Maxposure NSE SME IPO review (May apply)

• The company is a new age media and entertainment company.
• After listless performances for FY21 and FY22, it marked bumper performance.
• Based on its last 18 months’ performance, the issue appears fully priced.
• Considering the changed lifestyle and the increasing air travel, this company is perhaps poised for bright prospects.
• Well-informed investors may park funds for the medium to long term rewards.

PREFACE:
The company is a new age media and entertainment company with major thrust on inflight entertainment. This segment is very new and will need detailed information and its success going forward. The sudden boost in its bottom lines for the last 18 months raises eyebrows. The sustainability of such margins going forward is a major concern.

ABOUT COMPANY:
Maxposure Ltd. is a diverse new-age media and entertainment company offering 360-degree services across multiple distribution platforms. Specializing in customized solutions, the house of Maxposure stands on four pillars: Inflight Entertainment, Content Marketing, Technology and Advertising.

In over 4,500 airlines around the world, only around 175 offer Inflight Entertainment to their customers due to the high cost of the Inflight Screens and the annual maintenance costs. The Company identifies this void as an opportunity and has been investing in to building a wireless streaming server (“WMS”) which shall enable around 100 devices (Phone, tablets, Laptops) to stream content onboard at high speed. The AeroHub WMS will help airlines to offer IFE to their customers at fraction of cost to traditional Inflight Screens. It is aimed to reduce the cost of WMS compared to other similar solutions around the world, thereby disrupting the market.

The Company’s advertising services enables its clients to monetize their marketing collaterals and generate revenues and acts as a differentiator compared to other players in respective markets. It has its own sales team in 6 major cities in India and works with advertising reps in major hubs (Singapore, Dubai, London, Paris, New York, Chicago) around the world.

The company has established offices in Delhi, Mumbai, Bengaluru, and Kolkata. It has also successfully launched and managed projects outside India, particularly in the Indian subcontinent and the Middle East. These projects include Gulf Air (Kingdom of Bahrain), Air Arabia (Sharjah), VFS (UAE), Jazeera Airways (Kuwait), among others. As of October 31, 2023, it had 81 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 6140000 equity shares of Rs. 10 each to mobilize Rs. 20.26 cr. at the upper cap. The company has announced a price band of Rs. 31 -Rs. 33 per share. The issue opens for subscription on January 15, 2024, and will close on January 17, 2024. The minimum application to be made is for 4000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.99% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO funds, it will utilize Rs. 8.50 cr. for working capital, Rs. 3.50 cr. for obtaining certifications from FAA, EASA and AeroHub, Rs. 2.50 cr. for repayment/prepayment of certain borrowings and the rest for general corporate purposes.

The issue is solely lead managed by GYR Capital Advisors Pvt. Ltd. and Bigshare Services Pvt. Ltd. is the registrar of the issue. Giriraj Stock Broking Pvt. Ltd. is the market maker for the company.

Having issued initial equity capital at par value, the company issued further equity shares at a fixed price of Rs. 300 per share in March 2010. It has also issued bonus shares in the ratio of 0.09 for 1 in August 2015, and 4 for 1 in October 2023. The average cost of acquisition of shares by the promoters is Rs. NIL, and Rs. 0.49 per share.

Post-IPO, company’s current paid-up equity capital of Rs. 16.60 cr. will stand enhanced to Rs. 22.74 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 75.05 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 22.47 cr. / Rs. 0.36 cr. (FY21), Rs. 33.21 cr. / Rs. 0.35 cr. (FY22), Rs. 33.56 cr. / Rs. 4.41 cr. (FY23). For H1 of FY24 ended on September 30, 2023, it earned a net profit of Rs. 3.71 cr. on a total income of Rs. 20.59 cr.
For the last three fiscals, it has reported an average EPS of Rs. 1.44 and an average RoNW of 7.76%. The issue is priced at a P/BV of 3.15 based on its NAV of Rs. 10.48 as of September 30, 2023, and at a P/BV of 1.36 based on its post-IPO NAV of Rs. 24.20 per share (at the upper cap).

If we attribute annualized FY24 earnings to its post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 10.12 and based on FY23 earnings the P/E stands at 17.01. Thus on the basis of super earnings for the last 18 months, the issue appears fully priced.

For the reported periods, the company has posted PAT margins of 1.80% (FY21), 1.07% (FY22), 13.88% (FY23), 18.39% (H1-FY24), and RoCE margins of 2.73%, 2.50%, 19.55%,15.63% respectively for referred periods.

DIVIDEND POLICY:
The company has not declared any dividends for any reported financial years. It will adopt a prudent dividend policy based on its financial performance and future prospects.

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Crayons Advertising as their listed peer. It is trading at a P/E of 33.30 (as of January 12, 2024). However, they are not comparable on an apple-to-apple basis.

MERCHANT BANKER’S TRACK RECORD:
This is the 20th mandate from GYR Capital in the last three fiscals. Out of the last 10 listings, all listed with premiums ranging from 3.79% to 366.67% on the date of listing.

Conclusion / Investment Strategy
After listless performances for FY21 and FY22, it marked bumper profits with rise in top lines. Considering the changed lifestyle and rising air travel, this company may have bright prospects ahead, but all will depend on future trends. Based on last 18 months working, the issue appears fully priced. The sustainability of margins going forward is a major concern. Well-informed investors may park funds for the medium to long term rewards.

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