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Jonjua Overseas BSE SME IPO review (Avoid)

Review By Dilip Davda on Feb 8, 2019

•    JOL is engaged in IT enabled service and solution provider company.
•    Issue size is just Rs. 1.30 cr. for SME listings.
•    Financial performance is showing growth but is at very minuscule levels.
•    Despite at par offer, it is at a P/E of around 250.
•    Lead Manager has average track records.

ABOUT COMPANY:
Jonjua Overseas Ltd. (JOL) is engaged in IT enabled services and are certified service providers to its global clients of IT Solution & Business Services which includes Startup consultancy, Outsourcing Services that includes Import and Export Consultancy, International Project Finance and IPO, Legal and Accounts Outsourcing, Digital Solutions includes Website and Software Development and Cross Border Marketing, Brand Building and Business Plan service. With the right balance of technical expertise and vast industry knowledge JOL strives to create customer satisfaction considering the nature of work with an innovative approach maintaining integrity and confidentiality of the business. Currently, the company is mainly engaged in Outsourcing Services of overseas clients primarily located in North America and Africa

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its working capital and general corpus fund needs, JOL is coming out with a maiden IPO of 1300000 equity shares of Rs 10 each at par to mobilize Rs. 1.30 crore. Issue opens for subscription on 12.02.19 and will close on 15.02.19. Minimum application is to be made for 10000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME...Issue constitutes 27.45% of the post issue paid up capital of the company.

Issue is solely lead managed by Finshore Management Services Ltd. while Satellite Corporate Services Pvt. Ltd. is the registrar to the issue. Having raised initial equity at par, it issued further equity in the price range of Rs. 11.80 to Rs. 90 per share (on the basis of Rs.10 FV) between December 2015 and June 2018. It has also issued bonus shares in the ratio of 1 for 20 (22.02.2016),1 for 25 (31.05.16), 1 for 40 (26.09.16), 1 for 5 (13.02.17), 1 for 5 (19.12.17), 1 for 3 (20.06.18) and 1 for 3 (26.07.18).. Average cost of acquisition of shares by the promoters is Rs. 6.96, Rs. 7.47, Rs. 8.84, Rs. 13.29 and Rs. 13.75 per share. Post issue, JOL's current paid up equity capital of Rs. 3.44 cr. will stand enhanced to Rs. 4.74 cr.

FINANCIAL PERFORMANCE:
On financial performance front, for last three fiscals, JOL has posted turnover/net profits of Rs. 0.32 cr. / Rs. 0.01 cr. (FY16), Rs. 0.37 cr. / Rs. 0.02 cr. (FY17) and Rs. 0.66 cr. / Rs. 0.03 cr. (FY18), For first half of FY19 it has earned net profit of Rs. 0.01 cr. on a turnover of Rs. 0.49 cr. For the said periods, it has shown other comprehensive income of Rs. 2.97 cr. / Rs. 0.08 cr., 0.13 cr. and 0.10 cr. respectively. With the help of these additional incomes, it has been able to post an average EPS of Rs. 0.76 (on the basis of Rs. 10 FV) and an average RoNW of 3.31%. Issue is priced at a P/BV of 0.47 based on its NAV of Rs. 21.45 as on 30.09.18 and at a P/BV of 0.58 on the basis of post issue NAV of Rs. 17.11.  If we annualize latest earnings and attribute it on fully diluted equity post issue then asking price is at a P/E of around 250. Thus despite being at par offer, it is a risky bet.

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

MERCHANT BANKER'S TRACK RECORDS:
On merchant banker's front, this is the 8th mandate from this Lead Manager in last three fiscals, Out of last 7 listings 3 opened below par the the rest 4 with a premium ranging from 0.02% to 20.66%. Thus it has average track record.


Conclusion / Investment Strategy

Based on financial data, despite being at par issue, there is no ham in giving it a miss.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Feb 8, 2019

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 prior to making any actual investment decisions, based on information published here. With entry barriers, SEBI wants only well informed investors to participate is such offers. With crazy recent listings, SME IPOs have started drawing attention of investors across the board. However, as SME issues have entry barriers and continued low preference from broking community, any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on information available as on date coupled with market perceptions. Author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda, a freelance journalist

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

The Jonjua Overseas IPO Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered IPO Analysts tells you if Jonjua Overseas IPO worth investing. The Jonjua Overseas IPO Note sets the IPO expectations in systematic way which tells you if Jonjua Overseas IPO good to buy (good or bad / yes or no). The IPO Forecast tells you weather to invest in Jonjua Overseas IPO by providing IPO recommendations i.e. subscribe, avoid and neutral.


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