental products. In F.Y. 2021-22, the company delivered over 2 lakh orders in all 28 states and 6 Union Territories of India. The Company operates through a centralized distribution hub of 13000 sq. ft. located in Gurugram, India.
It also has a portfolio of more than 30 owned brands, which are manufactured/procured from third parties based on the specifications built by it through its dedicated research and development team. The company's owned brands are available on its online channels, as well as on third-party platforms such as Amazon, GeM and Flipkart. It also provides after-sales service in relation to products. As of December 31, 2022, it had 184 employees on its payroll.
ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden IPO of 4224000 equity shares of Rs. 10 each via book building combo offer to mobilize Rs. 54.07 cr. (at the upper cap of the price band). The issue comprises 3174000 fresh equity shares issue (Rs. 40.63 cr. at the upper cap) and an Offer for Sale (OFS) of 1050000 equity shares (Rs. 13.44 cr. at the upper cap). It has announced a price band of Rs. 121 - Rs. 128 per share. The issue opens for subscription on May 23, 2023, and will close on May 25, 2023. The minimum application to be made is for 1000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.37% of the post-IPO paid-up capital of the company.
Excluding the Market Maker portion (216000 shares), VDL has allocated 50% (2002000 shares) for QIBs, 15% (602000 shares) for HNIs and 35% (1404000 shares) for Retail investors. From the net proceeds of the fresh equity issue, VDL will utilize Rs. 26.00 cr. for working capital, Rs. 3.00 cr. for enhancing the visibility of the brand, and the rest for general corporate purposes.
Hem Securities Ltd. is the sole lead manager and MAS Services Ltd. is the registrar of the issue. Hem Group's Hem Finlease Pvt. 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.2374.62 per share in January and February 2023 and has also issued bonus shares in the ratio of 60 for 1 in March 2023. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. 0.16 per share.
Post-IPO, VDL's current paid-up equity capital of Rs. 12.84 cr. will stand enhanced to Rs. 16.02 cr. At the upper price band of the IPO, the company is looking for a market cap of Rs. 205.01 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, VDL has posted a turnover/net profit of Rs. 30.45 cr. / Rs. 0.09 cr. (FY20), Rs. 40.18 cr. / Rs. 0.33 cr. (FY21), and Rs. 77.14 cr. / Rs. 5.41 cr. (FY22). For 9M of FY23 ended on December 31, 2022, it earned a net profit of Rs. 5.02 cr. on a turnover of Rs. 87.57 cr.
For the last three fiscals, VDL has reported an average EPS of Rs. 2.32 and an average RoNW of 68.98%. The issue is priced at a P/BV of 14.15 based on its NAV of Rs. 9.04 as of December 31, 2022, and at a P/BV of 3.79 based on its post-IPO NAV of Rs. 33.81 per share (at the upper cap).
If we annualize FY23 super earnings and attribute it to post-IPO fully diluted equity capital, then the asking price is at a P/E of 30.62. Thus even with super earnings its IPO is aggressively priced discounting all near-term positives. The sustainability of such margins going forward remains a major concern.
DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy post-listing, based on its financial performance and future prospects.
COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Prevest Denpro as their listed peer. It is currently trading at a P/E of around 32.43 (as of May 19, 2023). However, they are not truly comparable on an apple-to-apple basis.
MERCHANT BANKER'S TRACK RECORD:
This is the 24th mandate from Hem Securities in the last four fiscals (including the ongoing one). Out of the last 10 listings, all got listed at premiums ranging from 1.82% to 166.67% on the listing date.
Review By Dilip Davda on May 20, 2023
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 Vasa Denticity Limited offers an early investment opportunity in Vasa Denticity Limited. A stock market investor can buy Vasa Denticity IPO shares by applying in IPO before Vasa Denticity Limited shares get listed at the stock exchanges. An investor could invest in Vasa Denticity IPO for short term listing gain or a long term.
Read the Vasa Denticity IPO recommendations by the leading analyst and leading stock brokers.
Vasa Denticity IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Vasa Denticity IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.
Our recommendation for Vasa Denticity 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 Vasa Denticity IPO.
The Vasa Denticity IPO allotment status will be available on or around May 30, 2023. The allotted shares will be credited in demat account by June 1, 2023. Visit Vasa Denticity IPO allotment status to check.
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