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Naapbooks BSE Startup IPO review (May apply)

Review By Dilip Davda on Aug 28, 2021

•    NBL is engaged in IT solutions and the development of related apps.
•    It has posted slow growth in its top and bottom lines for the last three years.
•    Based on financial parameters, the issue is aggressively priced.
•    Small equity post IPO indicates a long duration for migration to the mainboard.
•    Comparison with IT giants as peers is surprising.

PREFACE:
GYR Capital Advisors Pvt. Ltd. is a newly born merchant banker firm started by ex-associates of Fast Track Finsec Pvt. Ltd. (which has a non-impressive track record) along with new partners.

ABOUT COMPANY:
Naapbooks Ltd. (NBL) is engaged in the business of developing and providing Information Technological solutions to corporates for their requirements. The company develops and provides Fintech App, Cloud Consulting, Blockchain App, Mobile App, Web App, Embedded App products to its clients. The services broadly cover designing, developing, operating, installing analyzing, designing, maintaining, converting, porting, debugging, coding and programming software to be used on a computer or any microprocessor-based device or any other such hardware.

The Company is also engaged in Software Consultancy services. It adheres to all necessary regulatory specifications. As of the date of filing this offer documents, it had 39 employees on the roll.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its needs for working capital (Rs. 2.00 cr.), purchase of equipment (Rs. 0.50 cr.), marketing initiatives (Rs. 0.40 cr.) and general corpus funds, NBL is coming out with a maiden IPO of 539200 equity shares of Rs. 10 each via book building route to mobilize Rs. 3.99 cr. at the upper cap. The company has fixed a price band of Rs. 71 - Rs. 74 per share. Minimum application is to be made for 1600 shares and in multiples thereon, thereafter. The issue opens for subscription on September 01, 2021, and will close on September 06, 2021. Post allotment, shares will be listed on BSE Startups. The issue constitutes 29.04% of the post issue paid-up capital of the company.

The issue is solely lead managed by GYR Capital Advisors Pvt. Ltd. and KFin Technologies Pvt. Ltd. is the registrar to the issue. Beeline Broking Ltd. will be the market maker for this issue.

Having issued/converted initial equity at par, the company raised further equity at Rs. 71 per share in August 2020 and September 2020. It has also issued bonus shares in the ratio of 55 for 1 in June 2020. The average cost of acquisition of shares by the promoters is Rs. 0.18, Rs. 0.80 and Rs. 6.79 per share.

Post issue, NBL's current paid-up equity capital of Rs. 1.32 cr. will stand enhanced to Rs. 1.86 cr. Based on the upper cap of IPO price, the company is looking for a market cap of Rs. 13.74 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, NBL has posted turnover/net profits of Rs. 2.21 cr. / Rs. 0.14 cr. (FY19), Rs. 2.25 cr. / Rs. 0.32 cr. (FY20) and Rs. 2.71 cr. / Rs. 0.47 cr. (FY21).

For the last three years, NBL has reported an average EPS of Rs. 4.37 and an average RoNW of 39.01%. The issue is priced at a P/BV of 4.81 based on its NAV of Rs. 15.37 as of March 31, 2021.

If we attribute FY21 earnings on post-issue fully diluted equity, then the asking price is at a P/E of 29.25 based on the upper cap. Thus the issue is aggressively priced.

COMPARISON WITH LISTED PEERS:
As per the offer documents, NBL has shown Infosys Ltd., Happiest Minds and Tech Mahindra as its listed peers. They are currently trading at a P/E of around 38.78, 136.18 and 32.08 (as of August 27, 2021). Comparison with IT giants is an eyewash to tempt investors. However, they are not truly comparable on an apple to apple basis.

DIVIDEND POLICY:
The company has not paid any dividends since incorporation. However, it will follow a prudent dividend policy post listing based on its financial performance and future prospects.

MERCHANT BANKER'S PERFORMANCE:
This is the first mandate from GYR Capital and hence has no track record. Please refer to PREFACE for more info.


Conclusion / Investment Strategy

Though the company has posted slow growth in its top and bottom lines, aggressive pricing of the issue and increasing competition are major concerns. Comparison with bigwigs is nothing but an eyewash to tempt investors. Small equity post IPO indicates a longer duration for migration to the mainboard. Hence risk seeker/cash surplus investors only may consider investment for long term, rest can avoid.

Review By Dilip Davda on Aug 28, 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

Naapbooks Limited IPO FAQs

  1. 1. Why Naapbooks Limited IPO?

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  4. 4. Is Naapbooks Limited IPO good?

    Our recommendation for Naapbooks Limited IPO is to subscribe for long term.

  5. 5. Is Naapbooks Limited IPO worth Investing?

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

  6. 6. When will Naapbooks Limited IPO allotment status?

    The Naapbooks Limited IPO allotment status will be available on or around Sep 9, 2021. The allotted shares will be credited in demat account by Sep 14, 2021. Visit Naapbooks Limited IPO allotment status to check.

  7. 7. When will Naapbooks Limited IPO list?

    The Naapbooks Limited IPO will list on Wednesday, September 15, 2021, at BSE SME.