Plada Info NSE SME IPO review (Apply)

Plada Info NSE SME IPO review (Apply)

The company is a tailored BPO service provider with having Pan India presence.
• It marked growth in its top and bottom lines for FY21 – FY22 despite Covid impact.
• FY23 performance indicates bright prospects for the company ahead.
• The issue appears fully priced based on its FY23 earnings.
• Investors may park funds for long-term rewards.

ABOUT COMPANY:

Plada Infotech Services Ltd. (PISL) specializes in delivering comprehensive Business Process Outsourcing (BPO) services tailored to clients’ specific needs. Its focus is on exceeding delivery standards and providing high-quality solutions using the latest technology and industry best practices. With a team of skilled professionals, the company offers a diverse range of services to support various aspects of clients’ business operations. The company’s business operations span across various regions within India, with a notable concentration of business activities in the states of Maharashtra and Tamil Nadu.

While the company’s presence is Pan-India, a significant portion of its revenue is generated from these two states, showcasing the company’s strong market presence and engagement within these regions. The company currently operates solely within the boundaries of India and does not have any business activities, subsidiaries, or operations in foreign countries. The company’s focus remains on its domestic operations, ensuring efficient service delivery and customer satisfaction within the Indian market. The company maintains well-defined and established business agreements with all of its clients.

As of March 31, 2023, it had 1,519 employees including developers, software engineers, project coordinators, project managers, system administrators, system architects, finance personnel, Sales, Marketing and Content Team, technicians, etc.

ISSUE DETAILS/CAPITAL HISTORY:

The company is coming out with a maiden IPO of 2574000 equity shares of Rs. 10 each at a fixed price of Rs. 48 per share to mobilize Rs. 12.36 cr. The issue opens for subscription on September 29, 2023, and will close on October 05, 2023. The minimum application to be made is for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The offer document is missing the data on equity dilution percentages. (Based on the offer size and the post-IPO market cap, the issue constitutes 30.03% of the post-IPO paid-up capital of the company). PISL is spending Rs. 3.20 cr. for this IPO process and from the net proceeds, it will utilize Rs. 2.89 cr. for working capital, Rs. 3.00 cr. for repayment/prepayment of certain borrowings, Rs. 0.30 cr. for the purchase of laptops and accessories for IT development, and Rs. 2.97 cr. for general corporate purposes.

Indorient Financial Services Ltd. is the sole lead manager and Bigshare Services Pvt. Ltd. is the registrar of the issue. Nikunj Stock Brokers Ltd. is the market maker for the company. Neomile Corporate Advisory Ltd. is the advisor on the issue.

After issuing initial equity shares at par, the company issued bonus shares in the ratio of 19 for 1 in March 2022, 9 for 1 in June 2022, and 2 for 1 in April 2023. The average cost of acquisition of shares by the promoters is Rs. 0.02 per share.

Post-IPO, PISL’s current paid-up equity capital of Rs. 6.00 cr. will stand enhanced to Rs. 8.57 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 41.16 cr.

FINANCIAL PERFORMANCE:

On the financial performance front, for the past three fiscals, the company has (on a consolidated basis) posted a total revenue/net profit of Rs. 44.61 cr. / Rs. 0.67 cr. (FY21), Rs. 48.87 cr. / Rs. 1.10 cr. (FY22), and Rs. 62.75 cr. / Rs. 2.34 cr. (FY23).

For the last three fiscals, PISL has reported an average EPS of Rs. 2.74 and an average RoNW of 25.28%. The issue is priced at a P/BV of 3.82 based on its NAV of Rs. 12.55 as of March 31, 2023. The offer document is missing post-IPO NAV data.

If we attribute FY23 earnings to the post-IPO fully diluted paid-up equity capital of the company, then the asking price is at a P/E of 17.58. Thus the issue appears fully priced.

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.

COMPARISON WITH LISTED PEERS:

As per the offer document, the company has shown Firstsource Solutions and Eclerx Services as their listed peers. They are trading at a P/E of 47.46, and 22.80 (as of September 27, 2023). However, they are not comparable on an apple-to-apple basis.

MERCHANT BANKER’S TRACK RECORD:

This is the 6th mandate from Indorient Financial in the last three fiscals (including the ongoing one). Out of the last 2 listings, 1 opened at a discount and 1 at a premium of 5.86% of the date of listing. Thus it has a poor track record.

Conclusion / Investment Strategy

The company is a tailor-made BPO service provider with having Pan India presence. It marked growth in its top and bottom lines for the reported periods. Based on FY23 earnings, the issue appears fully priced. Investors may park funds for long-term rewards.

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