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Globesecure Techno NSE SME IPO review (Avoid)

Review By Dilip Davda on May 21, 2022

•    GTL is a cybersecurity-focused digital transformation company. 
•    It has posted super earnings for the last 21 months which raises eyebrows.
•    Its Topline has been almost static so far. 
•    Based on super earnings, the issue is fully priced. 
•    There is no harm in ignoring this fully structured offer.

ABOUT COMPANY:
Globesecure Technologies Ltd. (GTL) is a digital transformation company in India with a focus on cyber security. It has executed several cyber security transformation projects, infrastructure, and digital transformation projects for various institutions and also provided similar independent services to clients. Through its wide range of offerings across multiple verticals, GTL possesses capabilities spanning the digital lifecycle of services ranging from consultation, architecture, solution design, and implementation, to monitoring and providing managed services.

The company classified its business into three main aspects i.e. Cyber Security, integrated enterprise solutions and managed services. 

As per offer documents, GTL is generating major revenues from BFSI (Banking Financial Services and Insurance). This segment is highly competitive with many big players in the fray. As of May 16, 2022, it has 16 employees on its payroll. It operates from the premises on leave and license.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its needs for working capital (Rs. 6.98 cr.), general corporate purposes (Rs. 1.63 cr.), GTL is coming out with a maiden IPO of 3492000 equity shares of Rs. 10 each at a fixed price of Rs. 29 per share to mobilize Rs. 10.13 cr. The issue opens for subscription on May 23, 2022, and will close on May 25, 2022. Minimum application is to be made for 4000 shares and in multiples thereof, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 38.34% of the post issue paid-up capital of the company. GTL is spending Rs. 1.52 cr. for this IPO process. This indicates the issue is financially closed with funding arrangements arrived at. 

The issue is solely lead managed by Fast Track Finsec Pvt. Ltd. and Skyline Financial Services Pvt. Ltd. is the registrar to the issue. Nirman Share Brokers Pvt. Ltd. is the market maker for this company. 

Having issued initial equity at par, the company issued further equity in the price range of Rs. 15 to Rs. 23 between November 2018 and October 2021. It has shown 604659 shares issued for a consideration at Rs. 23 per share as other than cash (??) for conversion of loans. (Refer to page 69 of the offer documents). The average cost of acquisition of shares by the promoters is Rs. 12.60 and Rs. 13.82 per share. 

Post-IPO, GTL's current paid-up equity capital of Rs. 5.62 cr. will stand enhanced to Rs. 9.11 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 26.41 cr. 

FINANCIAL PERFORMANCE: 
On the financial performance front, for the last three fiscals, GTL has posted turnover/net profits of Rs. 10.43 cr. / Rs. 0.62 cr. (FY19), Rs. 19.24 cr. / Rs. 0.12 cr. (FY20) and Rs. 19.23 cr. / Rs. 1.01 cr. (FY21).  For the first nine months of FY22 ended on December 31, 2022, it has earned a net profit of Rs. 1.11 cr. on a turnover of Rs. 11.17 cr. The sudden boost in its net profits for the last 21 months working raises eyebrows. The top line for the last two fiscals was static and for FY22 9M appears to be lower.  

For the last three fiscals, GTL has reported an average EPS of Rs. 1.28 (basic) and an average RoNW of 9.59%. The issue is priced at a P/BV of 1.64 based on its NAV of Rs. 17.71 as of December 31, 2021, and at a P/BV of 1.32 based on its post-IPO NAV of Rs. 22.04. 

If we annualize FY22 super earnings and attribute it to fully diluted post IPO equity, then the asking price is at a P/E of 17.90. Thus the issue is fully priced with its super earnings for the last 21 months' financial data. The sustainability of such performances going forward raises concern. 

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

DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer documents. It will adopt a prudent dividend policy post listing, based on its financial performance and future prospects. 

MERCHANT BANKER'S TRACK RECORDS:
Surprisingly, the Lead Manager's past track record information is missing in the offer document (Final prospectus). However, based on Chittorgarh.com website data, this is the 7th mandate from Fast Track in the last five fiscals (including the ongoing one). Out of the last 6 listings, 2 closed at discount and the rest with premiums ranging from 0.83% to 15.57% on the day of listings. Approval of incomplete offer documents by regulators raises eyebrows. 


Conclusion / Investment Strategy

GTL is operating in a highly competitive segment with many big players in the fray. The sustainability of super earnings reported for the last 21 months raises concern. With the issue expenses, this IPO is fully structured for the subscription part. There is no harm in skipping this fully priced offer.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on May 21, 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

Globesecure Technologies IPO FAQs

  1. 1. Why Globesecure Technologies IPO?

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

  2. 2. How is Globesecure Technologies IPO?

    Read the Globesecure Technologies IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Globesecure Technologies IPO what should investors do?

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

  4. 4. Is Globesecure Technologies IPO good?

    Our recommendation for Globesecure Technologies IPO is to avoid.

  5. 5. Is Globesecure Technologies IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the Globesecure Technologies IPO.

  6. 6. When will Globesecure Technologies IPO allotment status?

    The Globesecure Technologies IPO allotment status will be available on or around May 30, 2022. The allotted shares will be credited in demat account by May 31, 2022. Visit Globesecure Technologies IPO allotment status to check.

  7. 7. When will Globesecure Technologies IPO list?

    The Globesecure Technologies IPO will list on Thursday, June 2, 2022, at NSE SME.