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Ksolves India NSE SME IPO review (Avoid)

Review By Dilip Davda on June 22, 2020

•    KIL is a software services and product company.
•    It derives maximum revenue from exports to over 30 countries.
•    Financial data is not in line with its asking price.
•    LM has an average track record and this is just 2nd mandate from its stable.

Ksolves India Ltd. (KIL) is an ISO certified software services and product company offering solutions that enable client organizations to rapidly develop powerful applications addressing their strategic business needs. The applications created by it enable organizations to drive digital transformation and competitive differentiation. This may include automation of routine business functions, making them faster, easier and more accurate and increasing the channels or devices through which these functions can be performed.

KIL is basically engaged in software development, enterprise solutions and consulting, providing a range of Information Technology ('IT') solutions to companies across sectors such as Real Estate, E-commerce, Finance, Telecom and Healthcare etc. The company designs, develops and maintains software systems and solutions, create new applications and enhance the functionality of its customer's existing software products.

Company has acquired 100% stake in Kartik Solutions Private Limited in the year 2019 which become a wholly-owned Subsidiary company. This Subsidiary Company is engaged in providing IT and IT Enabled Services which include mobile application development, web solutions, E-commerce solutions and cloud solutions.

Company's revenue is predominantly generated from exports sales and it is providing Information Technologies services to clients over 30 countries and over 80% of sales come from North American Clients.

To part finance its needs for working capital (Rs. 2.80 cr.) and general corpus fund needs (Rs. 0.82 cr.), KIL is coming out with a maiden IPO of 402000 shares of Rs. 10 each at a fixed price of Rs. 100 per share to mobilize Rs. 4.02 cr. The issue opens for subscription on 23.06.20 and will close on 26.06.20. Minimum application is to be made for 1200 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. Issue constitutes 27.13% of the post issue paid-up capital of the company.

The issue is solely lead managed by Shreni Shares Pvt. Ltd., while Bigshare Services Pvt. Ltd. is the registrar to the issue. Shreni Shares Pvt. Ltd. is also acting as a market maker for this IPO. KIL is spending Rs. 0.40 cr. for this IPO process.  From the issue expenses point of view, this issue is fully structured with funding arrangements.

Post issue KIL's current paid-up equity capital of Rs. 1.08 cr. will stand enhanced to Rs. 1.48 cr. It mulls a market cap of Rs. 14.82 cr. post this issue.

Having issued initial equity at par, KIL has also issued rights equity shares at a fixed price of Rs. 101 per share in the ratio of 5 for 1 in April 2020 and has also issued bonus shares in the ratio of 8 for 1 in the same month. The average cost of acquisition of shares by the promoters is Rs. 9.78 per share.

On the financial performance front, for the last three fiscals, KIL has on a standalone basis reported turnover/net profits of Rs. 3.41 cr. / Rs. 0.06 cr. (FY18), Rs. 5.43 cr. / Rs. 0.16 cr. (FY19) and Rs. 8.15 cr. / Rs. 0.67 cr. (FY20).

On a consolidated basis, KIL has earned a net profit of Rs. 0.68 cr. on a turnover of Rs. 10.14 cr. for the financial year 2019-20. For the last three fiscals, KIL has posted an average EPS of Rs. 8.16 and an average RoNW of 69.90% (on a weighted average basis).

The issue is priced at a P/BV of around 0.23 based on its NAV of Rs. 433.95 (Rs. 437.95 on a consolidated basis) as on 31.03.2020 and at a P/BV of around 3.03 on the basis of post-issue NAV of Rs. 32.98 (Rs. 33.04 on a consolidated basis).  If we consider the latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of 21.8 making it aggressively priced offer. KIL has declared dividend at 778.9%for the financial year 2018-19.

As per offer documents, KIL has shown Dev Information Techno and Innovana Thinklabs as its listed peers that are currently trading at a P/Es of around 8.91 and 10.14 (as on 22.06.20). However, they are not strictly comparable on an apple to apple basis.

On merchant banker's front, this is the 2nd mandate from its stable in the last two fiscals including the ongoing one. The only listing that took place in FY 2019-20 opened at par to its offer price on the day of listing. Thus this lead managed has no impressive track records so far.

Conclusion / Investment Strategy

KIL's financial data is not in line with its asking price. With ongoing global scenario, it will be facing high competition and thus immediate future looks gloomy. Being aggressively priced IPO, investors may give it a miss.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on June 22, 2020

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. My reviews do not cover GMP market and operators game plans. Readers must consult a qualified financial advisor before making any actual investment decisions, based the on information published here. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the recent past, SME IPOs drew the attention of investors across the board and lead to seer madness. 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 their own risk. The above information is based on information available as of date coupled with market perceptions. The Author has no plans to invest in this offer.

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.

(Dilip Davda -SEBI registered Research Analyst-Mumbai,

Registration no. INH000003127 (Perpetual)

Email id: ).

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  4. 4. Is ksolves India IPO good?

    Our recommendation for ksolves India IPO is to avoid.

  5. 5. Is ksolves India IPO worth Investing?

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

  6. 6. When will ksolves India IPO allotment status?

    The ksolves India IPO allotment status will be available on or around [.]. The allotted shares will be credited in demat account by [.]. Visit ksolves India IPO allotment status to check.

  7. 7. When will ksolves India IPO list?

    The ksolves India IPO will list on Monday, July 6, 2020, at NSE SME.