Saakshi Medtech NSE SME IPO review (Apply)
• SMPL is engaged in the manufacturing of electrical control panels, cabinets, medical equipment, etc.
• It marked growth in its financial performance for the reported periods.
• The company posted above 10% net margins for the last two fiscals.
• The company has good relations with renowned customers.
• Investors may park funds for short to long-term rewards in this IPO.
ABOUT COMPANY:
Saakshi Medtech and Panels Ltd. (SMPL) is a diversified company engaged in manufacturing of i) Electrical Control Panels and Cabinets used in elevators, air compressors, renewal energy industry, oil and gas exploration industry, electrical vehicle charging stations, etc., ii) Medical X-Ray System used in healthcare industry iii) Fabrication works for locomotives and (iv) wire harness division for its captive consumption in electrical control panels and for supply to air compressor industry. Its in-house engineering and design capabilities help offer diversified products and solutions to customers in each of the product categories in which SMPL operates. Its comprehensive solutions include design, process engineering, and manufacturing including fabrication, assembly, and testing facilities.
The hardware components are imported or sourced from local suppliers which are then programmed and assembled at its manufacturing facilities. The company designs, programs, and assembles Electrical Control Panels and Cabinets comprising microcontrollers, programmable logic controllers, and SCADA systems. These Electrical control panels are essential for industrial automation. They provide higher-level monitoring and control of various functions of machines to define, organize, and meet production objectives.
The end users of SMPL’s products in this category include OEMs producing elevators, wind turbines, air compressors, oil and gas exploration equipment, electrical vehicle charging stations, or diesel generators. These panels direct the input and output of equipment in which they are installed like monitoring the directional movement of wind turbines, bi-lateral movement of elevators, setting automatic load and unload of pressure in air compressors used in CNG petrol pumps, metal industry, forging industry, chemical industry, aviation industry and allied industries, vibration and temperature monitoring in oil and gas exploration equipment, for charging of EV batteries and alarming of DG sets.
SMPL’s major clientele in this product category include Atlas Copco (India) Ltd, GE India Industrial Pvt. Ltd, OTIS Elevator Company (India) Ltd., GE Oil & Gas India Pvt. Ltd., Kirloskar Oil Engines Ltd, Kirloskar Pneumatic Co. Ltd. The company has entered into a long-term supply agreement with OTIS Elevator Company (India) Ltd for the supply of electrical control panels for controlling of lift movement valid up to June 30, 2024.
Medical X-ray System manufactured and assembled by it comprises X-ray machines, Imaging systems, Generator, and mechanics. It is a certified manufacturer of medical diagnostic X-ray equipment by AERB since 2018. Its major clientele includes Wipro GE Healthcare Pvt. Ltd, Philips India Limited, and BPL Medical Technologies Private Limited. The company is also involved in the Fabrication of High-level Assembly (HLA) to be installed in locomotives which include manufacturing and assembly of sensor box, battery boxes, sandboxes, dynamic brake weldments, resistor boxes, oil tank assemblies, snow plow, etc. It mainly supplies these HLA to the Wabtec group of companies namely, Wabtec India Industrial Private Limited, Wabtec Transportation Systems LLC, and Wabtec Locomotive Private Limited.
The company also has a wire harness division where wiring assembly or cable assembly is undertaken for the transmission of signals or electrical power in the electrical cables or wires. The majority of its harnessed wire is used for captive consumption in manufacturing activities of Medical X-ray systems or Electrical Control Panels and Cabinets. As of March 31, 2023, it had 90 employees on its payroll and in addition, it also hired 255 contract workers.
ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden book-building route IPO of 4656000 equity shares of Rs. 10 each and has announced a price band of Rs. 92 – Rs. 97. At the upper cap, the company mulls raising Rs. 45.16 cr. The issue opens for subscription on September 25, 2023, and will close on September 27, 2023. The minimum application to be made is for 1200 shares. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.37% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO fund, SMPL will utilize Rs. 5.00 cr. for repayment of certain borrowing in full or in part, Rs. 25.50 cr. for working capital, and the balance for general corporate purposes.
After reserving 235200 shares for the market maker, the company has allocated not more than 2209200 shares for QIBs, not less than 663600 shares for HNIs, and not less than 1548000 shares for Retail investors.
Hem Securities Ltd. is the sole lead manager and Bigshare Services Pvt. Ltd. is the registrar of the issue. Hem Group’s Hem Finlease Pvt. Ltd. is the market maker for the company.
The company has issued entire equity shares at par value so far and has also issued bonus shares in the ratio of 4 for 1 in May 2023. The average cost of acquisition of shares by the promoters is Rs. 0.00, and Rs. 0.02 per share.
Post-IPO, SMPL’s current paid-up equity capital of Rs. 13.00 cr. will stand enhanced to Rs. 17.66 cr. Based on the upper price band of IPO, the company is looking for a market cap of Rs. 171.26 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total revenue/net profit of Rs. 60.22 cr. / Rs. 2.20 cr. (FY21), Rs. 91.69 cr. / Rs. 9.38 cr. (FY22), and Rs. 122.20 cr. / Rs. 12.38 cr. (FY23). The company has posted PAT margins of 3.68% (FY21), 10.24% (FY22), and 10.15% (FY23), while its RoCE margins for the corresponding periods were 10.56%, 30.10%, and 28.57% respectively.
For the last three fiscals, the company reported an average EPS of Rs. 7.45 and an average RoNW of 26.87%. The issue is priced at a P/BV of 2.99 based on its NAV of Rs. 32.49 as of March 31, 2023, and at a P/BV of xx based on its post-IPO NAV of Rs. Xx per share (at the upper cap).
If we attribute FY23 earnings to the post-IPO fully diluted paid-up equity capital of the company, then the asking price is at a P/E of 13.84. Thus the issue appears reasonably priced.
DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy based on its financial performance and future prospects.
COMPARISON WITH LISTED PEERS:
As per the offer documents, the company has not listed peers to compare with.
MERCHANT BANKER’S TRACK RECORD:
This is the 29th mandate from Hem Securities in the last three fiscals (including the ongoing one). Out of the last 10 listings, all are listed with premiums ranging from 1.82% to 90% on the date of listing.
Conclusion / Investment Strategy
The company is in the business of manufacturing electrical control panels, cabinets, medical equipment, etc. It marked steady growth in the top lines for the last three fiscals and was able to post over 10% net margins for the last two fiscals. Based on FY23 earnings, the issue appears reasonably priced. Investors may park funds for short to long-term rewards.
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.
Email: dilip_davda@rediffmail.com
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