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Review By Dilip Davda on June 20, 2023
• VSL claims to be the only SCF technology player.
• It posted growth in its top lines with boosted profits for 10M-FY23.
• Based on its FY23 super earnings the issue appears greedily priced.
• VSL is asking for fancy premiums based on its financial performance, which discounts all near-term positives.
• Well-informed / risk seekers may consider parking funds; others can stay away.
ABOUT COMPANY:
Veefin Solutions Ltd. (VSL) is a Digital Lending and Supply Chain Finance (SCF) technology product solutions company based in Mumbai. Supply Chain Finance is a financial tool that is used to help businesses manage their cash flow and improve their working capital. It provides product solutions to a wide range of clients globally, including Banks, Non-Banking Financial Institutions, FinTech, Marketplaces, and Corporates. VSL's technology product solutions are unique offerings, which are designed with a user-led approach, data and analytics, and built by experienced bankers for bankers. Supply chain finance (SCF) is a method of lending that can be particularly beneficial for small and medium-sized enterprises (SMEs).
Its SCF products and platforms are highly flexible and can be promptly configured to meet the specific needs of clients, without relying on third-party execution. VSL's cutting-edge technology products offer unmatched flexibility to clients, facilitating quick and efficient configuration and implementation of products. This empowers bankers and financial institutions to offer highly customized solutions to their clients, tailoring loan products both regular and transaction-based on their client's unique requirements.
The company is committed to delivering innovative and best-in-class Digital Lending and Supply Chain Finance technology solutions for clients. It works with financial institutions globally to help them grow their business with VSL's scalable technology solutions. It offers a unique blend of technology, data analytics, and experienced bankers, making VSL the ideal partner for financial institutions looking to stay ahead of the curve. As of April 30, 2023, it had around 161 employees, 145 on payroll and 16 on a contract basis.
ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden combo IPO of 5699200 equity shares of Rs. 10 each at a fixed price of Rs. 82 per share to mobilize Rs. 46.73 cr. The issue consists of 2849600 fresh equity issues and 2849600 shares by Offer for Sale (OFS). The issue opens for subscription on June 22, 2023, and will close on June 26, 2023. The minimum application to be made is for 1600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 26.90% of the post-issue paid-up equity capital of the company. VSL is spending Rs. 0.53 cr. for this IPO process (fresh equity shares issue) and from the net proceeds, it will utilize Rs. 4.80 cr. for global sales and marketing expenses, Rs. 15.50 cr. for the development of new products and upgrading of existing products, and Rs. 2.54 cr. for general corporate purposes. Overall expenses for this IPO will be approx. Rs. 1.06 cr.
Shreni Shares Ltd. (erstwhile known as Shreni Shares Pvt. Ltd.) is the sole lead manager as well as the market maker for the company. Bigshare Services Pvt. Ltd. is the registrar of the issue.
Having issued initial equity shares at par value, the company issued/converted further equity shares in the price range of Rs. 21246.50 - Rs. 116606 between November 2020 and January 2023. It has also issued bonus shares in the ratio of 1170 for 1 in January 2023. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. 0.0085 and Rs. 45.21 per share.
Post-IPO, VSL's current paid-up equity capital of Rs. 18.34 cr. will stand enhanced to Rs. 21.19 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 173.74 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, VSL has (on a standalone basis) posted a total income/net profit of Rs. 0.81 cr. / Rs. 0.14 cr. (FY21), and Rs. 6.19 cr. / Rs. 0.29 cr. (FY22). For 10M of FY23 ended on January 31, 2023, it earned a net profit of Rs. 3.30 cr. on a total income of Rs. 11.76 cr.
On a consolidated basis, for the last two fiscals, VSL has reported a total income/net profit of Rs. 6.55 cr. / Rs. 0.70 cr. (FY22), and Rs. 12.62 cr. / Rs. 3.50 cr. (10M-FY23). Thus on a standalone as well as on a consolidated basis, it posted a jump in its top line but boosted its bottom line for 10M-FY23 raising eyebrows and concern over sustainability.
As the company has just one full year working i.e. for FY22, it has posted an EPS of 0.48 and a RoNW of 7.57% (on a consolidated basis) and Rs. 0.17 and 6.76% (on a standalone basis).
The issue is priced at a P/BV of 3.50 based on its NAV of Rs. 23.41 and at a P/BV of 2.64 based on its post-IPO NAV of Rs. 31.04 (on a consolidated basis).
If we annualize FY23 earnings and attribute it to post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 41.41. While on the basis of FY22 earnings P/E comes to 248.48. Thus the issue appears greedily priced and discounts all near-term positives. However, it's confining to servicing the MSME segment that holds the key.
DIVIDEND POLICY:
The company has not declared any dividends since incorporation. 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 no listed peers to compare with.
MERCHANT BANKER'S TRACK RECORD:
This is the 17th mandate from Shreni Shares in the last three fiscals (including the ongoing one). Out of the last 10 listings, 1 opened at a discount and the rest listed at premiums ranging from 4.29% to 101.18% on the listing date.
Review By Dilip Davda on June 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 Veefin Solutions Limited offers an early investment opportunity in Veefin Solutions Limited. A stock market investor can buy Veefin Solutions IPO shares by applying in IPO before Veefin Solutions Limited shares get listed at the stock exchanges. An investor could invest in Veefin Solutions IPO for short term listing gain or a long term.
Read the Veefin Solutions IPO recommendations by the leading analyst and leading stock brokers.
Veefin Solutions IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Veefin Solutions IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.
Our recommendation for Veefin Solutions 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 Veefin Solutions IPO.
The Veefin Solutions IPO allotment status will be available on or around June 30, 2023. The allotted shares will be credited in demat account by July 4, 2023. Visit Veefin Solutions IPO allotment status to check.
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