Womencart NSE SME IPO review (May apply)

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Review By Dilip Davda on October 11, 2023

•    WCL is a digital consumer centric retail platform providing range of personal care for men and women.
•    Based on FY24 annualized earnings, the issue appears fully priced. 
•    Its compare with Nykaa is nothing but an eyewash.
•    Well-informed/cash surplus investors may park funds for long-term rewards.

ABOUT COMPANY:
Womancart Ltd. (WCL) is primarily a digital consumer centric retail platform, providing wide range of classic and emerging branded beauty and wellness products for skin care, body care, hair care, fragrance for both men and women at the comfort of home. It also sells lifestyle brands for make-up, imitation jewellery, lingerie. The company also runs brick and mortar stores where customers can visit, make purchases, and interact with the brand.

It has specially sourced products to cater to everyday needs from skin care, makeup products, fragrance, hair styling products and tools and a separate section for men and their grooming needs with shavers, trimmers and beard care. Its product portfolio consists of approximately 10,000 SKUs from own brand along with various national & international brands.

The Company started its operations in FY 2019-20 with an offline grocery store- "The Family Store" at Paschim Vihar, New Delhi. The Company took over the business from the Promoter w.e.f April 01, 2020. It added beauty and wellness products in this store over a period of time. However, the Company discontinued the operations of this store from July 2021, which now is used as a warehouse. In July 2021, it launched its website womancart.com and started selling online various beauty and wellness products. Its first offline store was launched in Shalimar Bagh, Delhi in April 2022. In FY 2022-23, the Company launched its own brands - Wondercurve, Sayda Jewels, Faeezah & Feya. It further launched second store in Model Town, Delhi along with a Kiosk in Pacific Mall, Pitampura, Delhi.

WCL also incorporated its 4 subsidiaries in the second half of FY 2022-23, which took over the running online businesses listings on online website. The fifth subsidiary M/s Varadda Overseas Private Limited shareholding was taken over from promoters during same period. Its subsidiaries are Sellers on various marketplaces like Amazon, Flipkart, Meesho, Dhani and are selling similar products as holding company. As of May 31, 2023, it had 27 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden IPO of 1112000 equity shares of Rs. 10 each at a fixed price of Rs. 86 per share to mobilize Rs. 9.56 cr. The issue opens for subscription on October 16, 2023, and will close on October 18, 2023.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 26.43% of the post-IPO paid-up equity capital of the company. WCL is spending Rs. 1.09 cr. for this IPO process, and from the net proceeds, it will utilize Rs. 1.36 cr. for branding and marketing, Rs. 0.14 cr. for App development, Rs. 5.70 cr. for working capital, and Rs. 1.27 cr. for general corporate purposes.  

Narnolia Financial Services Ltd. is the sole lead manager and Maashitla Securities Pvt. Ltd. is the registrar of the issue. Nikunj Stock Brokers Ltd. is the market maker for the company. PLS Capital Consultants Pvt. Ltd. and Longview Research and Advisory Services Pvt. Ltd. are the advisors. 

Having issued initial equity shares at par value, the company issued further equity shares in the price range of Rs. 60 - Rs. 150 per share between October 2021 and June 2023. It has also issued bonus shares in the ratio of 3 for 2 in May 2023. The average cost of acquisition of shares by the promoters is Rs. 4.95 per share. 

Post-IPO, WCL's current paid-up equity capital of Rs. 3.10 cr. will stand enhanced to Rs. 4.21 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 36.19 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a standalone basis) posted a total income/net profit/-(loss) of Rs.1.35 cr. / Rs. - (0.18) cr. (FY21), Rs. 4.26 cr. / Rs. 0.21 cr. (FY22), and Rs. 8.75 cr. / Rs. 0.47 cr. (FY23). For 5M of FY24 ended on August 31, 2023, it earned a net profit of Rs. 0.54 cr. on a total income of Rs. 7.65 cr.  

On a consolidated basis, the company posted a turnover/net profit of Rs. 9.65 cr. / Rs. 0.51 cr. for FY23, and Rs. 8.50 cr. /Rs. 1.03 cr. for 5M of FY24 ended on August 31, 2023.

For the last three fiscals, WCL has reported an average EPS of Rs. 0.73 and an average RoNW of - (0.08) %. The issue is priced at a P/BV of 4.75 based on its NAV of Rs. 18.12 as of August 31, 2023, and at a P/BV of 2.39 based on its post-IPO NAV of Rs. 36.06 per share. 

If we attribute annualized FY24 earnings to post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 14.65. Thus the IPO appears to be fully priced. 

DIVIDEND POLICY:
The company has not declared any dividend for any financial year so far. It will adopt a prudent dividend policy based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per the offer document, WCL has shown FSN E-Commerce (Nykaa) as their listed peer. It is currently trading at a P/E of 746.67. (as of October 11, 2023). However, they are not comparable on an apple-to-apple basis. This compare appears to be an eyewash.

MERCHANT BANKER'S TRACK RECORD:
This is the 5th mandate from Narnolia Financial Services in the current ongoing fiscal. Out of the last four listings, all opened at premiums ranging from 4.35% to 57.08% on the day of listing.

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