Infurnia Holdings BSE Startup SME IPO review (Avoid)

•    It’s a mega Startup IPO from a loss-making company.
•    Despite negative earnings and NAV, it is coming with a hefty premium.
•    According to market circles, this may be the PayTM in the making for Startup Platform.
•    Lead Manager has an average track record.
•    Better stay away from this exorbitantly priced IPO.

PREFACE:
BSE announced starting a platform for Startup SME Listing in June 2018, but it marked the first two IPO only in August 2019 and since then we have witnessed only 14 Startup IPOs entry for this platform. Now we have the 15th Startup IPO opening in the first week of September 2022. Eventually, after a long, it’s once again Finshore Management that is bringing Startup Mandate after a big gap. However, while the same merchant banker is bringing below Rs. 5 cr. IPOs for SMEs, it is bringing Rs. 38 cr. IPO for this Startup platform has surprised one and all. It is really surprising how BSE gives a nod to such pathetic companies.

ABOUT COMPANY:
Infurnia Holdings Ltd. (IHL) – (formerly known as Infurnia Furnishings Pvt. Ltd.) is an architecture and interior design software Company. The company was set up in 2014 and owns, developed, and operates a cloud-based platform that allows professionals to design buildings, interiors, and modular kitchens. Infurnia provides a viable alternative to architects looking to work in a more collaborative environment, not just in terms of the designs but also how that design data is shared across the various stakeholders in a project.

A core pillar of Infurnia’s vision is to create an integrated platform where all the stakeholders involved in the design, build and operate phases of a building lifecycle can seamlessly communicate over the same digital design with each other; from the architects designing the building to the engineers performing strength analysis; from the site contractors developing the project to the facilities managers operating it; from the interior designers to the end customers; from the furniture retailers to the modular furniture manufacturers; This will enhance productivity and bring digital accountability on every stakeholder’s action across disciplines throughout the life cycle of the project.

Though IHL released its first such product way back in 2015, and further release of few more products thereafter till date, it has not marked any growth or notable performance as can be seen from its financial data.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its need for investment in wholly owned subsidiary (Rs. 29.03 cr.), general corporate purposes (Rs. 8.68 cr.), IHL is coming out with a maiden IPO of 38200000 equity shares of Re. 1 each at a fixed price of Rs. 10 per share to mobilize Rs. 38.20 cr. The issue opens for subscription on September 06, 2022, and will close on September 09, 2022. Minimum application is to be made for 10000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on the BSE Startup SME platform. The issue constitutes 26.32% of the post-issue paid-up capital of the company. IHL is spending Rs. 0.49 cr. for this IPO process.

The issue is solely lead managed by Finshore Management Services Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue. Nikunj Stock Brokers Ltd. is the market maker for this company.

Having issued initial equity at par, the company issued/converted further equity in the price range of Rs. 10 to Rs. 728 per share (based on its FV of Re. 1 per share) between June 2015 and June 2022. It has also issued bonus shares in the ratio of 105 for 1 in March 2022. Thanks to hefty premiums collected that helped the company for such a liberal bonus issue despite losses. The average cost of acquisition of shares by the promoters is Rs. Negligible per share. 

Post-IPO, IHL’s current paid-up equity capital of Rs. 10.70 cr. will stand enhanced to Rs. 14.52 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 145.15 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, IHL has (on a consolidated basis) posted a turnover/net profit (loss) of Rs. 0.02 cr. / Rs. – (2.06) cr. (FY20), Rs. 0.26 cr. / Rs. – (2.65) cr. (FY21) and Rs. 0.14 cr. / Rs. – (2.77) cr. (FY22). Thus a negligible financial performer with carried forward losses wants Rs. 38 cr. from the market for its operations. 

For the last three fiscals, it has posted an average EPS of Rs. – (0.25) and an average RoNW of – (29.07%). The issue is priced at a P/BV of 20 based on its NAV of Rs. 0.50 as of March 31, 2022, and at a P/BV of 3.23 based on its post-IPO NAV of Rs. 3.10 (for Re. 1 paid up FV).

As the company has negative earning data, it is priced at a negative P/E. 

DIVIDEND POLICY:
The company has not paid any dividends for the covered 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 30th mandate from Finshore Management in the last five fiscals (including the ongoing one). Out of the last 10 listings, 1 opened at discount, 2 at par, and the rest with premiums ranging between 0.9%% to 150% on the day of listing.