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Focus Business BSE SME IPO review (May apply)

Review By Dilip Davda on Jun 26, 2021

•    FBSL is engaged in providing services for debt collections.
•    It has shown a stagnant top line since FY 2018.
•    Though the issue appears reasonably priced, sustainability of earnings is a concern.
•    Based on its tiny equity capital post IPO, it will take a long time for migration to the mainboard.

ABOUT COMPANY:
Focus Business Solution Ltd. (FBSL) evolved as a financial services company and is engaged in the business of debt collection services for Banks, NBFC and financial institutions. The company has entered an agreement with India's leading banks, financial institutions and non-banking financial companies to act as authorized recovery/collection agents on behalf of them.

FBSL focuses strategically timed action based on the ageing of delinquent account with an emphasis on traditional methods such as tele-calling and field visits. It deploys its manpower to visit and collect overdue payments of loans/credit cards/credit facilities advanced to borrowers by clients, who engage with the company in service agreements. In occasional cases, FBSL needs to trace the new address and contact details of borrowers as delinquent borrowers may relocate their address.

Through its call centres, the company also do follow up over telecalls, to the defaulters for overdue payments. FBSL has a fully equipped call centre with 64 (sixty-four) work station along with a call recording, dialler and CRM facility. The company also does repossessions of vehicles or other hypothecated assets on the request of its clients, in case defaulting borrowers unable to repay of its loan overdue. FBSL has worked on over two lacs customer's database from pickup to recovery category of all kind of products such as Personal Loan, Business Loan, Vehicle Loan, Loan against properties, two-wheeler loan, equipment loan, SME loans, the Gold loan with different banks and NBFCs with a pool size of more than Rs. 200 cr. The company is working mainly in the Gujarat regions only.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its needs for working capital (Rs. 0.65 cr.), general corpus fund (Rs. 0.30 cr.), FBSL is coming out with a maiden IPO of 642000 equity shares of Rs. 10 each at a fixed price of Rs. 19 per share to mobilize Rs. 1.22 cr.  The issue is opening for subscription on June 30, 2021, and will close on July 05, 2021. Minimum application is to be made for 6000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 28.89% of the post issue paid-up capital of the company. FBSL is spending Rs. 0.27 cr. for this IPO process. This indicates that the issue is pre-sold with arranged funding.

Having issued initial equity at par, the company has raised further equity at Rs. 50 per share in February 2020, it has also issued bonus shares in the ratio of 48 for 1 in February 2020 and 1 for 1 in October 2020.  The average cost of acquisition of shares by the promoters is Rs.6.65 and Rs. 8.50 per share. Post issue, company's current paid-up equity capital of Rs. 1.58 cr. will stand enhanced to Rs. 2.22 cr. At the IPO pricing, FBSL is looking for a market cap of Rs. 4.22 cr.

The issue is solely lead managed by Navigant Corporate Advisors Ltd. and Purva Sharegistry (India) Pvt. Ltd. is the registrar to the issue. Nikunj Stock Brokers Ltd. is the market maker for this IPO.

FINANCIAL PERFORMANCE:
On the financial performance front, the company has posted turnover/net profits of Rs. 10.24 cr. / Rs. 0.11 cr. (FY18), Rs. 10.74 cr. / Rs.0.12 cr. (FY19) and Rs. 10.91 cr. / Rs. 0.15 cr. (FY20). For the first nine months ended on December 31, 2020, it has earned a net profit of Rs. 0.20 cr. on a turnover of Rs. 7.99 cr. Super earnings in pre-IPO year raise concern. Its top line has remained stagnant for all these years while profit has seen negligible growth.

For the last three fiscals, FBSL has posted an average EPS of Rs. 2.48 and an average RoNW of 16.25%. The issue is priced at a P/BV of 1.28 based on its NAV of Rs. 14.86 as of December 31, 2020, and at a P/BV of 1.18 based on its post-issue NAV of Rs. 16.06 per share.

If we annualize FY21 earnings, then the asking price is at a P/E of around 7.67.

DIVIDEND POLICY:
The company has not declared any dividend on the Equity Shares in the past five financial years. It will follow a prudent dividend policy post listing based on its financial performance and the business prospects going forward.

COMPARISON WITH LISTED PEERS:
According to offer documents, FBSL has no listed peers to compare with.

MERCHANT BANKER'S PERFORMANCE:
This is the 19th mandate from its stable in the last five fiscals including the ongoing one. Out of the last 10 listings, 1 opened at discount, 2 at par and the rest with premiums ranging from 0.125% to 20% on the day of listing. The last issue from this merchant banker was in September 2019.


Conclusion / Investment Strategy

The company has shown a stagnant top line with marginal growth in bottom lines for all these years. As the company has tiny equity even after the IPO, it will take a pretty long time to migrate to the mainboard. Even in the segment in which the company is engaged, there are many unorganized players. Though the issue appears reasonably priced based on its FY21 annualized earnings, sustainability raises concern. Considering all these, cash surplus, risk savvy investors may consider investment at their own risk.

Review By Dilip Davda on Jun 26, 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

Focus Business Solution IPO FAQs

  1. 1. Why Focus Business Solution IPO?

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

  2. 2. How is Focus Business Solution IPO?

    Read the Focus Business Solution IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Focus Business Solution IPO what should investors do?

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

  4. 4. Is Focus Business Solution IPO good?

    Our recommendation for Focus Business Solution IPO is to subscribe for long term.

  5. 5. Is Focus Business Solution IPO worth Investing?

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

  6. 6. When will Focus Business Solution IPO allotment status?

    The Focus Business Solution IPO allotment status will be available on or around Jul 8, 2021. The allotted shares will be credited in demat account by Jul 12, 2021. Visit Focus Business Solution IPO allotment status to check.

  7. 7. When will Focus Business Solution IPO list?

    The Focus Business Solution IPO will list on Tuesday, July 13, 2021, at BSE SME.