Exhicon Events Media BSE SME IPO review (May apply)
• EEMSL is providing all kinds of services for exhibitions, marketing and media events.
• It has posted spectacular growth in its top and bottom lines for the reported periods.
• The company is laying major focus on the B2B segment that has higher margins.
• Based on FY23 annualized earnings, the issue appears lucratively priced.
• It’s a first mover in the segment and may fetch fancy post listing.
• Well-informed investors may consider investment for the medium to long-term rewards.
PREFACE:
Off late we are witnessing the filing of offer documents with incomplete or half-heartedly cooked financial data. In particular, the BRLM of this IPO which has restarted its merchant banking activities after a gap of almost three years has erred on this count for its recent two IPOs. For this IPO it has given NAV data as of September 30, 2022, (in RHP as well as IPO ad), based on old equity capital of Rs. 0.01 cr. and for restated data on post bonus/right equity of Rs. 8.58 cr., it has simply given * note of the change in NAV without specific restated figure, but surprisingly showing post-IPO NAV based on lower and upper price bands. When they could give this data, why they ignored the revised restated NAV data as of September 30, 2022? Perhaps they know the exact reason for the same. On the other hand, this merchant banker has moved a step further to set new trends with a 10% quota for market-making by the group company as a market maker. Will this be a boon for investors is a million-dollar question.
Note: So far we have seen a trend of 5% reservation for the market maker (as a fixed lower cap for such reservation) as this aspect has no upper limit prescribed, the lead manager seems taking benefit to mark a new trend on this count.
ABOUT COMPANY:
Exhicon Events Media Solutions Ltd. (EEMSL) is engaged in providing a full range of products and services for the Exhibitions, Conferences and Events industry. Its solutions include Media to Integrated Marketing Solutions, Temporary to Permanent Event Infrastructure and Management to Organizing. Over the period the company has successfully developed itself into End to End Services provider for the Exhibition and Event Industry.
EEMSL provides turnkey events and trade fair constructs for small to large graphs of B2B and B2C fairs and events. It also helps clients in getting the requisite permissions and licenses for the events. Its clients include various state Governments, domestic associations and international clients. The company also provides services to various domestic trade fair organizers. It has worked for various industries including Hospitality, F&B, Non-Chemical FMCG, International Trading and Healthcare. The company provides in-house infrastructure for large graph events to integrated marketing solutions. EEMSL’s forte lies in effectively assimilating various project aspects and ensuring operational efficiencies and delivering optimum value for all stakeholders. Its exhibitions include B2B, B2C and also hybrid events.
The company is expanding into new markets where it could be subject to additional risks associated with establishing and conducting operations, including compliance with a wide range of laws, regulations and practices including uncertainties associated with the changes as per the law of the land.
The company also supplies large span steel AC structures, octanorm systems, flooring and carpets, modular registration setup, furniture and general lighting, sound light and video, branding & signage CCTV and hardware setup, huge modular stocks of outdoor and indoor event venue construct spread over 5 cities of India. It also makes show bulletins for the Distribution of Content, Design and Printing of Bulletins. The company also caters to Outdoor, Print, Radio & Digital Media for Trade Fairs and Events, the services of this vertical include Media Planning, Media Buying, Creative Designing and Media releasing for Print, Electronics, Outdoors and Digital Advertising Mediums across cities in the country. As of the date of filing this offer document, it had 27 employees on its payroll.
ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden IPO of 3300000 equity shares of Rs. 10 each via the book-building route. It has announced a price band of Rs. 61 – Rs. 64 per share. At the upper cap, EEMSL mulls mobilizing Rs. 21.12 cr. The issue opens for subscription on March 31, 2023, and will close on April 05, 2023. The minimum application to be made is for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 27.79% of the post-issue paid-up capital of the company. From the net proceeds of the IPO money, it will utilize Rs. 10.28 cr. for the acquisition of exhibition materials, Rs. 5.00 cr. for working capital and the rest for general corporate purposes. Perhaps for the first time, we are seeing a reservation of a market maker portion of 10% by a BRLM group company for market making and are trying to set a new trend. From the net proceeds excluding market making portion, EEMSL has allocated 50% for QIBs, 15 for HNIs and 35% for Retail investors.
Share India Capital Services Pvt. Ltd. is the sole BRLM and Link Intime India Pvt. Ltd. is the registrar of the issue. Share India group’s Share India Securities Ltd. is the market maker for the company.
Having issued initial equity shares at par, the company issued rights equity shares at Rs. 74 per share in November 2022. It has also issued bonus shares in the ratio of 550 for 1 in November 2022. The average cost of acquisition of shares by the promoters is Rs. NIL per share.
Post-IPO, EEMSL’s current paid-up equity capital of Rs. 8.58 cr. will stand enhanced to Rs. 11.88 cr. Based on the upper cap of the IPO price, the company is looking for a market cap of Rs. 76.00 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, EEMSL has (on a consolidated basis) posted a total turnover/net profit of Rs. 9.49 cr. / Rs. 0.12 cr. (FY21), and Rs. 46.51 cr. / Rs. 4.28 cr. (FY22). For H1 of FY23 ended on September 30, 2022, it earned a net profit of Rs. 4.70 cr. on a turnover of Rs. 29.31 cr. For FY20, on a standalone basis, it posted a turnover of Rs. 1.80 cr. with a loss of Rs. 0.64 cr.
For the last three fiscals, EEMSL has reported an average EPS of Rs. 1.29 and an average RoNW of – (55.08%). The issue is priced at a P/BV of 0.007 based on its NAV of Rs. 9304.50 as of September 30, 2022, (based on a paid-up equity capital of Rs. 0.01 cr.) and at a P/BV of 1.95 based on its post IPO NAV of Rs. 32.83 per share. (at the upper cap). However, as per offer documents and IPO ad, its NAV Data is missing info on the basis of ex-bonus/ex-rights equity (refer to page no. 62 of the offer document. (Based on the information received after the telephonic call the restated NAV as of September 30, 2022, stands at Rs. 11.41 and based on this the IPO is at a P/BV of 5.61.)
For the reported periods of the offer document, its PAT margins improved from 1.24% for FY21 to 16.05% for FY23 H1. Similarly, its RoE and RoCE improved from 62.21% to 67.65% and 33.94% to 144.58% respectively for the corresponding periods. For the said period, its no. of order grew from 39 to 78.
If we annualize FY23 earnings and attribute it to post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 8.08 thus the issue appears lucratively priced, while based on its FY22 earnings, the P/E stands at 17.73. The management is confident of maintaining trends of recent performance as it is focusing on B2B contracts that have higher margins.
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 4th mandate from Share India Capital in the last four fiscals (including the ongoing one). Out of the last 2 listings, 1 opened at par and the other with a premium of 1.82%. Thus the BRLM has an average track record.
Conclusion / Investment Strategy
The company is engaged in providing exhibition/marketing and media-related services with long-term contracts. It is focusing largely on a B2B model that carries higher margins. Based on FY23 annualized earnings, the issue is lucratively priced. It is a first mover in the segment and may fetch a fancy post listing. Well-informed investors may consider parking of funds for the medium to long term.
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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