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Alkosign BSE SME IPO review (Avoid)

Review By Dilip Davda on Jan 14, 2022

•    Alkosign is engaged in the manufacturing of presentation systems.
•    It has been just 20 months working since incorporation.
•    The issue is at negative P/E as the company posted a loss for FY22 till Nov. 21.
•    The issue is exorbitantly priced.
•    There is no harm in ignoring this pricy issue. 

ABOUT COMPANY: 
Alkosign Ltd. is engaged in the manufacturing of visual presentation systems namely writing boards/display boards/notice boards of different types along with its associated accessories and stands used for these boards, school benches, desks and their accessories.

As of date, it has several designs in the product basket, which are marketed under various trademarks such as "Alkosign", "Sit and Study", "Brainee", "Glassy-BO", "Ultra- EX", "Ultra". The company has introduced a new product, Glass White Boards, under the brand name, "Glassy-BO". Some of the key features of this product include 1) Compatible with any marker pen 2) Wiping away easily without staining or ghosting. 3) Lasts as much as the life span of the wall. As of the date of filing this offer documents, it had a network of 50 registered dealers. As of November 30, 2021, it had 33 employees on its payroll. The company has immense competition from local players amidst fragmented segments.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its plans for prepayment/repayment of certain borrowings (Rs. 3.00 cr.), working capital needs (Rs. 5.46 cr.) and general corporate purpose (Rs. 2.43 cr.), Alkosign is coming out with a maiden IPO of 2700000 equity shares of Rs. 10 each at a fixed price of Rs.45 per share to mobilize Rs. 12.15 cr. The issue opens for subscription on January 18, 2022, and will close on January 21, 2022. The minimum application to be made is for 3000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 49.59% of the post issue paid-up capital of the company. Alkosign will spend Rs. 1.26 cr. for this IPO process which indicates that the issue is fully structured with pre-funding arrangements. 

The issue is solely lead managed by Shreni Shares Pvt. Ltd. and Skyline Financial Services Pvt. Ltd. is the registrar to the issue. Shreni shares Pvt. Ltd. is also the market maker for this company. 

Having issued initial equity at par, the company converted further equity at a price of Rs. 675 per share in November 2021 and has also issued bonus shares in the ratio of 60 for 1 in the same month. The average cost of acquisition of shares by the promoters is Rs. 8.66 and Rs. 9.70 per share.

Post-IPO, Alkosign's current paid-up equity capital of Rs. 2.75 cr. will stand enhanced to Rs. 5.45 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 24.50 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, since the company is formed only in March 2020, it has given just the last 20 months of working which is not justifying the asking price. For FY21 it has posted a turnover of Rs. 13.28 cr. with a net profit of Rs. 0.66 cr. and for the first eight months of FY22 ended on November 30, 2021, it has incurred a loss of Rs. - (0.64) cr. on a turnover of Rs. 5.92 cr. Due to these losses, its NAV as on the same date is negative at Rs. 8.84 (against face value of Rs. 10)

The issue is priced at a P/BV of 5.09 based on its NAV of Rs. 8.84 as of November 30, 2021, and at a P/BV of 1.84 based on its post-IPO NAV of Rs. 24.41. Thus company mulls positive NAV post issue with an exorbitantly priced offer. 

Due to loss incurred for the first eight months of FY22, the issue price is at a negative P/E and based on its FY21 earnings, the asking price is at a P/E of around 36.88, thus the issue is exorbitantly priced. 

COMPARISON WITH LISTED PEERS:
As per offer documents, Alkosign has no listed peers to compare with. 

DIVIDEND POLICY:
The company has not paid any dividend in the last three fiscals and will adopt a prudent dividend policy post listing based on its financial performance and future prospects. 

MERCHANT BANKER'S TRACK RECORD:
This is the 8th mandate from Shreni shares in the last three fiscals (including the ongoing one). Out of the last seven listings, 2 opened at par and the rest with premiums ranging from 0.68% to 19.05% on the day of listing. Thus the merchant banker has an average track record.


Conclusion / Investment Strategy

The company has shown just 20 months working with the last eight months reporting negative earnings. The company has a long gestation period to migrate to the main board as its post IPO equity remains small. The issue expenses indicate a fully structured IPO with pre-funding arrangements. It operates in a highly competitive and fragmented segment. Based on its financial data, the issue is exorbitantly priced. There is no harm in avoiding this issue.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Jan 14, 2022

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

Alkosign IPO FAQs

  1. 1. Why Alkosign IPO?

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

  2. 2. How is Alkosign IPO?

    Read the Alkosign IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Alkosign IPO what should investors do?

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

  4. 4. Is Alkosign IPO good?

    Our recommendation for Alkosign IPO is to avoid.

  5. 5. Is Alkosign IPO worth Investing?

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

  6. 6. When will Alkosign IPO allotment status?

    The Alkosign IPO allotment status will be available on or around Jan 27, 2022. The allotted shares will be credited in demat account by Jan 28, 2022. Visit Alkosign IPO allotment status to check.

  7. 7. When will Alkosign IPO list?

    The Alkosign IPO will list on Tuesday, February 1, 2022, at BSE SME.