Vinsys IT NSE SME IPO review (May apply)
• VINSYS is engaged in IT business providing training and certifications.
• It marked losses for FY22, but posted spectacular performance for FY23.
• Based on its bumper earnings for FY23, the issue appears reasonably priced.
• The sustainability of such super margins going forward is a major concern.
• It is in a highly competitive and fragmented segment.
• Well-informed investors may consider parking funds for the medium term.
ABOUT COMPANY:
Vinsys IT Services India Ltd. (VINSYS) is a part of the VINSYS group. It is engaged in IT business. Its core competence includes Training and Certifications, Digital Learning, Project Management, and technology training. Vinsys IT, an ISO 9001:2015 certified organization, is dedicated to becoming an accredited training service provider to meet the growing demand for training and workforce development.
VINSYS specializes in corporate training and consulting across a broad range of domains. Its certifications of CMMIDEV/3 and ISO 27001: 2013 demonstrate adherence to strict quality control standards.
The company is a trusted partner with CompTIA, Hybris Software, EC-Council, Red Hat, Oracle, CISCO, IBM, PECB, Autodesk, Skillsoft, AWS, PMI, PRINCE2, ISACA, ITIL, PeopleCert, Citrix and Microsoft in more than 30 countries, with a strong presence in India, USA, UAE. It also has footprints by delivering services in Saudi Arabia, Oman, Qatar, Australia, Kenya, Tanzania, Singapore, and Malaysia. As of the date of this Red Herring Prospectus, the company offers 326 courses across 17 domains. In addition to certifications and training offerings, it provides a comprehensive end-to-end solution by delivering robust and advanced digital learning solutions.
Till the date of this Red Herring Prospectus, the company has catered to corporate clients across continents which, includes IBM, Atos, Infosys, HSBC, EY, Siemens, Dubai Airports, Dubai Custom & Synechron. As of April 30, 2023, it had 206 employees on its payroll.
ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden IPO of 3894000 equity shares of Rs. 10 each via a book-building route. It has announced a price band of Rs. 121 – Rs. 128 per share and mulls mobilizing Rs. 49.84 cr. at the upper cap. The issue opens for subscription on August 01, 2023, and will close on August 04, 2023. The minimum application to be made is for 1000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.53% of the post-IPO paid-up capital of the company.
After reserving 195000 shares for the market maker, from the rest portion, the company has allocated not more than 50% for QIBs, not less than 15% shares for HNIs and not less than 35% shares for Retail investors.
From the net proceeds of the IPO fund, it will utilize Rs. 24.16 cr. for working capital, Rs. 3.90 cr. for repayment of loans to a subsidiary, and Rs. 4.10 cr. for loans to subsidiaries and the rest for general corporate purposes. Fund utilization by way of loans to subsidiary raise eyebrows.
Beeline Capital Advisors Pvt. Ltd. is the sole lead manager and Link Intime India Pvt. Ltd. is the registrar of the issue. Sunflower Broking Pvt. Ltd. is the market maker for the company.
Having issued initial equity shares at par, the company issued further equity shares at a price of Rs. 126 in May 2023. It has also issued bonus shares in the ratio of 9 for 1 in February 2023. The average cost of acquisition of shares by the promoters is Rs. 0.02 and Rs. 2.89 per share.
Post-IPO, VINSYS’s current paid-up equity capital of Rs. 10.78 cr. will stand enhanced to Rs. 14.68 cr. Based on the upper cap of IPO pricing, the company is looking for a market cap of Rs. 187.88 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, VINSYS has (on a consolidated basis) posted a total revenue/net profit – (loss) of Rs. 20.41 cr. / Rs. 0.35 cr. (FY21), Rs. 32.03 cr. / Rs. – (0.52) cr. (FY22), and Rs. 96.32 cr. / Rs. 15.01 cr. (FY23). The bumper performance for FY23 raises eyebrows and concerns over sustainability as it is operating in a highly competitive segment.
For the last three fiscals, the company has reported an average EPS of Rs. 7.39 and an average RoNW of 28.71%. The issue is priced at a P/BV of 5.18 based on its NAV of Rs. 24.73 as of March 31, 2023, and at a P/BV of 2.22 based on its post-IPO NAV of Rs. 57.53 per share (at the upper cap).
If we attribute FY23 bumper earnings to post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 12.51, and on the basis of FY22 earnings, it is at a negative P/E. This indicates that the issue is fully priced.
The jump in PAT margins from 1.71% (FY21) to 15.83% (FY23), as well as RoE from 4.35% to 94.17% (for the said periods), are raising eyebrows and concern over sustainability.
DIVIDEND POLICY:
The company has not declared any dividends for the reported 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 shown NIIT Ltd., and Aptech Ltd. as their listed peers. They are currently trading at a P/E of 25.10 and 24.25 (as of July 28, 2023). However, they are not truly comparable on an apple-to-apple basis.
MERCHANT BANKER’S TRACK RECORD:
This is the 16th mandate from Beeline Capital in the last two fiscals (including the ongoing one). Out of the last 10 listings, 1 opened at par and the rest listed at premiums ranging from 0.39% to 85.71% on the listing date.
Conclusion / Investment Strategy
The company operates in a highly competitive and fragmented segment with many players around. The sudden boost in its top and bottom line for FY23 raise eyebrows and concern over the sustainability going forward. It posted a loss for FY22 and then the sudden jump in top and bottom lines in pre-IPO year appears to be window dressing. Due to such super earnings, the issue appears reasonably priced. Well-informed investors may consider parking funds for the medium term.
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. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the past, SME IPOs drew the attention of investors across the board. 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 own risk. The above information is based on information available as on date coupled with market perceptions. The Author has no plans to invest in this offer.
(SEBI registered Research Analyst-Mumbai).
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 detail fundamental and financial analysis of companies coming up with IPO 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.
Email: dilip_davda@rediffmail.com
Courtesy: https://www.chittorgarh.com/
