Atmastco NSE SME IPO review (May apply)
• The company is an EPC contractor providing turnkey projects.
• It also provides project management solutions and has ventured in to defence segment.
• The defence segment activities has not yet commenced.
• Based on FY24 annualized super earnings, the issue appears fully priced.
• Well-informed investors may park funds for the medium to long term rewards.
ABOUT COMPANY:
Atmastco Ltd. an ISO 9001-2015, ISO 9001-2015, ISO 45001-2018 & ISO 14001-2015 certified Company engaged in the business of executing turnkey/Engineering Procurement and Construction Company (EPC) contracts in ferrous and non-ferrous sector and providing end-to-end solutions offering multi-disciplinary services and project management solutions.
The company is also into manufactured products i.e. design, manufacturing and supply of precision equipments and heavy fabrication structures for various industrial use and other incomes such as Ceiling Girder, Railway Girder, Columns & Bracings, Bolted Structures, Equipment’s and Pressure ducts, Box Columns etc. which are used in Power and Energy, Steel Plants, Cement Plants, Railway Bridges, Water Treatment Plants, Refinery & Fertilizer plants. Pre-Engineered Building etc. It has more than two decades of experience in executing projects involving manufacturing and fabrication work of heavy structures.
It is also engaged in the business of trading steel, iron, chemical alloys, metals, grinding wheels, welding electrodes, abrasives, industrial helmets which are used extensively for industrial use. It aims to continue to build strength in the field of manufacturing steel fabrication, and execution of EPC / turnkey projects. in the ferrous and non-ferrous sectors, mineral processing. The Company is recognized as an approved vendor in the Master list of Approved Vendors issued by the Quality Assurance Civil Directorate, Research Designs, Standards Organization, Ministry of Railways and Government of India for fabrication of Composite Girder and Other Steel Plate Girder.
Its customer base includes a diverse set of industries including power plants, refineries, steel plants, Railways, cement plants, Industrial and Infrastructure, Chemicals, Pharmaceuticals, Petrochemicals, Refineries, Power, Oil & Gas Explorations, etc.
It incorporated a separate legal entity for its wholly owned subsidiary (WOS) namely Atmastco Defence Systems Private Limited on July 22, 2020 to carry on the business of manufacture of bullet proof jackets & helmets especially for military application and full body protector for female troops and related activities. However, its WOS Atmastco Defence System Private Limited has not commenced its production. As of August 31, 2023, it had 276 employees on its payroll.
ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden IPO of 7305600 equity shares of Rs. 10 each at a fixed price of Rs. 77 per share to mobilize Rs. 56.25 cr. The issue consists of 5480000 fresh equity shares (worth Rs. 42.20 cr.) and 1825600 shares by way of Offer for Sale (OFS) worth Rs. 14.05 cr. The issue opens for subscription on February 15, 2024, and will close on February 20, 2024. The minimum application to be made is for 1600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 29.53% of the post-IPO paid-up capital of the company. The company is spending Rs. 6.75 cr. for this IPO and from the net proceeds of fresh equity issue, it will utilize Rs. 11.78 cr. for working capital, Rs. 10.41 cr. for repayment/prepayment of unsecured load, and Rs. 13.26 cr. for general corporate purposes.
The company has reserved 366400 equity shares for the market maker, and from the rest, it has allocated not more than 3469600 shares for Retail investors and at least 3469600 shares for Non-Retail investors.
The issue is solely lead managed by Affinity Global Capital Market Pvt. Ltd., and Cameo Corporate Services Ltd. is the registrar of the issue. Asnani Stock Broker Pvt. Ltd. is the market maker for the company. The issue is underwritten for 15% by Affinity Global and 85% by Comfort Securities Ltd.
Having issued initial/converted equity capital at par, the company issued further equity shares in the price range of Rs. 14.13 – Rs. 130 per share between September 2004 and November 2013. It has also issued bonus shares in the ratio of 20 for 1 in June 2018, and 0.3 for 1 in October 2023. The average cost of acquisition of shares by the promoters is Rs. 0.37, Rs. 1.40, Rs. 6.00, and Rs. 7.37 per share.
Post-IPO, company’s current paid-up equity capital of Rs. 19.26 cr. will stand enhanced to Rs. 24.74 cr. Based on the upper IPO price band, the company is looking for a market cap of Rs. 190.46 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a consolidated basis) posted a total revenue/net profit of Rs. 69.91 cr. / Rs. 0.60 cr. (FY21), Rs. 94.68 cr. / Rs. 3.23 cr. (FY22), and Rs. 242.79 cr. / Rs. 12.78 cr. (FY23). For 5M of FY24 ended on August 31, 2023, it earns a net profit of Rs. 6.29 cr. on a total revenue of Rs. 67.00 cr. Surprisingly, this company’s data is given in Rs. 000 (Thousands).
For the last three fiscals, it has reported an average EPS of Rs. 5.11. The offer document missing an average RoNW data. The issue is priced at a P/BV of 1.83 based on its NAV of Rs. 42.16 as of August 31, 2023. The post-IPO NAV data is missing in the offer document.
If we attribute annualized FY24 earnings to its post-IPO fully diluted paid-p capital, then the asking price is at a P/E of 12.62. Thus the issue appears fully priced. The sudden boost in its bottom lines from FY23 onwards raise eyebrows and concern over its sustainability as it is operating in a competitive segment.
For the reported periods, the company has posted PAT margins of 0.87% (FY21), 3.45% (FY22), 5.28% (FY23), 9.66% (5M-FY24), and RoCE margins of 15.07%, 20.38% 29.91%, 15.15% respectively for the referred periods.
DIVIDEND POLICY:
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, the company has no listed peers to compare with.
MERCHANT BANKER’S TRACK RECORD:
This is the 3rd mandate from Affinity Global in the current fiscals, out of the last 2 listings, 1 opened at par and 1 at a premium of 30.43% on the date of listing.
Conclusion / Investment Strategy
The company is an EPC contractor and has diversified into project management solutions and defense related products like bulletproof jackets/helmets etc. However, defense segment activities is yet to take off. Based on FY24 annualized super earnings, the issue appears fully priced. Well-informed investors may park funds for the 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
Courtesy: https://www.chittorgarh.com/
