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All E Techno NSE SME IPO review (Apply)

 

•    AETL is engaged in Business Applications & Digital Transformation activities for Microsoft.
•    It enjoys a niche place as a Gold Microsoft partner. 
•    Sudden boost in margins is surprising and raises eyebrows.
•    Based on its current financial trends, the issue appears lucratively priced. 
•    Investors may consider it for medium to long-term rewards.

ABOUT COMPANY:
All E Technologies Ltd. (AETL) is a Microsoft Business Applications & Digital Transformation company. In this age of relentless transformations powered by the forces of the digital era, AETL helps clients stay ahead with Intelligent Business Applications. Leveraging the suite of Microsoft Dynamics 365, Power Platform, Data & AI – powered by Microsoft Azure & Collaboration platforms – its industry solutions and services prepare clients to win in this volatile, uncertain, changing, and ambiguous business environment.

The company helps in bringing together – Company & Customers, Factory & Field Service, Store Front & Supply Chain, Patients & Providers, People & Governments – by putting in place integrated operational systems of ERP, CRM, Collaboration Portals, and Mobile Apps, and enabling businesses to draw actionable insights from data. It provides consulting services for solution assessments, provides product licenses, carries out solution implementation, and provides solution enhancements and ongoing support. AETL also provides offshore technology services to some large Microsoft Business Applications partners from the USA and Europe.

AETL started operations in the year 2000 as an Outsourced Product Development Company. It brought focus to the Microsoft Business Applications space from 2002. Since then, it has continued to strengthen its position and enrich its experience in this area. The company has always remained current with the new technologies and products released by Microsoft and has also been contributing to product development and sustained engineering work. Over the years it has added new geographies and new industries. The core focus of the business has however remained firm. As of the filing of this offer document, AETL has 330 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its need for expansion of business (Rs. 25 cr.), acquisition of a similar business (Rs.10 cr.), and general corporate purposes, AETL is coming out with a maiden combo IPO of 5355200 equity shares of Rs. 10 each via book building route with a price band of Rs. 87 – Rs. 90 per share to mobilize Rs. 48.20 cr. The company is issuing 4864000 fresh equity shares and 491200 shares as Offer for Sale (OFS). The issue opens for subscription on December 09, 2022, and will close on December 13, 2022. Minimum application is to be made for 1600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.52% of the post-issue paid-up capital of the company. AETL has allocated 50% for QIBs, 15% for HNIs, and 35% for Retail investors.

Unistone Capital Pvt. Ltd. is the sole lead manager for this IPO, while Skyline Financial Services Pvt.  Ltd. is the registrar of the issue. Nikunj Stock Brokers Ltd. is the market maker for this company.

Having issued initial equity shares at par, the company issued further equity shares in the price range of Rs. 11.65 to Rs. 86.23 between October 2001 and March 2022. It has also issued bonus shares in the ratio of 3 for 1 in August 2021 and 1 for 1 in March 2022. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. 3.13, Rs. 4.92, and Rs. 10.02 per share.

Post issue, AETL’s current paid-up equity capital of Rs. 15.33 cr. will stand enhanced to Rs. 20.20 cr. Based on the upper cap of IPO pricing, the company is looking for a market cap of Rs. 181.75 cr.

AETL is a cash surplus company with Rs. 30.90 cr. in bank FD as of June 30, 2022, according to management, this money will be used for their acquisition plans.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, AETL has posted a turnover/net profit of Rs. 55.29 cr. / Rs. 2.33 cr. (FY20), Rs. 63.28 cr. / Rs. 8.66 cr. (FY21), and Rs. 72.34 cr. / Rs. 8.59 cr. (FY22). For Q1 of FY23 ended on June 30, 2022, it earned a net profit of Rs. 2.96 cr. on a turnover of Rs. 23.20 cr. The boost in margins is surprising and raises eyebrows. However, the management is confident in maintaining the growth trends going forward due to its niche play.

For the last three fiscals, AETL has reported an average EPS of Rs. 5.68 and an average RoNW of 22.20%. The issue is priced at a P/BV of 2.90 based on its NAV of Rs. 31.01 as of June 30, 2022, and at a P/BV of 1.99 based on its post-IPO NAV of Rs. 45.22 (at the upper cap).

If we annualize FY23 earnings and attribute it to post-issue fully diluted paid-up equity capital, then the asking price is at a P/E of around 15.36. (at the upper cap). Thus the issue appears lucratively priced.

DIVIDEND POLICY:
AETL paid a maiden dividend of 150% for FY22 and also approved its dividend policy on June 20, 2022, which is uploaded on the company’s website www.alletech.com.

COMPARISON WITH LISTED PEERS:
As per the offer document, AETL has shown InfoBeans and K Solves as their listed peers. They are currently trading at a P/E of 43.71 and 26.13 (as of December 05, 2022). However, they are not truly comparable on an apple-to-apple basis.

MERCHANT BANKER’S TRACK RECORD:
This is the 7th mandate from Unistone Capital in the last three fiscals (including the ongoing one). Out of the last six listings, 1 opened at a discount and the rest with premiums ranging from 10.97% to 270.40% on the day of listing.