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Dynamic Services NSE SME IPO review (Avoid)

Review By Dilip Davda on Sep 28, 2021

•    DSSL is in the business of providing manpower for mechanised cleaning, housekeeping etc.
•    It is also in logistics, catering and security services segments.
•    As per financial data, it has shown declining trends in top lines with inconsistent earnings.
•    The issue is aggressively priced based on FY21 earnings.

ABOUT COMPANY:
Dynamic Services & Security Ltd. (DSSL) is the outcome of the integration of family businesses run by the proprietorship concerns M/s Dynamic Services, M/s Dynamic Enterprises and M/s Global Services. All these companies were giving similar services to government and corporate bodies. Their combined turnover was Rs.100 cr. (FY18), Rs. 118.91 cr. (FY2019) and Rs. 114.13 cr. (FY20). After the merger of all the three concerns, it came into the current status. 

The company is in the business of providing manpower for mechanised cleaning, catering, housekeeping, conservancy services, security services, catering services, contractual services, logistics and other related services to Indian railways and other reputed government organisations on a Pan India basis.  

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its needs for working capital (Rs. 20.00 cr.), general corporate purpose (Rs. 3.70 cr.), DSSL is coming out with a maiden IPO of 4732000 equity shares of Rs.10 each at a fixed price of Rs. 51 per share to mobilize Rs. 24.13 cr. The issue opens for subscription on September 30, 2021, and will close on October 05, 2021. Minimum application is to be made for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 35% of the post issue paid-up capital of the company. DSSL will spend Rs. 0.43 cr. for this IPO process.

The issue is solely lead managed by Finshore Management Services Ltd. and Cameo Corporate Services Ltd. is the registrar to the issue. Nikunj Stock Brokers Ltd. will be the market maker for this issue. 

After issuing initial equity at par, the company converted loans at Rs. 2212.64 per share in August 2021. It has also issued bonus shares in the ratio of 100 for 1 in the same month. The average cost of acquisition of shares by the promoters is Rs. 14.59, Rs. 19.32 and Rs. 21.90 per share. 

Post issue, DSSL's current paid-up equity capital of Rs. 8.79 cr. will stand enhanced to Rs. 13.52 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 68.94 cr.

FINANCIAL PERFORMANCE: 
On the financial performance front, for the last three fiscals, DSSL has posted a total revenue/net profit of Rs. 0.43 cr. / Rs. 0.001 cr. (FY19), Rs. 0.47 cr.  / Rs. 0.02 cr. (FY20) and Rs. 70.96 cr. / Rs. 1.04 cr. The company suffered a setback in FY21 following the pandemic. As per data given on page 64 of the offer document, its combined revenue/profit before tax were Rs. 118.92 cr. / Rs. 1.23 cr. (FT19) and Rs. 114.13 cr. / Rs. 1.65 cr. (FY20). Thus if we see the overall impact, its top line has seen declining trends, while its bottom line has shown inconsistency. However, as of March 31, 2021, it had order on hand for Rs. 122 cr. 

For the last three fiscals, DSSL has posted an average EPS of Rs. 525.83 and an average RoNW of 35.62% (on the basis of pre-conversion and bonus issue). The company has not compiled its post-conversion and bonus issue basis data for its average EPS and RoNW for the last three fiscals. The issue is priced at a P/BV of xx based on its NAV of Rs. 21.90 (as of the filing of the offer documents), and at a P/BV of xx based on its post-issue NAV of Rs. 32.09.

If we attribute FY21 earnings on post-issue fully diluted equity, then the asking price is at a P/E of around 66.23 making it an aggressively priced offer. 

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

DIVIDEND POLICY:
The company has not declared any dividend for the period covered in the restatement of accounts as per the offer documents. It will follow a prudent dividend policy post listing based on its financial performance and future prospects. 

MERCHANT BANKER'S TRACK RECORD:
This is the 19th mandate from Finshore Management in the last five fiscals (including the ongoing one). Out of the last 10 listings, 2 opened at discount, 1 at par and the rest with premium ranging from 1.63% to 20% on the day of listings. 


Conclusion / Investment Strategy

The issue is aggressively priced above 66 P/E. Its top line has shown declining trends for the last three fiscals based on combined data. Though it claims that there are no listed peers, it is operating in a highly competitive and fragmented segment. There is no harm in ignoring this IPO

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Sep 28, 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

Dynamic Services & Security IPO FAQs

  1. 1. Why Dynamic Services & Security IPO?

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

  2. 2. How is Dynamic Services & Security IPO?

    Read the Dynamic Services & Security IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Dynamic Services & Security IPO what should investors do?

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

  4. 4. Is Dynamic Services & Security IPO good?

    Our recommendation for Dynamic Services & Security IPO is to avoid.

  5. 5. Is Dynamic Services & Security IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the Dynamic Services & Security IPO.

  6. 6. When will Dynamic Services & Security IPO allotment status?

    The Dynamic Services & Security IPO allotment status will be available on or around Oct 8, 2021. The allotted shares will be credited in demat account by Oct 12, 2021. Visit Dynamic Services & Security IPO allotment status to check.

  7. 7. When will Dynamic Services & Security IPO list?

    The Dynamic Services & Security IPO will list on Wednesday, October 13, 2021, at NSE SME.

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