Courtesy: https://www.chittorgarh.com/
Review By Dilip Davda on February 15, 2025
- The company is in the business of distributing mobile phones, accessories and related products.
• It has exclusive rights of distribution for Apple, Nothing and other brands for many states.
• The company posted steady growth in its top and bottom lines for the reported periods.
• Based on recent financial performance, the issue appears fully priced.
• Well-informed investors may park funds for the medium to long term.
ABOUT COMPANY:
H P Telecom India Ltd. (HTIL) initially focused solely on distributing mobile phones, accessories, and related products. the company secured exclusive distribution rights for brands such as Sony LED TVs and Mobiles and other mobile brands, for the different Regions of Gujarat during the fiscal year 2014-15. Additionally, in the same financial year, the company expanded its product portfolio to include LCD/LED home theatres, indoor/outdoor air conditioners, and other home appliances.
Over subsequent years, the promoters continuously diversified into new product lines in Mobile like Nokia, Micro Max, Intex, Gionee, Karbonn Mobiles to broaden their offerings and geographical reach. In the fiscal year 2015-16, the company further expanded its distribution portfolio by obtaining exclusive rights for Jio products in the West Region Trade Partner for Gujarat. In 2016, Apple made a strategic move to establish its presence in India, recognizing the immense potential of the market. Sensing the opportunity HTIL secured the distribution rights for the Vapi Region, aligning with Apple’s vision to expand its reach and provide cutting-edge technology solutions to customers. This distribution ship underscores its commitment to delivering superior products and services, ensuring that customers in the Vapi Region have access to the latest innovations from one of the world’s most renowned technology brands. By joining forces with Apple Inc., it aims to elevate the standard of technological offerings in region and meet the evolving needs of clientele.
Currently, the company operates as the exclusive distributor of Apple products across significant territories, including Madhya Pradesh & Chhattisgarh, select cities in Uttar Pradesh, and major urban centers in Gujarat. It proudly offers Apple’s iconic range of devices, comprising the iPhone, iPad, Mac, Apple Watch, and more, catering to the discerning tech-savvy consumers in these regions. While Apple products remain the cornerstone of distribution portfolio, the company also engages in the distribution of select other brands to diversify offerings and cater to a broader customer base. In FY 2023-24, it secured the exclusive distribution rights for ‘Nothing’ in the state of Gujarat, allowing it to enhance product line-up with innovative offerings.
Further expanding market footprint, it commenced trading operations in Karnataka in the current financial year. Its trading activities in Karnataka include Apple accessories, Nothing smartphones, and related accessories. However, the company has not entered into any formal distribution agreement with any brand for trading operations in Karnataka. Instead, it procures products through authorized channels and engage in trading to capitalize on emerging market opportunities in the region. Despite this diversification, Apple products continue to drive a significant portion of revenue, contributing over 80% to overall earnings. The remaining revenue is generated through the sale of other brands, including JIO Recharge, JIO Phones, INFINIX Mobiles, etc. This balanced approach helps it stay strong in the market while taking advantage of new opportunities in the fast-changing technology world. As of September 30, 2024, it had 7 employees on its payroll, and 84 employees on contractual basis.
ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden IPO of 3169200 equity shares at a fixed price of Rs. 108 per share to mobilize Rs. 34.23 cr. The issue opens for subscription on February 20, 2025, and will close on February 24, 2025. The minimum number of shares to be applied is for 1200 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.60% of the post-IPO paid-up capital of the company. The company is spending Rs. 0.73 cr. for this IPO process, and from the net proceeds of the issue, the company will utilize Rs. 30.00 cr. for working capital, and Rs. 3.50 for general corporate purposes.
The IPO is solely lead managed by Interactive Financial Services Ltd., Bigshare Services Pvt. Ltd., is the registrar to the issue. Aftertrade Broking Pvt. Ltd. is the Market Makers for the company.
Having issued initial equity shares at par value, the company issued additional equity shares in the price range of Rs. 11 – Rs. 23.80 per share between February 2016, and March 2022. It has also issued bonus shares in the ratio of 1 for 2 in January 2024. The average cost of acquisition of shares by the promoters is Rs. 7.33, Rs. 7.52, and Rs. 10.44 per share.
Post-IPO, company’s current paid-up equity capital of Rs. 8.75 cr. will stand enhanced to Rs. 11.92 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 128.68 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 292.55 cr. / Rs. 2.13 cr. (FY22), Rs. 638.48 cr. / Rs. 6.35 cr. (FY23), and Rs. 1079.78 cr. / Rs. 8.61 cr. (FY24). For H1 of FY25 ended on September 30, 2024, it earned a net profit of Rs. 5.24 cr. on a total income of Rs. 594.19 cr. The quantum jump in top and bottom lines from FY23 onwards raises eyebrows and concern over its sustainability.
For the last three fiscals, the company has reported an average EPS of Rs. 9.61 and an average RoNW of 27.40%. The issue is priced at a P/BV of 2.75 based on its NAV of Rs. 39.28 as of September 30, 2024, and at a P/BV of 1.88 based on its post-IPO NAV of Rs. 57.56 per share.
If we attribute FY25 annualized super earnings on post-IPO fully diluted equity capital, then the asking price is at a P/E of 12.29. Based on FY24 earnings, the P/E stands at 14.96. Based on its recent earnings, prima facie, the issue relatively appears fully priced.
For the reported periods, the company has posted PAT margins of 0.73% (FY22), 1.00% (FY23), 0.81% (FY24), 0.90% (H1-FY25), and RoCE margins of 31.17%, 62.41%, 66.62%, 28.99%, for the referred periods, respectively.
DIVIDEND POLICY:
The company has not declared any dividends for the last five fiscals. It has already adopted a dividend policy in March 2024, based on its financial performance and future prospects.
COMPARISION WITH LISTED PEERS:
As per the offer document, the company has shown Bhatia Communications, and Jay Jalaram Techno., as their listed peers. They are trading at a P/E of 21.6, and 42.6 (as of February 14, 2025). However, they are not truly comparable on an apple-to-apple basis.
MERCHANT BANKER’S TRACK RECORD:
This is the 23rd mandate from Interactive Financial in the last three fiscals. Out of the last 12 listings, 4 opened at discount, and the rest opened with a premiums ranging from 2.50% to 90% on the date of listing.
Conclusion / Investment Strategy
HTIL is in the business of distributing mobile phones, accessories and related products. It has exclusive rights of distribution for Apple, Nothing and other brands for many states. The company posted steady growth in its top and bottom lines for the reported periods. Based on recent financial performance, the issue appears fully priced. Well-informed investors may park funds for the medium to long term.
Review By Dilip Davda on February 15, 2025
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. My reviews do not cover GMP market and operators game plans. Readers must consult a qualified financial advisor before making any actual investment decisions, based the on information published here. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the recent past, SME IPOs drew the attention of investors across the board and lead to seer madness. 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 their own risk. The above information is based on information available as of date coupled with market perceptions. The Author has no plans to invest in this offer.
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 detailed fundamental and financial analysis of companies coming up with IPOs 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.
(Dilip Davda -SEBI registered Research Analyst-Mumbai,
Registration no. INH000003127 (Perpetual)
Email id: dilip_davda@rediffmail.com ).
Courtesy: https://www.chittorgarh.com/
