Vertexplus Techno NSE SME IPO review (May apply)


Vertexplus Techno NSE SME IPO review (May apply)

•    VTL is engaged in providing IT solutions services.
•    For the last three fiscals, its top line remained almost static. 
•    It posted marginal growth in its bottom lines. 
•    Based on the current financial data, the issue is priced aggressively. 
•    Well-informed/cash surplus investors may consider parking funds for the long term.

Vertexplus Technologies Ltd. (VTL) is an ISO 9001:2015 and ISO/IEC 27001:2013 certified Information Technology company engaged in consulting, outsourcing, infrastructure and digital solutions and services. It collaborates with companies to fulfil their ever-evolving Information Technology needs and support their business with its enabling solutions to strengthen their current capabilities and build pathways for sustainable growth.

The company has experience across various industry sectors. The Company operates from its Registered Office situated at B-19, Ground Floor, 10-B Scheme, Gopalpura Road Jaipur -302018, India and development facilities at Jaipur and Noida. Vertexplus endeavours to bring together creativity and knowledge with a positive business strategy to furnish the requirements of diverse customers with an inclusive range of products and services which are comprehensive and cost-effective so that the client can focus on their core competencies to improve or expand their businesses. Vertexplus has worked for numerous industries, realized its true potential and scaled to global recognition. As of September 30, 2022, it had 313 employees on its payroll.

The company is coming out with a maiden IPO of 1479600 equity shares of Rs. 10 each via the book-building route and has fixed a price band of Rs. 91 – Rs. 96 per share. At the upper cap, the company mulls mobilizing Rs. 14.20 cr. The issue opens for subscription on March 02, 2023, and will close on March 06, 2023. The minimum application to be made is for 1200 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes xx% of the post-issue paid-up capital of the company.

The company has allocated note more than 50% for QIBs, not less than 15% for HNIs and not less than 35% for Retail investors. From the net proceeds of the IPO fund, it will utilize Rs. 10.00 cr. for working capital and the balance for general corporate purposes.

Beeline Capital Advisors Pvt. Ltd. is the sole lead manager and Skyline Financial Services Pvt. Ltd. is the registrar of the issue. Prabhat Financial Services Ltd. is the market maker for the company.

After issuing initial equity shares at par, the company issued bonus shares in the ratio of 399 for 1 in March 2022. The average cost of acquisition of shares by the promoters is Rs. 0.00 and Rs. 0.03 per share.

Post-IPO, VTL’s current paid-up equity capital of Rs. 4.00 cr. will stand enhanced to Rs. 5.48 cr. Based on the upper cap of the IPO price, the company is looking for a market cap of Rs. 52.60 cr.

On the financial performance front, for the last three fiscals, VTL has (on a consolidated basis) posted a turnover/net profit of Rs. 19.64 cr. / Rs. 0.55 cr. (FY20), Rs. 20.26 cr. / Rs. 1.03 cr. (FY21), and Rs.21.32 cr. / Rs. 1.87 cr. (FY22). For the H1 of FY23 ended on September 30, 2022, it earned a net profit of Rs. 0.91 cr. on a turnover of Rs. 10.92 cr.

For the last three fiscals, VTL has reported an average EPS of Rs. 3.45 and an average RoNW of 23.69%. The issue is priced at a P/BV of 4.75 based on its NAV of Rs. 20.19 as of September 30, 2022, and at a P/BV of 2.36 based on its post-IPO NAV of Rs. 40.66 (at the upper cap).

If we annualize FY23 earnings and attribute it to post-IPO fully diluted paid-up equity capital, the asking price is at a P/E of around 28.83. Thus the issue is aggressively priced.

The company has not declared any dividends in the last five years. It will adopt a prudent dividend policy post-listing, based on its financial performance and future prospects.

As per the offer document, the company has shown Ksolves and Sigma Solves as their listed peers. They are currently trading at a P/E of 22.81 and 185.44 (as of February 28, 2023). However, they are not truly comparable on an apple-to-apple basis.

The merchant banker associated with this issue has handled 8 issues in the last three fiscals, out of which 1 issue closed below the issue price on the listing date.


Conclusion / Investment Strategy

VTL is an IT solution service provider operating in a highly competitive segment. Based on its current financial data, the issue appears aggressively priced. A small equity base post-IPO also indicated longer gestation for migration to the mainboard. Well-informed/cash surplus investors may consider parking of funds for the long term.

Review Author

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.