Vinyas Innovative NSE SME IPO review (May apply)
• VITL is engaged in providing related services for design, engineering, and electronics manufacturing globally.
• It posted static financial performance for FY21 and FY22.
• For FY23 while its top line marked marginal growth, its bottom line spurted manifold.
• The issue appears fully priced based on FY23 earnings.
• Well-informed Investors may park funds for medium to long-term rewards.
ABOUT COMPANY:
Vinyas Innovative Technologies Ltd. (VITL) is a provider of design, engineering, and electronics manufacturing services catering to global Original Equipment Manufacturers and Original Design Manufacturers in the Electronic Industry. As an integrated electronic manufacturing services provider, VITL has offered a broad range of products and services across multiple industry segments for about 20 years.
With wide industry knowledge, cutting-edge technologies, and state-of-the-art infrastructure, Vinyas supports its Global partners from conceptualizing the design, engineering, and manufacturing to turnkey requirements for mission-critical applications.
The company leverages the design capabilities of over three decades of domain expertise providing engineering and design solutions globally with a focus on multiple industries. Its Electronic Manufacturing Services are provided as Build to Print (“B2P”) and Build to Specification (“B2S”) services to clients.
Its B2P solutions involve the client providing the design for the product for which the company provides agile and flexible manufacturing services. Its B2S services involve utilizing design capabilities to design the relevant product based on the specifications provided by the client and manufacturing the product. VITL’s solutions primarily comprise: (i) printed circuit board (“PCB”) assembly (“PCBA”), and (ii) box builds which are used in safety-critical systems such as cockpits, inflight systems, landing systems, and medical diagnostic equipment.
Continuously investing in strengthening its design and manufacturing expertise, the Company is identified as a game changer in the EMS industry for its innovative and in-house path-breaking solutions to complex manufacturing processes. Focusing on quality, integrity, and hard work, it has not only established a Global network of suppliers and customers but also created a long-lasting partnership to accelerate One-stop-shop solutions to all its customers worldwide.
VITL is the preferred partner for Global OEMs and ODMs by offering end-to-end solutions ranging from Design for Manufacturability, Supply Chain Management, PCB assembly, advanced test solutions, Product Integration, and after-market support. As of the date of filing this offer document, it had 382 employees on its payroll.
ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden book-building route IPO of 3312800 equity shares of Rs. 10 each. It has announced a price band of Rs. 162 – Rs. 165 per share of Rs. 10 each and mulls mobilizing Rs. 54.66 cr. at the upper cap. The issue opens for subscription on September 27, 2023, and will close on October 03, 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 26.32% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO funds, the company will utilize Rs. 46.36 cr. for working capital and the rest for general corporate purposes.
Sarthi Capital Advisors Pvt. Ltd. is the sole lead manager and Skyline Financial Services Pvt. Ltd. is the registrar of the issue. Gretex Share Broking Ltd. is the market maker for the company.
Having issued initial equity shares at par value, the company issued/converted further equity shares in the price range of Rs. 106 – Rs. 280.60 between September 2014 and May 2023. It has also issued bonus shares in the ratio of 2 for 1 in February 2008, 1 for 1 in March 2009, 1 for 1 in February 2010, 1 for 1 in July 2010, and 1 for 1 in July 2023. The average cost of acquisition of shares by the promoters is Rs. 0.21, and Rs. 19.02 per share.
Post-IPO, VITL’s current paid-up equity capital of Rs. 9.27 cr. will stand enhanced to Rs. 12.59 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 207.65 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company posted a total income/net profit of Rs. 207.81 cr. / Rs. 1.23 cr. (FY21), Rs. 212.63cr. / Rs. 1.01cr. (FY22), Rs. 238.85 cr. / Rs. 7.34 cr. (FY23). Multifold jump in its bottom line for FY23 raises eyebrows and concerns over its sustainability going forward.
For the last three fiscals, VITL reported an average EPS of Rs. 11.26 and an average RoNW of 9.80%. The issue is priced at a P/BV of 1.36 based on its NAV of Rs. 121.67 as of March 31, 2023, and at a P/BV of 1.66 based on its post-IPO NAV of Rs. 99.55 per share (at the upper cap).
If we attribute FY23 super earnings to the post-IPO paid-up capital of the company, then the asking price is at a P/E of 28.30. The issue appears fully priced based on its manifold rise in earnings for FY23.
The company reported PAT margins of 0.59 % (FY21), 0.48 % (FY22), and 3.07% (FY23), and RoE margins of 4.01 %, 3.21 %, and 16.13 % for corresponding periods respectively.
DIVIDEND POLICY:
The company has paid a dividend of Rs. 1.86 lakh for FY23. 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 shown Cyient DLM and Centum Electro as their listed peers. They are trading at a P/E of 166.35, and 66.90 (as of September 25, 2023). However, they are not comparable on an apple-to-apple basis.
MERCHANT BANKER’S TRACK RECORD:
This is the 7th mandate from Sarthi Capital in the last two fiscals (including the ongoing one). Out of the last 5 listings, 1 opened at a discount and the rest with premiums ranging from 39.62% to 333.05% of the date of listing.
Conclusion / Investment Strategy
VITL is a global player in providing related services for design, engineering, and electronics manufacturing. It posted static performance for FY21 and FY22, but reported boosted margins for FY23, and based on these earnings, the issue appears fully priced. Well-informed investors may park funds for medium 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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