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ADJIA Techno BSE Startup IPO review (Avoid)

Review By Dilip Davda on Feb 27, 2021

•    The company is engaged in offering augmented/virtual reality services.
•    ATL has shown minuscule financial data for limited periods.
•    The issue is priced exorbitantly.
•    Lead Manager has an average track record so far.

ABOUT COMPANY:
Adjia Technologies Ltd.  (ATL) is engaged in the business of offering augmented reality and virtual reality related services to various customers electronically. It also is doing software consultancy services.

The segment of augmented/virtual reality related service has may multinational key market players like Google, PTC, Apple, Sony (Japan), Samsung, Microsoft, Seiko Epson, Lenovo etc to name a few. Thus it is competing with many big names. The company has no technical/financial or performance guarantee collaboration with anyone. It does not have any intellectual property.

As on filing of the offer documents, the company has just 5 employees besides a board of directors. It is operating from a rented office.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its plans for funding purchase of equipment (Rs. 1.01 cr.), marketing initiatives (Rs. 0.28 cr.) and general corporate funds (Rs. 0.30 cr.) needs, ATL is coming out with a maiden Initial Public Offer (IPO) of 270400 equity shares of Rs. 10 each at a fixed price of Rs. 74 per share to mobilize Rs. 2.00 cr. The issue opens for subscription on March 02, 2021, and will close on March 04, 2021. Minimum application is to be made for 1600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME Startup. The issue constitutes 30.71% of the post issue paid-up capital of the company. ATL will be spending around Rs. 0.41 cr. (above 20%) for this issue process.

The issue is solely lead managed by Shreni Shares Pvt.  Ltd. and KFin Technologies Pvt. Ltd. is the registrar to the issue. Shreni Shares Pvt. Ltd. is also a Market Maker for this issue.

ATL's initial equity is issued at par; the company has also issued further equity at a price of Rs. 110 per share and bonus shares in the ratio of 4 shares for every 1 share held in December 2020. The average cost of acquisition of shares by the promoters is Rs. 10.71 per share.

Post issue, ATL's current paid-up equity capital of Rs. 0.61 cr. will stand enhanced to Rs. 0.88 cr. With the IPO pricing, the company is looking for a market cap of Rs. 6.51 cr.

FINANCIAL PERFORMANCE: 
In fact, the company had no income for FY18 and FY19. Income for FY20 and the first nine months of FY21 is at minuscule levels at Rs. 0.10 cr. and Rs. 0.17 cr. with a net profit of 0.02 cr. and 0.06 cr. respectively.

For the last three fiscals, the company has posted an average EPS of Rs. 0.18 and an average RoNW of 25.69%. The issue is priced at a P/BV of 7 based on its consolidated Net Asset Value (NAV) of Rs. 10.57 and at a P/BV of 2.46 based on post issue NAV of Rs. 30.05.

If we annualize the latest earnings and attribute it to fully diluted post issue equity, then the asking price is at a P/E of around 87. On the basis of FY20 earnings, it is at a P/E of 352, thus the issue is exorbitantly priced.

COMPARISION WITH LISTED PEERS:
As per the offer documents, the company has no listed peers to compare with.

MERCHANT BANKER'S TRACK RECORD:
On the merchant banker's front, this is the 5th mandate from its stable in the last three fiscals (including the ongoing one). Out of the last 4 listings, 2 opened at par to offer price and the rest with a premium ranging from 1.25% to 1.95% on the day of listing. Thus the Lead Manager has average track records.


Conclusion / Investment Strategy

ATL being a startup has minuscule financial data for a limited period. Based on this, the asking price is at a much higher P/E. The company is paying around 20% to mobilize Rs. 2 crores from the market, this indicates that the issue is pre-structured and funding arrangement is done. There is no harm in giving this issue a MISS.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Feb 27, 2021

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

ADJIA Technologies IPO FAQs

  1. 1. Why ADJIA Technologies IPO?

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

  2. 2. How is ADJIA Technologies IPO?

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

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

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

  4. 4. Is ADJIA Technologies IPO good?

    Our recommendation for ADJIA Technologies IPO is to avoid.

  5. 5. Is ADJIA Technologies IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the ADJIA Technologies IPO.

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

    The ADJIA Technologies IPO allotment status will be available on or around Mar 9, 2021. The allotted shares will be credited in demat account by Mar 12, 2021. Visit ADJIA Technologies IPO allotment status to check.

  7. 7. When will ADJIA Technologies IPO list?

    The ADJIA Technologies IPO will list on Monday, March 15, 2021, at BSE SME.