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Review By Dilip Davda on November 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.
Review By Dilip Davda on November 22, 2019
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. My reviews do not cover GMP market and operators game plans. Readers must consult a qualified financial advisor before making any actual investment decisions, based the on information published here. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the recent past, SME IPOs drew the attention of investors across the board and lead to seer madness. 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 their own risk. The above information is based on information available as of date coupled with market perceptions. The Author has no plans to invest in this offer.
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.
(Dilip Davda -SEBI registered Research Analyst-Mumbai,
Registration no. INH000003127 (Perpetual)
Email id: dilip_davda@rediffmail.com ).
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.
Read the Ascom Leasing IPO recommendations by the leading analyst and leading stock brokers.
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.
Our recommendation for Ascom Leasing IPO is to subscribe for long term.
As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the Ascom Leasing IPO.
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.
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