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Review By Dilip Davda on August 1, 2023
• YSL is engaged in online gaming products and IT solutions/consultancy.
• The sudden boost in its top and bottom lines for FY23 raises eyebrows.
• Even on the basis of super earnings of FY23, the issue is exorbitantly priced.
• It is in the highly competitive and fragmented segment.
• There is no harm in skipping this pricey IPO.
ABOUT COMPANY:
Yudiz Solutions Ltd. (YSL) is a subsidiary of Ability Games Ltd. which is engaged in the business of online fantasy gaming and innovative gaming products. YSL is in the business of providing IT solutions and consultancy focused on providing scalable and secure solutions to shape a business idea by implementing the latest and cutting-edge technologies. It has been engaged in several projects and successfully completed them. It offers web, mobile, game and blockchain solutions for business.
YSL is an ISO 9001:2015 certified IT development company and an ideal digital transformation and technology services company. The company also has an ISO 13485:2016 certificate in the area of Medical Care and Quality Management Systems (QMS) Development in the respective field. Right from ideation to execution, it has consistently delivered a competitive edge in the form of robust, fore-sighted, and qualitative solutions. As of March 31, 2023, it had 439 employees on its payroll.
As per media reports, many state governments are on the verge of revising their policy on online gaming which may go against this company.
ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden book-building route IPO of 2717600 equity shares of Rs. 10 each with a price band of Rs. 162 - Rs. 165 per share. The company mulls mobilizing Rs. 44.84 cr. at the upper cap of the price band. The issue opens for subscription on August 04, 2023. and will close on August 08, 2023. The minimum application to be made is for 800 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.33% of the post-IPO paid-up capital of the company.
After reserving 136800 shares for market makers, the company has allocated not more than 1280000 shares for QIBs, not less than 392800 shares for HNIs, and not less than 908000 shares for Retail investors.
From the net proceeds of the IPO money, it will utilize Rs. 6.16 cr. for unidentified acquisitions, Rs. 6.16 cr. for development of new products and technology, Rs. 1.23 cr. for networking and cabling, Rs. 4.87 cr. for branding and marketing, Rs. 1.73 cr. for capital expenditure, Rs. 10.58 cr. for working capital and the rest for general corporate purposes.
Narnolia Financial Services Ltd. is the sole lead manager and MAS Services Ltd. is the registrar of the issue. Kantilal Chhaganlal Securities Pvt. Ltd. is the market maker for the company as well as the underwriter (with 85% underwriting). Narnolia Fin has underwritten up to 15%.
Having issued/converted initial equity capital at par value, the company issued further equity capital in the price range of Rs. 20 - Rs. 73.50 between January 2020 and September 2022. It has also issued bonus shares in the ratio of 2 for 1 in December 2022. The average cost of acquisition of shares by the promoters is Rs. 4.63, and Rs. 18.15 per share.
Post-IPO, YSL's current paid-up equity capital of Rs. 7.60 cr. will stand enhanced to Rs. 10.32 cr. Based on the upper cap of the IPO price band, the company is looking for a market cap of Rs. 170.27 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, on a standalone basis, YSL has posted a total income/net profit of Rs. 13.05 cr. / Rs. 0.81 cr. (FY21), Rs. 18.82 cr. / Rs. 0.71 cr. (FY22), and Rs. 27.45 cr. / Rs. 2.75 cr. (FY23). The sudden boost in its top and bottom lines for FY23 raises eyebrows and appears to be a window dressing to fetch fancy valuations.
The contribution of the top 10 customers to revenue has declined from 41.64% (FY21) to 7.22% (FY23). Its average employee benefit cost for the last three fiscals has been in the range of 66% of the revenue.
For the last three fiscals, the company has reported an average EPS of Rs. 4.56 and an average RoNW of 18.81%. The issue is priced at a P/BV of 11.51 based on its NAV of Rs. 14.33 as of March 31, 2023, and at a P/BV of 3.25 based on its post-IPO NAV of Rs. 50.82 per share (at the upper cap).
If we attribute FY23 super earnings to the post-IPO fully diluted paid-up equity capital of the company, then the asking price is at a P/E of 61.80. Based on FY22 earnings, the P/E stands at 229.17. Thus the issue appears exorbitantly priced.
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 shown Dev Information, Nazara Tech, Silver Touch, Sigma Solve and Ksolves as their listed peers. They are currently trading at a P/E of 32.35, 00, 54.81, 248.66, and 48.95 (as of July 31, 2023). However, they are not truly comparable on an apple-to-apple basis.
MERCHANT BANKER'S TRACK RECORD:
This is the 2nd mandate from Narnolia Financial in the last three fiscals (including the ongoing one). The only listing that took place so far has opened at a premium of 65.31% on the listing date.
Review By Dilip Davda on August 1, 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 Yudiz Solutions Limited offers an early investment opportunity in Yudiz Solutions Limited. A stock market investor can buy Yudiz Solutions IPO shares by applying in IPO before Yudiz Solutions Limited shares get listed at the stock exchanges. An investor could invest in Yudiz Solutions IPO for short term listing gain or a long term.
Read the Yudiz Solutions IPO recommendations by the leading analyst and leading stock brokers.
Yudiz Solutions IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Yudiz Solutions IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.
Our recommendation for Yudiz Solutions IPO is to avoid.
As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the Yudiz Solutions IPO.
The Yudiz Solutions IPO allotment status will be available on or around August 11, 2023. The allotted shares will be credited in demat account by August 17, 2023. Visit Yudiz Solutions IPO allotment status to check.
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