Maagh Advertising BSE SME IPO review (Avoid)
• MAMSL is in the business of offering media services including related matter solutions.
• Its top line marked decline while margins witnessed pressure.
• The company is operating in a highly competitive segment.
• Based on its FY22 earnings, the issue is priced aggressively.
• There is no harm in skipping this pricy bet.
Maagh Advertising & Marketing Services Ltd. (MAMSL) is engaged in the business of offering media services that include advertising campaigns, designing and printing services, media buying, public relations, product launch campaigns, etc. It highly depends on third-party providers of servicing and material suppliers.
As of the date of filing this offer document, it had 14 employees on its payroll.
ISSUE DETAILS/CAPITAL HISTORY:
To part finance its need for the purchase of software (Rs. 3.36 cr.), purchase of media inventory (Rs. 3.00 cr.), and general corporate purposes (Rs. 1.96 cr.), MAMSL is coming out with a maiden IPO of 1520000 equity shares of Rs. 10 each at a fixed price of Rs. 60 per share to mobilize Rs. 9.12 cr. The issue opens for subscription on September 26, 2022, and will close on September 29, 2022. The minimum application is to be made for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 46.34% of the post-IPO paid-up equity capital of the company. MAMSL is spending Rs. 0.80 cr. for this IPO. This indicates the fully structured model of this IPO.
The issue is solely lead managed by Inventure Merchant Banker Services Pvt. Ltd., and Satellite Corporate Services Pvt. Ltd. is the registrar to the issue. NNM Securities Pvt. Ltd. is the market maker for the company.
After issuing initial equity shares at par, the company issued bonus shares in the ratio of 175 for 1 in August 2021. The average cost of acquisition of shares by the promoters is Rs. 1.30 and Rs. 10.00 per share.
Post this IPO, MAMSL’s paid-up equity capital of Rs. 1.76 cr. will stand enhanced to Rs. 3.28 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 19.68 cr.
On the financial performance front, for the last three fiscals, MAMSL has (on a consolidated basis) reported a turnover/net profit of Rs. 52.61 cr. / Rs. 0.82 cr. (FY20), Rs. 24.55 cr. / Rs. 0.76 cr. (FY21), and Rs. 21.80 cr. / Rs. 0.55 cr. (FY22). Thus it has posted declining trends in its top lines with falling margins that raise concerns. The sustainability of such margins going forward is a major concern, as it is operating in a highly competitive segment.
For the last three fiscals, MAMSL has posted an average EPS of Rs. 3.60 and an average RoNW of 16.94%. The issue is priced at a P/BV of 2.48 based on its NAV of Rs. 24.17 as of March 31, 2022, and at a P/BV of 1.47 based on its post-IPO NAV of Rs. 40.77 per share.
If we attribute FY22 earnings on post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 37.5. Thus the issue is aggressively priced.
COMPARISON WITH LISTED PEERS:
As per the offer documents, MAMSL has shown Pressman Advertising, Praveg Commu., Digicontent, and Brandbucket Media as its listed peers. They are currently quoting at a P/E of 27.32, 25.4, 00, and 32.82 (as of September 20, 2022). However, they are not truly comparable on an apple-to-apple basis.
The company has not declared/paid any dividend since incorporation. It will adopt a prudent dividend policy post IPO, based on its financial performance and future prospects.
MERCHANT BANKER’S TRACK RECORD:
This is the 7th mandate from Inventure Merchant Banker in the last four fiscals (including the ongoing one). Out of the last 6 listings, 3 opened at discount and the rest with premiums ranging from 0.50% to 57.14% on the day of listing.
Conclusion / Investment Strategy
MAMSL is operating in a highly competitive segment with third-party service providers. It has posted a declining top line with pressure on margins. Post IPO low promoter’s holding and small equity base are major concerns. Based on FY22 earnings, the issue is aggressively priced. There is no harm in skipping this pricy issue.
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. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the past, SME IPOs drew the attention of investors across the board. 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 own risk. The above information is based on information available as on date coupled with market perceptions. The Author has no plans to invest in this offer.
(SEBI registered Research Analyst-Mumbai).
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.