Courtesy: https://www.chittorgarh.com/
Review By Dilip Davda on February 20, 2025
• The company is engaged in the business of providing co-working and managed office space.
• It posted growth in its top and bottom lines.
• The company is operating in a highly competitive and fragmented segment.
• Based on its recent financial performance, the issue appears aggressively priced.
• Small paid up equity capital post IPO indicates longer gestation period for migration.
• Well-informed investors may park moderate funds for medium to long term.
ABOUT COMPANY:
Nukleus Office Solutions Ltd. (NOSL) is co-working and managed office space provider which provides range of fully furnished, flexible workspaces, dedicated desks, private cabins, meeting rooms, innovative spaces, start-up zones, virtual office etc. in Delhi NCR region. Its range of office solutions cater to diverse range of occupants including start-ups, SMEs, large enterprises, professionals, and entrepreneurs. The company also offers fully serviced and managed workspace solution for enterprises ranging from 50-500 seats.
As of December 31, 2024, it had 7 centres with flexible workspaces and also manage 4 Managed Offices in Delhi NCR region with an aggregate of 2,796 total seats operating with occupancy of 88.48%.
Flexible office space has long been a viable solution for freelancers, remote workers, and start-ups. Now it is rapidly gaining ground among large enterprises / corporates / MNCs because of its flexibility, speed and capital deferral benefits not widely available through traditional leasing. As India’s capital, with strong trade and commerce environment and excellent employment opportunities, Delhi has attracted people from all over India. Further, accelerated demand for flexible workspaces due to emergence of Gurgaon and Noida as the IT / ITES hub of North India and increased number of start-up businesses has enabled the Delhi NCR see growth in the flexible workspace segment. As of December 31, 2024, it had 30 employees on its payroll.
According to the management, recent acquisition of leased premises will be deployed on rents and fresh pull of working capital will increase their offerings that will get translated in higher top and bottom lines in coming years. They have many blue chip customers in busy business centres in Delhi and NCR region. The valuations do mirror all these developments.
ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden IPO of 1354800 equity shares at a fixed price of Rs. 234 per share to mobilize Rs. 31.70 cr. The issue opens for subscription on February 24, 2025, and will close on February 27, 2025. The minimum number of shares to be applied is for 600 shares and in multiples thereon, thereafter. The promoters are contributing to the tune of 289800 shares (worth Rs. 6.78 cr.) in the IPO. Post allotment, shares will be listed on BSE SME. The issue constitutes 26.41% of the post-IPO paid-up capital of the company. The company is spending Rs. 3.01 cr. for the equity issue, and from the net proceeds, the company will utilize Rs. 22.96 cr. for capex on establishment of new centers, Rs. 0.34 cr. for building technology platform, Rs. 0.50 cr. for advertisement expenses for enhancing visibility of brand, and Rs. 4.89 cr. for general corporate purposes. Higher spending for equity issue indicates funding arrangement and the issue is fully structured.
The IPO is solely lead managed by Sundae Capital Advisors Pvt. Ltd., MAS Services Ltd., is the registrar to the issue. Nikunj Stock Brokers Ltd. is the Market Makers for the company. The issue is underwritten to the tune of 85% by Nikunj Stock Brokers, and 15% by Sundae Capital.
Having issued initial equity shares at par value, the company issued further equity shares at a price of Rs. 188 per share in August 2024. It has also issued bonus shares in the ratio of 2.25 for 1 in January 2024. The average cost of acquisition of shares by the promoters is Rs. NIL, and Rs. 8.57 per share.
Post-IPO, company’s current paid-up equity capital of Rs. 2.68 cr. will stand enhanced to Rs. 4.03 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 94.35 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 3.42 cr. / Rs. 0.11 cr. (FY22), Rs. 10.90 cr. / Rs. 0.67 cr. (FY23), and Rs. 17.16 cr. / Rs. 1.20 cr. (FY24). For 9M of FY25 ended on December 31, 2024, it earned a net profit of Rs. 1.51 cr. on a total income of Rs. 21.36 cr. The quantum jump in top and bottom lines from FY24 onwards raises eyebrows and concern over its sustainability.
For the last three fiscals, the company has reported an average EPS of Rs. 14.51 and an average RoNW of 42.10%. The issue is priced at a P/BV of 7.20 based on its NAV of Rs. 32.52 as of December 31, 2024, and at a P/BV of 2.35 based on its post-IPO NAV of Rs. 100.22 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 46.80. Based on FY24 earnings, the P/E stands at 78.79. Based on its recent earnings, prima facie, the issue relatively appears aggressively priced. Total borrowing of Rs. 13.58 cr. as of December 31, 2024, also raises alarm.
For the reported periods, the company has posted PAT margins of 3.12% (FY22), 6.18% (FY23), 6.99% (FY24), 7.08% (9M-FY25), and RoCE margins of 39.68%, 31.94%, 14.39%, 11.68%, for the referred periods, respectively.
DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy, based on its financial performance and future prospects.
COMPARISION WITH LISTED PEERS:
As per the offer document, the company has shown Awfis Space, Kontor Space, and EFC (India), as their listed peers. They are trading at a P/E of 144, 20.7, and 20.5 (as of February 20, 2025). However, they are not truly comparable on an apple-to-apple basis. This compare appears to be an eyewash.
MERCHANT BANKER’S TRACK RECORD:
This is the 3rd mandate from Sundae Capital in the last two fiscals. Out of the last 2 listing, all opened with premiums ranging from 6.49% to 27.59% on the date of listing.
Conclusion / Investment Strategy
The company is engaged in the business of providing co-working and managed office space. It posted growth in its top and bottom lines. The company is operating in a highly competitive and fragmented segment. Based on its recent financial performance, the issue appears aggressively priced. Small paid up equity capital post IPO indicates longer gestation period for migration. Well-informed investors may park moderate funds for medium to long term.
Review By Dilip Davda on February 20, 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/
