DAPS Advertising BSE SME IPO review (May apply)
• DAPS is in the business of providing advertising agency services.
• Sudden boost in its bottom lines for the last 18 months raises concern.
• Higher issue expenses raise eyebrows.
• Based on its super recent earnings, the issue is lucratively priced.
• Well-informed risk seekers may consider investment for the long term.
DAPS Advertising Ltd. (DAPS) is engaged in the business of providing advertising agency services offering a range of advertising media services consisting of print media, electronic media and outdoor media services which cover advertisement modes such as newspapers, brochures, magazines, television channels, FM channels and display of outdoor hoardings etc.
DAPS is an INS (Indian Newspaper Society) accredited Company. it acts as an intermediary between clients and the media and the company’s scope of services includes assisting clients in choosing the optimal advertisement channel in accordance with their budget and regional preference, designing advertisements (through an in-house team or third party), negotiating and booking ad space with chosen media agency and ensuring the publication of requisite advertisement.
DAPS’s client domain mainly includes corporate clients operating in various business fields viz. construction, education, electronics, automobiles, FMCG, jewellery, apparel, insurance, housing, hospital, financial service providers, aviation, Government organizations etc., thus providing exposure to serve clients working in various industries and thus widening its exposure. As of the date of filing this offer documents, it had 12 employees on its payroll.
ISSUE DETAILS/CAPITAL HISTORY:
To part finance its needs for working capital (Rs. 2.53 cr.), and general corporate purpose (Rs. 1.00 cr.), DAPS is coming out with a maiden IPO of 1700000 equity shares of Rs. 10 each at a fixed price of Rs. 30 per share to mobilize Rs. 5.10 cr. The issue opens for subscription on October 31, 2022, and will close on November 03, 2022. A minimum application is to be made for 4000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 32.85% of the post-issue paid-up equity capital of the company. DAPS is spending Rs. 1.57 cr. for this IPO process, which indicates funding arrangements for the subscription.
The sole lead manager for this IPO is Shreni Shares Pvt. Ltd., and Bigshare Services Pvt. Ltd. is the registrar to the issue. Shreni Shares Pvt. Ltd. is also acting as a market maker for this company.
Having issued entire equity shares at par so far, the company also issued bonus shares in the ratio of 32 for 1 in December 2017. The average cost of acquisition of shares by the promoters is Rs. 0.21 and Rs. 0.49 per share.
Post-IPO, DAPS’s current paid-up equity capital of Rs. 3.48 cr. will stand enhanced to Rs. 5.18 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 15.53 cr.
On the financial performance front, for the last three fiscals, DAPS has posted revenue/net profit of Rs. 20.37 cr. / Rs. 0.39 cr. (FY20), Rs. 8.04 cr. / Rs. 0.10 cr. (FY21), and Rs. 18.77 cr. / Rs. 1.09 cr. For the first half of FY23 ended on September 30, 2022, it earned a net profit of Rs. 0.88 cr. on a revenue of Rs. 14.66 cr. Thus sudden boost in the bottom line for the last 18 months’ performance raises eyebrows.
For the last three fiscals, DAPS has reported an average EPS of Rs.1.85 and an average RoNW of 7.91%. The issue is priced at a P/BV of 1.13 based on its NAV of Rs. 26.53 as of September 30, 2022, and at a P/BV of 1.31 based on its post-IPO NAV of Rs. 22.94.
If we annualize FY23 earnings and attribute it to a post-IPO fully diluted paid-up equity base, then the asking price is at a P/E of around 8.82. Thus the issue is lucratively priced based on its super earnings.
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, DAPS has shown Vertoz Advertising and Pressman Advertising as their listed peers. They are currently trading at a P/E of around 34.42 and 30.43 (as of October 25, 2022). However, they are not truly comparable on an apple-to-apple basis.
MERCHANT BANKER’S TRACK RECORD:
This is the 14th mandate from Shreni Shares in the last three fiscals (including the ongoing one). Out of the last 10 listings, all opened at premiums ranging from 0.55% to 101.18% on the day of listing.
Conclusion / Investment Strategy
DAPS is in a highly competitive and fragmented segment. Though the issue appears lucratively priced based on its recent super financial performance, higher spending for IPO marketing raises concern. Small equity post-IPO also indicates a longer gestation for migration to the main board. Well-informed risk seekers may consider parking funds for the medium to long term.
Review By Dilip Davda on Oct 25, 2022
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.