Xelpmoc Design Main Board IPO review (May apply)

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Review By Dilip Davda on January 21, 2019

• Xelpmoc is engaged in end-to-end technology solution and support provider.
• Till H1 of FY19 it has shown negative earnings.
• A mini IPO for main board IPO for only Rs. 23 crore fund mobilization.
• Retail investor's portion is just 10% of the overall size.
• Company offers Rs. 3 discount for retail investors.

ABOUT COMPANY:
Xelpmoc Design and Tech Ltd. (XDTL) is a provider of professional and technical consulting services, offering technology services and end-to-end technology solutions and support. Its clients range from entrepreneurs and start-up enterprises to established companies, engaged in e-commerce, transportation and logistics, recruitment, financial services, social networking, and various other industries. XDTL provides a wide range of services, including, mobile and web application development, prototype development, thematic product development and data science and analytics assistance. The company grows its portfolio of services and products as per the needs of clients evolve.

It commenced operations in Bengaluru, India, in 2015 and have since serviced enterprises across four states in India. Company's business operations may broadly be categorized as technology services, and technology solutions/ products. It also occasionally provide business support to some of clients to enable them to set-up their operations. The company also carries out operations through joint venture and associate. Main promoters of this company are ex-Just Dial executives.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its plans of purchasing IT hardware, network equipments, fit outs for new development centers at Kolkata and Hyderabad, working capital and general corpus fund needs, XDTL is coming out with a maiden IPO of approx. 3709800-3484800 equity shares (based on lower and upper price bands) of Rs. 10 each via book building route. It has fixed a price band of Rs. 62 – Rs. 66. The company mulls raising Rs. 23 crore through this issue. Issue opens for subscription on 23.01.19 and will close on 25.01.19. Minimum application to be made is for 200 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE/NSE. Issue is solely lead managed by ITI Capital Ltd. (erstwhile known as Inga Capital Ltd.). Karvy Fintech Pvt. Ltd. is the registrar to the issue. Due to negative earnings till now, it has reserved quota of 70% for QIBs, 15% for HNI and 10% for retail investors. The company is offering a discount of Rs. 3 per share to retail investors. .

Having raised initial equity at par, it issued further equity in the price range of Rs. 29 to 90 between May 2017 and May 2018. It has also issued bonus shares in the ratio of 55 for 100 in July 2018. Average cost of acquisition of shares by the promoters is Rs. 6.84, Rs. 6.93 and Rs. 20.80 per share. Issue constitutes 25.45% of fully diluted post issue equity capital. Post issue, its current paid up equity capital of Rs. 10.20 cr. will stand enhanced to approx Rs. 13.90 cr. to 13.69 cr. (based on lower and upper price band).

FINANCIAL PERFORMANCE:
On financial performance part, on a consolidated basis, XDTL has posted in FY17, FY18 and H! FY19, turnover/net profit (loss) of Rs. 1.97 cr. / Rs. (2.82) cr., Rs. 5.04 cr. / Rs. (3.43) cr. and Rs. 3.62 cr. / Rs. (2.27) cr., respectively. For the said periods its EBITDA was Rs. 0.27 cr., Rs. 0.34 cr. and Rs. 0.23 cr. Its net worth was Rs. 1.32 cr. Rs. 1.92 cr. and Rs. 1.76 cr. for corresponding previous periods respectively. For last two fiscals, it has posted an average negative EPS of Rs. (5.75) and an average RoNW of (28.28%). Even for H1 of current fiscal, its earnings and RoNW stands negative. Thus the offer is at negative P/E. Issue is priced at a P/BV of 3.83 on the basis of consolidated NAV of Rs. 17.22 as on 30.09.18.

COMPARE WITH LISTED PERS:
It has no listed peers to compare with.

LEAD MANAGER'S TRACK RECORD:
On merchant banker's front, this is the 3rd mandate from its stable and last 2 listings closed above offer price on the day of listing.

Important note:
Retail Individual Investors shall use Unified Payments Interface (UPI) as an additional payment mechanism with Application Supported by Block Amount (ASBA) for making payments. *All Other Category of investors shall mandatorily use only Application Supported by Blocked Amount (ASBA) facility for making payments.

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