AAA Techno NSE SME IPO review (Subscribe for Long Term)

Review By Dilip Davda on Sep 26, 2020

•    ATL engaged in IT security auditing and consulting services.
•    The company has posted constant growth in its bottom lines.
•    Issue is reasonably priced based on P/E and P/BV parameters.
•    ATL is a debt free-dividend paying company.
•    This being first SME mandate from LM, it has no track record.

ABOUT COMPANY:
AAA Technologies Ltd. (ATL) is an information technology and information security auditing and consulting company offering platform that enables organizations to identify the issues of corporate governance of the information system in a computerized environment and execute security controls to safeguard information related system. ATL offers IT audit services like information system audit, cybersecurity, IT assurances and compliance, information security and IT governance to BFSI, Government, Regulatory agencies and public and private sectors organizations.

The company has kept its focus on information security auditing and consulting keeping in view the vast scope of work in the existing and untapped areas. ATL has been able to build its resources capable of auditing operating systems, networking, IDS, web application, ERP, ATM, core banking, forensic, websites, computer crime investigations etc. ATL is an ISO 9001:2015 and ISO 27001:2013 accredited company. It has a team of 64 people located at its Mumbai and Delhi offices.

ATL is one of the 5 companies empanelled/working closely with NICSI (National Informatics Centre Services Inc) and CERT-In (Computer Emergency Response Team). It operates in a largely untapped market, indicating huge growth business potential. This segment has huge entry barriers for new entrants; on account of the sensitive nature of assignments.   'Digital India' initiative of Government of India to accelerate cybersecurity and information technology audit augurs well for ATL. An ever-growing list of cyber frauds and hacking a strong impetus to demand Information technology audit and consulting.

ATL's client list includes renowned names from BFSI, Government, Education, Hospitality, Manufacturing, Healthcare, Refineries, Travel, Infrastructure, Telecom sectors as well as Stock Exchanges, Regulatory Authorities etc.

ISSUE DETAILS/CAPITAL HISTORY:
To meet its plans for expansion and development of business operations across various cities in India (Rs. 5.54 cr.), working capital and security deposit for bank guarantee (Rs. 3.93 cr.), general corporate funds (Rs. 0.06 cr.) needs, ATL is coming out with a maiden IPO of 2436000 equity shares of Rs.10 each at a fixed price of Rs. 42 per share to mobilize Rs. 10.23 cr. The issue opens for subscription on September 30, 2020, and will close on October 05, 2020. Minimum application is to be made for 3000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge platform.

Issue constitutes 28.49% of the post issue paid-up capital of the company. The company will be spending Rs. 0.70 cr. for this IPO process.

The issue is solely lead managed by Chartered Finance Management Ltd. and Link Intime India Pvt. Ltd. is the registrar to the issue. NNM Securities Pvt. Ltd. is acting as a Market Maker for this company.  Having issued initial equity at par, the company has raised further equity in the price range of Rs. 42 to Rs.100 between March 2009 and August 2020.  It has also issued bonus shares in the ratio of 19 shares for 2 shares held in August 2020.

The average cost of acquisition of shares by the promoters is Rs. 1.72, Rs. 6.19 and Rs. 9.52 per share. Post issue, ATL's current paid-up equity capital of Rs. 6.12 cr. will stand enhanced to Rs. 8.55 cr. With this IPO, the company is looking for a market cap of Rs. 18.50 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, on a standalone basis, ATL has posted turnover/net profits of Rs. 10.40 cr. / Rs. 1.00 cr. (FY18), Rs. 10.47 cr. / Rs. 2.06 cr. (FY19) and Rs. 14.25 cr. / Rs. 3.70 cr. (FY20). ATL has posted growth in its bottom lines for all these years.

For the last three fiscals, on a standalone basis, ATL has posted an average EPS of Rs. 4.60 and an average RoNW of 31.80%. The issue is priced at a P/BV of 1.68 on the basis of its post-issue NAV of Rs. 25.05.

If we attribute FY20 earnings on fully diluted post issue equity, then asking price is at a P/E of around 9.7, making it a reasonably priced IPO. ATL is a debt-free and dividend-paying company and for the last three fiscals, it has paid a constant dividend of 30%.

COMPARISION WITH LISTED PEERS:
As per offer documents, ATL has indicated that there are no listed peers to compare with.  

MERCHANT BANKER'S TRACK RECORDS:
On merchant banker's performance front, this is the first mandate from its stable on SME front and hence no track record.


Conclusion / Investment Strategy

ATL has posted growth in bottom lines for the last three fiscals. On the basis of P/E and P/BV parameters, the issue appears reasonably priced. Being the first mover in the segment, this issue may get fancy post listing. Investors may consider an investment with a long term perspective.

Reviewer recommends Subscribing to the issue for Long Term.

Review By Dilip Davda on Sep 26, 2020

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

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

AAA Technologies IPO FAQs

  1. 1. Why AAA Technologies IPO?

    The initial public offer (IPO) of AAA Technologies Limited offers an early investment opportunity in AAA Technologies Limited. A stock market investor can buy AAA Technologies IPO shares by applying in IPO before AAA Technologies Limited shares get listed at the stock exchanges. An investor could invest in AAA Technologies IPO for short term listing gain or a long term.

  2. 2. How is AAA Technologies IPO?

    Read the AAA Technologies IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. AAA Technologies IPO what should investors do?

    AAA Technologies IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the AAA Technologies IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.

  4. 4. Is AAA Technologies IPO good?

    Our recommendation for AAA Technologies IPO is to subscribe for long term.

  5. 5. Is AAA Technologies IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the AAA Technologies IPO.

  6. 6. When will AAA Technologies IPO allotment status?

    The AAA Technologies IPO allotment status will be available on or around Oct 8, 2020. The allotted shares will be credited in demat account by Oct 12, 2020. Visit AAA Technologies IPO allotment status to check.

  7. 7. When will AAA Technologies IPO list?

    The AAA Technologies IPO will list on Tuesday, October 13, 2020, at NSE SME.

1 Comments

SKC
1. SKC  Sep 26, 2020 21:53
Hi,

Any expert comments on the issue. Whether is it good for short to medium term and any listing gains expected?

Thanks
SKC
1.1. SKC  Sep 26, 2020 22:37
Was checking Glassdoor comments on the company. Looks like the company is very poorly managed like a local road side company. The employees who have worked their have mentioned that AAA is most unprofessionally managed company. They do not even get salary slips too. Getting in to company is easy but exiting with with proper documentation is very difficult or impossible. Most unethical company as per X-employees. Better to do some more research on the fundamentals of the company as the balance sheets may be manipulated too :).








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