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Fidel Softech NSE SME IPO review (May apply)

Review By Dilip Davda on May 25, 2022

•    FSL is in the business of LangTech technology servicing consultancy.
•    Over 80% of revenue comes from the export business.
•    Based on its financial performance, the issue appears fully priced. 
•    Cash surplus/risk seekers may consider investment for the long term. 

ABOUT COMPANY:
Fidel Softech Ltd. (FSL) is a LangTech Consulting firm offering technology services with local language UI/ UX. The services offered by the Company include IT services including Software development, Infrastructure & Cloud support, Localization including translation, interpretation, software localization & multilingual data creation and Consulting & Staffing services including training. It is a LangTech Consulting firm helping clients with either Technology-Languages- People. The company helps its customers to deliver their solutions /products /services to the end-users in their local languages by leveraging technology, localization solutions and Consulting. 

FSL offers Software development & Cloud infrastructure support services, and localization services; such as Translation, Interpretation, Content creation, Multilingual data creation, transcription & Annotation for training AI engines, Video subtitling and other video audio services, Data engineering, testing, scripting & tooling services and Consulting & Staffing services. The company offers bilingual software development capabilities & has engineers speaking in various languages working for Asian markets. It takes up turnkey projects, product design & development, operational support & manpower augmentation.

FSL's customer base is spread across the globe with presence in countries like Argentina, Belgium, China, Cyprus, Czech Republic, Dubai, Egypt, Germany, Hong Kong, Ireland, Italy, Japan, Kingdom of Saudi Arabia, Malaysia, Mauritius, Netherlands, New Zealand, Poland, Portugal, Russia, Singapore, South Africa, South Korea, Spain, Sweden, Taiwan, Ukraine, United Arab Emirates, United Kingdom, and the United States of America. Its sales through exports contributed 86.09%, 86.89% and 82.40% respectively towards revenue from operation for the year ended March 31, 2022, 2021 and 2020 respectively. As of March 31, 2022, FSL had an employee base of 165 employees.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its needs for working capital (Rs. 9.43 cr.) and general corporate purposes (Rs. 2.70 cr.), FSL is coming out with a maiden IPO of 3648000 equity shares of Rs. 10 each at a fixed price of Rs. 37 per share to mobilize Rs. 13.50 cr. The issue opens for subscription on May 30, 2022, and will close on June 02, 2022. Minimum application is to be made for 3000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.53% of the post issue paid-up capital of the company. FSL is spending Rs. 1.37 cr. for this IPO process. 

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

After issuing initial equity at par, the company issued further equity at Rs. 390.01 per share in September 2007 and has also issued bonus shares in the ratio of 39 for 1 in March 2022. The average cost of acquisition of shares by the promoters is Rs. 0.25 per share. 

Post-IPO, FSL's current paid-up equity capital of Rs. 10.10 cr. will stand enhanced to Rs. 13.75 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 50.88 cr. 

FINANCIAL PERFORMANCE: 
On the financial performance front, for the last three fiscals, FSL has posted a turnover/net profit of Rs. 22.80 cr. / Rs. 3.15 cr. (FY20), Rs. 26.21 cr. / Rs. 3.45 cr. (FY21) and Rs. 26.87 cr. / Rs. 4.57 cr. (FY22). While it's top-line remained almost static for the last two fiscals, it has posted improved margins. 

For the last three fiscals, the company has reported an average EPS of Rs. 3.92 and an average RoNW of 34.12%. The issue is priced at a P/BV of 2.51 based on its NAV of Rs. 14.73 as of March 31, 2022, and at a P/BV of 1.79 based on its post-IPO NAV of Rs. 20.64 per share. 

If we attribute FY22 earnings to the fully diluted post IPO equity capital base, then the asking price is at a P/E of 11.15. Thus the issue appears fully priced. 

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

DIVIDEND POLICY:
FSL has not declared any dividend since incorporation. It will adopt a prudent dividend policy post listing based on its financial performance and future prospects. 

MERCHANT BANKER'S TRACK RECORDS:
This is the 10th mandate from Shreni Shares in the last three fiscals (including the ongoing one). Out of the last 9 listings, 1 opened at par and the rest with premiums ranging from 0.06% to 19.05% on the day of listings. 


Conclusion / Investment Strategy

The company is operating in a highly competitive and fragmented segment. Based on its financial track records, the issue appears fully priced. Cash surplus/risk seekers may consider an investment with a long term perspective.

Review By Dilip Davda on May 25, 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

Fidel Softech IPO FAQs

  1. 1. Why Fidel Softech IPO?

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

  2. 2. How is Fidel Softech IPO?

    Read the Fidel Softech IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Fidel Softech IPO what should investors do?

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

  4. 4. Is Fidel Softech IPO good?

    Our recommendation for Fidel Softech IPO is to subscribe for long term.

  5. 5. Is Fidel Softech IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the Fidel Softech IPO.

  6. 6. When will Fidel Softech IPO allotment status?

    The Fidel Softech IPO allotment status will be available on or around Jun 7, 2022. The allotted shares will be credited in demat account by Jun 9, 2022. Visit Fidel Softech IPO allotment status to check.

  7. 7. When will Fidel Softech IPO list?

    The Fidel Softech IPO will list on Friday, June 10, 2022, at NSE SME.

2 Comments

2. Suryakant Gupta  
This is 1st time I am investing in SME IPO, please give me clear suggestion should I invest or not?
1. Vrushali  
Good information on Fidel Softech IPO. Thanks for sharing.