Vrundavan Plantation BSE SME IPO review (May apply)

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Review By Dilip Davda on October 27, 2023

•    VPL is engaged in "clean and green environment" movement of central govt. 
•    It is providing services for Landscaping, gardening, and related services. 
•    It turned a public limited company only by April 23 end emerged as organized player.
•    Based on annualized FY24 earnings, the issue appears aggressively priced. 
•    The issue may catch first mover fancy post listing. 
•    Well-informed investors may park funds for the medium to long-term rewards. 

ABOUT COMPANY:
Vrundavan Plantation Ltd. (VPL) - the company that was operating as a proprietorship concern and engaged in nursery and plantation for sale of plants, preserve and protect the environment in the arena of deforestation and shrinking green spaces era. It also ventured in to landscaping, and gardening. With the rising demand for greenery and cleanliness, it started getting long term contracts for its services in the development of "Clean and Green environment" and to manage its growing business, it transformed itself in a public limited company as an organized player. 

The customers list of the company included Reliance group, JSW foundation, Iscon, L & T Group, Adani Township, state government projects like Sabarmati river front and landscaping with nursery plants at Statue of Unity, etc. In its ongoing projects, Department of Space - ISRO, Reliance Industries etc. and has also started taking AMC (annual maintenance contracts) for its related services. It also undertakes construction works related to such developments. As of June 30, 2023, it had 208 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden IPO of 1416000 equity shares of Rs. 10 each at a fixed price of Rs. 108 per share to mobilize Rs. 15.29 cr. The issue opens for subscription on October 30, 2023, and will close on November 01, 2023. The minimum application to be made is for 1200 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 26.55% of the post-IPO paid-up capital of the company. VPL is spending Rs. 0.41 cr. for this IPO process and from the net proceeds, it will utilize Rs. 1.70 cr. for repayment of unsecured loans, Rs. 9.50 cr. for working capital, and Rs. 3.68 cr. for general corporate purposes. 

Having issued initial equity shares at par, the company issued/converted further equity shares at a price of Rs. 125 per share in April 2023, and May 2023. It has also issued bonus shares in the ratio of 11 for 1 in May 2023. The average cost of acquisition of shares by the promoters is Rs. 10.24 per share. 

(The offer document has wrong figure of pre-bonus equity data on page no. 43, and different average cost of promoter's acquisition data (page 17 and page 59) of the offer document).

The issue is solely lead managed by Interactive Financial Services Ltd., KFin Technologies Ltd. is the registrar of the issue and NNM Securities Pvt. Ltd. is the market maker for the company. Neomile Corporate Advisory Ltd. is the advisors to the company.  (THESE DATA AS PER ITS FINAL PROSPECTUS. BUT SURPRISINGLY THE COMPANY GAVE AD ON OCTOB ER 28, 2023, ABOUT CHANGE IN MARKET MAKER. AS PER THIS AD THE MARKET MAKER IS NIKUNJ STOCK BROKERS LTD. FOR THE COMPANY).

Post-IPO, company's current paid-up equity capital of Rs. 3.92 cr. (3916728 shares) will stand enhanced to Rs. 5.33 cr. (5332728 shares). Based on the IPO pricing, the company is looking for a market cap of Rs. 57.59 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, as a proprietorship firm, it has posted a total revenue of Rs. 6.72 cr. / Rs. 0.29 cr. (FY21), Rs. 12.23 cr. / Rs. 0.35 cr. (FY22), and Rs. 18.28 cr. / Rs. 1.99 cr. (FY23). For 1M of FY24 ended on April 30, 2023, it earned a net profit of Rs. 0.14 cr. on a total revenue of Rs. 1.79 cr. Post conversion in a public limited company, for the one-month period ended on May 31, 2023, it has reported a net profit of Rs. 0.17 cr. on a total revenue of Rs. 1.81 cr. 

For the 1M-FY24 period ended on May 31, 2023, it has reported an EPS of 0.52 and RoNW of 4.19%. The issue is priced at a P/BV of 10.22 based on its NAV of Rs. 10.57 as of May 31, 2023, and at a P/BV of 2.96 based on its NAV of Rs. 36.44 per share post IPO. 

If we annualize FY24 earnings and attribute it to post-IPO fully diluted paid-p equity capital of the company, then the asking price is at a P/E of 27.69. Thus the issue is aggressively priced, but it may catch first mover fancy post listing. 

As a proprietorship concern, it reported PAT margins of 4.31% (FY21), 2.84% (FY22), and 10.45% (FY23). While as a limited company, it has posted PAT margin of 9.59% and RoCE margin of 6.71% for 1M of FY24. 

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 no listed peers to compare with. 

MERCHANT BANKER'S TRACK RECORD:
On the merchant banker's track record front, there is some mismatch in the offer documents (page 157-158 of the offer document. However as per the data given on our website, this is the 13th mandate from Interactive Financial in the last three fiscals. Out of the last 10 listings, 2 opened at discount, 2 at par and the rest with premiums ranging from 1.46% to 20.74% on the day of listing. 

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