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Alphalogic Ind BSE SME IPO review (May apply)
• AIL is a subsidiary of ATL (already listed entity on BSE).
• The company is in the business of industrial/institutional storage system installation.
• It posted spectacular performance for FY23 with optimum utilization of capacities.
• Based on FY23 super earnings, the issue appears fully priced.
• Well-informed investors may consider an investment with a medium to long-term perspective.
PREFACE:
Group company Alphalogic Techsys Ltd. (ATL) floated its IPO for Rs. 6.18 cr. at a price of Rs.84 per share in the month of August 2019 as a start-up SME. The company migrated to the mainboard in December 2021. While the company has no track records for dividends, it issued bonus shares in the ratio of 27 for 10 in August 2021, and 1 for 2 in September 2022. It also opted for a stock split from Rs. 10 to Rs. 5 in October 2021. On Wednesday, June 28, 2023, it closed at Rs. 49.99 per share of Rs. 5 each. Thus it has rewarded handsomely to investors. Looking at this track record of ATL, investors can look forward to handsome rewards from Alphalogic Industries Ltd. (AIL) which is taping the market soon. AIL has reserved some shares for stakeholders of ATL as an investor-friendly gesture and is a welcome step.
ABOUT COMPANY:
Alphalogic Industries Ltd. (AIL) – formerly known as Alphalogic Trademart Ltd. – is a subsidiary of Alphalogic Techsys Ltd. It is engaged in the Design, Manufacturing, Supply and Installation of Industrial and Institutional Storage Systems i.e. Compactor Storage Systems, Heavy Duty Storage Racks, Cantilever Racks, Lockers, Mezzanine Floors, Metal Pallets & Crates, Library Stacks, Book Cases, Book Trolley, Periodical Display Rack, School Lockers, Book Support etc. Its state-of-the-art manufacturing facility located at Survey No. 164/1, Plot No. 6, Alkapuram Road, Opp Yashobhumi Society, Wadmukhwadi, Pimpri Chinchwad, Pune – 412105, Maharashtra delivers an array of customized storage systems that are safe, easy to use, save space, and attractive.
AIL is an ISO 9001:2015, 14001:2015, 45001:2018 and BIFMA-certified storage solution manufacturing company. Its commitment to innovation, excellence, quality, and customer service has ensured consistent growth. Its compact products with simple designs facilitate transport and assembly at the site. They are easy to operate and maintain, and beautifully become a part of clients’ workspace, enhancing its ambience. AIL has designed and delivered storage solutions for the automobile industry, e-commerce companies, the food industry, logistics companies, engineering companies, pharmaceutical organizations, educational institutes, IT companies, etc. In Fiscal Year 2023, it has served over 150 clients covering 10 states in different industries with repeat orders. As of the date of filing this offer document, it had 16 employees on its payroll. It employs contract labourers as and when needed. As of May 31, 2023, it had an order book of Rs. 5 cr.
Its client list includes Shoppers’ Stop, Thermax, Mahindra Group, Bajaj, Chitale Bandhu, Baskin & Robbins, JSW, BEL, Kalyani Group, etc.
ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden IPO of 1341600 equity shares of Rs. 10 each at a fixed price of Rs. 96 per share to mobilize Rs. 12.88 cr. The issue opens for subscription on July 03, 2023, and will close on July 06, 2023. The minimum application to be made is for 1200 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 26.33% of the post-IPO paid-up capital of the company. AIL is spending Rs. 0.44 cr. for this IPO process. From the net proceeds, it will utilize Rs. 9.95 cr. for working capital, and Rs. 2.49 cr. for general corporate purposes. The company has reserved 67200 shares for market maker, 133200 shares for shareholders of ATL, 571200 shares for NIIs and 570000 shares for Retail investors.
Finshore Management Services Ltd. is the sole lead manager and Cameo Corporate Services Ltd. is the registrar of the issue. Nikunj Stock Brokers Ltd. is the market maker for the company.
Having issued initial equity shares at par, the company issued further equity shares in the price range of Rs. 38.50 – Ra. 115 per share between March 2022 and March 202. It has also issued bonus shares in the ratio of 11 for 1 in May 2023. The average cost of acquisition of shares by the promoters is Rs. 5.54 per share.
Post-IPO, AIL’s current paid-up equity capital of Rs. 3.75 cr. will stand enhanced to Rs. 5.09 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 48.91 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, AIL posted a turnover/net profit of Rs. 3.22 cr. / Rs. 0.08 cr. (FY21), Rs. 7.84 cr. / Rs. 0.31 cr. (FY22), and Rs. 18.23 cr. / Rs. 2.19 cr. (FY23). The sudden boost in top and bottom lines for the pre-IPO year FY23 is attributed to higher capacity utilization based on orders for its expanded product portfolio and repeated demand.
For the last three fiscals, AIL has reported an average EPS of Rs.3.47 and an average RoNW of 44.75%. The issue is priced at a P/BV of 8.31 based on its NAV of Rs. 11.55 as of March 31, 2023, and at a P/BV of 2.84 based on its post-IPO NAV of Rs. 33.79 per share.
If we attribute FY23 earnings to post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 22.30. Thus, the issue appears fully priced based on its super FY23 performance.
DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy post-listing, 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 35th mandate from Shreni Shares in the last six fiscals (including the ongoing one). Out of the last 10 listings, 4 opened at discount and the rest listed at premiums ranging from 16.67% to 150% on the listing date. The merchant banker has a poor track record.
Conclusion / Investment Strategy
Though the company is in a highly competitive and fragmented segment, it has improved its market share and is confident of maintaining the trends going forward. An investor-friendly gesture of reserved quota for ATL stakeholders is a welcome step. Post-IPO small equity base indicates a longer gestation period for migration to the mainboard. Though the issue appears fully priced, well-informed investors may consider parking funds for the medium to long term.
Review By Dilip Davda on Jun 29, 2023
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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