Ascom Leasing NSE SME IPO review (Apply at your own risk)

Review By Dilip Davda on Nov 22, 2019


•    ALIL is engaged in financial services to self-employed and professionals.
•    Its financial performance from FY18 onwards appears rosy but raises concern.
•    It has around 2000 customers and it operates only in the state of Gujarat.
•    Lead Manager has an average track record so far.
 

ABOUT COMPANY:
Ascom Leasing & Investments Ltd. (ALIL) started its business as NBFC in 2001 with the mission of providing services to economically active poor who are not adequately served by the financial institutions. ALIL is engaged in the business of finance, hire purchase, leasing and lending terms loans, mortgage financing. Its customers include first-time buyers of vehicles, self-employed and professional or non-professional individuals, small and medium entrepreneurs and customers with informal income and limited banking and credit history. As of June 30, 2019, it had around 2000 plus active customers. Company operations are concentrated in the State of Gujarat Only. Being the NBFC - Non-Deposit Company, the company is not entitled to take deposit from the general public. And the company sources the funds from the promoter investments and Bank funding. Currently, the company has NIL revenue from trading operations.


ISSUE DETAILS/CAPITAL HISTORY:
To part finance its needs for onward lending and capital base augmenting (Rs. 4.47 cr.) and general corpus fund (Rs. 1.45 cr.), ALIL is coming out with a maiden IPO of 2108000 equity shares of Rs. 10 each at a fixed price of Rs. 30 per share to mobilize Rs. 6.32 cr. The issue opens for subscription on 26.11.19 and will close on 28.11.19. Minimum application is to be made for 4000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.99% of the post issue paid-up capital of the company. ALIL is spending Rs. 0.41 cr. for the entire proceeds of this IPO.


The issue is solely lead managed by Fast Track Finsec Pvt. Ltd. and Skyline Financial Services Pvt. Ltd. is the registrar to the issue. Jainam Share Consultants Pvt. Ltd. is the market maker for this issue. Having issued initial equity at par, ALIL raised further equity at Rs. 11 per share in September 2017. The average cost of acquisition of shares by the promoters is Rs. 10.04 per share. Post issue, ALIL's paid-up capital will stand enhanced from Rs. 5.70 cr. to Rs. 7.81 cr.


FINANCIAL PERFORMANCE:
On a standalone basis, for the last three fiscals, ALIL has posted total income/net profits of Rs. 3.66 cr. / Rs. 0.49 cr. (FY17), Rs. 6.24 cr./ Rs. 4.44 cr. (FY18) and Rs. 9.14 cr. / Rs. 3.45 cr. (FY19). For Q1 of FY20, it has clocked in the net profit of Rs. 1.97 cr. on a total income of Rs. 2.62 cr. Thus sudden boost in bottom lines in pre-IPO years and for Q1 of IPO year is surprising and raises a concern and that too on a minuscule scale of working.


For the last three fiscals, ALIL has posted an average EPS of Rs. 5.77 and an average RoNW of 27.2% with super bottom lines. The issue is priced at a P/BV of 1.05 based on its NAV of Rs. 28.46 as on 30.06.19 and at a P/BV of 1.04 based on post-IPO NAV of Rs. 28.88. Despite bumper profits, ALIL has not paid any dividend so far. Its current debt-equity ratio of 0.60 will come down to 0.43 post issue (based on equity + reserves v/s borrowings) (see page 142 of offer documents).


If we annualize FY20 Q1 earnings and attribute it to post issue paid-up equity capital then asking price is at a P/E of 3 against the industry average of 97.


COMPARISION WITH LISTED PEERS:
As per offer documents, ALIL has shown Bajaj Finserve, Kama Holdings, LKP Finance and Edelweiss Financial as its listed peers. They are currently trading at a P/E of 405.7, 89.7, 34.6 and 81.8 (as on 22.11.19). However, they are not strictly comparable.


MERCHANT BANKER'S TRACK RECORD:
On merchant banker's front, this is the 3rd mandate from its stable in the last two fiscals (including the ongoing). Out of the last 2 listings, one issue opened at a discount (Krainti Ind.) and the other with a premium of 5.77% on the day of listings. Thus it has an average track record.


Conclusion / Investment Strategy

As per minuscule financial data, ALIL has shown super earnings in the last two fiscals and the trend are continuing as indicated by Q1 FY20 earnings. However, as the NBFC segment is currently facing rough weather with rising NPAs, most of them are showing dull performances. ALIL is not at all a master in the segment and its super performance raises concern for sustainability. Although IPO pricing appears lucrative based on its super earnings in recent years, in the light of negativity emerging for the segment and rising NPAs, cash surplus risk savvy investors may consider investment at their own risks.

Review By Dilip Davda on Nov 22, 2019

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

Ascom Leasing IPO FAQs

  1. 1. Why Ascom Leasing IPO?

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

  2. 2. How is Ascom Leasing IPO?

    Read the Ascom Leasing IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Ascom Leasing IPO what should investors do?

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

  4. 4. Is Ascom Leasing IPO good?

    Sorry, we didn't rate the Ascom Leasing IPO.

  5. 5. Is Ascom Leasing IPO worth Investing?

    Our lead analyst Mr. Dilip Davda didn't rate the Ascom Leasing IPO.

  6. 6. When will Ascom Leasing IPO allotment status?

    The Ascom Leasing IPO allotment status will be available on or around [.]. The allotted shares will be credited in demat account by [.]. Visit Ascom Leasing IPO allotment status to check.

  7. 7. When will Ascom Leasing IPO list?

    The Ascom Leasing IPO will list on Friday, December 6, 2019, at NSE SME.








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