Newjaisa Tech NSE SME IPO review (Apply)

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Review By Dilip Davda on September 20, 2023

•    NTL is engaged in refurbishing electronic products at affordable prices.
•    It has posted growth in its top and bottom lines for the reported periods. 
•    Based on FY23 earnings, the issue appears fully priced. 
•    The government of India's proposed move to ban imports of electronic items augurs well for this company. 
•    Investors may park funds for medium to long-term rewards. 

ABOUT COMPANY:
Newjaisa Technologies Ltd. (NTL) is a technology-driven direct-to-consumer refurbished IT electronics company providing quality refurbished electronics at significant discounts as compared to new products. Its goal is to provide best-in-class, refurbished electronics at affordable prices. Its business model encompasses an end-to-end reverse supply chain for IT assets. It involves procuring used IT assets (laptops, desktops, and peripherals), refurbishing them to as close to new computer conditions, and selling them directly to end-use customers - businesses or retail. 

Currently, the Company is engaged in direct sales of IT Products i.e. Laptops/ Chromebooks, Desktops/Chromeboxes/ Monitors, and Accessories (Keyboard, Mouse, Wi-Fi, Speakers) which is its key revenue model. NTL's key goal is to reduce e-waste, by the life extension of IT assets and to deliver High-quality computing devices to end customers in as good as new conditions, with warranty at affordable prices. The company currently is focused and operates in the Indian market and caters to Pan India customer base via e-commerce and online platforms and caters its products across industries. The four key customer segments for it include students, home users, SMEs, and working professionals.

NTL's business is helping it to reduce the growing e-waste problem on one hand and, at the same time, help serve a large underserved Indian population that currently has low personal computing ownership, by delivering quality products at very affordable prices with service guarantee via warranties. It is solving the complex problem of refurbishing multiple brands and models with determinant issues in various components by building technology-driven preoperatory refurbishing processes and infrastructure. This is helping it to deliver output at scale and importantly, quality and restoration of product to as good as new condition.

Its Online first approach is helping the company to cater and scale to the Pan India customer base without high distribution and inventory overheads. It helps to also service customers faster and economically. The company has served customers at more than 19,298 pin codes in India, with a centralized team and plant in Bangalore. As of August 31, 2023, it had 347 employees on its payroll including 248 interns.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden IPO of 8496000 equity shares of Rs. 5 each via the book-building route. It has announced a price band of Rs. 44 - Rs. 47 per share and mulls mobilizing Rs. 39.93 cr. at the upper cap. The issue opens for subscription on September 25, 2023, and will close on September 27, 2023. The minimum application to be made is for 3000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.40% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, it will utilize Rs. 1.00 cr. for expansion of refurbishment facility and purchase of plant, machinery, and equipment, Rs. 2.00 cr. for technology development, Rs. 2.00 cr. for branding and marketing, Rs. 15.45 cr. for working capital, Rs. 7.30 cr. for repayment of bank loans, and the rest for general corporate purposes.

After reserving 426000 shares for the market maker, the company has allocated not more than 50% for QIBs, not less than 15% for HNIs, and not less than 35% for Retail investors. 

Indorient Financial Services Ltd. Is the sole lead manager and Bigshare Services Pvt. Ltd. Is the registrar of the issue. Nikunj Stock Brokers Ltd. is the market maker for the company. 

Having issued initial equity shares at par value, the company issued further equity shares at a price of Rs. 1132.50 (based on an FV of Rs. 5) in June 2023. It has also issued bonus shares in the ratio of 35 for 1 in September 2021. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. 0.000009, and Rs. 0.18 per share. 

Post-IPO, NTL's current paid-up equity capital of Rs. 11.84 cr. will stand enhanced to Rs. 16.09 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 151.26 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, NTL has posted a total revenue/net profit of Rs. 9.61 cr. / Rs. 0.73 cr.  (FY21), Rs. 27.93 cr. / Rs. 1.80 cr. (FY22), and Rs. 44.53 cr. / Rs. 6.76 cr. (FY23). 

For the last three fiscals, the company has reported an average EPS of Rs. 1.84 and an average RoNW of 76.36%. The issue is priced at a P/BV of 11.27 based on its NAV of Rs. 4.17 as of March 31, 2023, and at a P/BV of 2.79 based on its post-IPO NAV of Rs. 16.85 per share (at the upper cap). 

If we attribute FY23 super earnings to the post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 22.38. The issue appears fully priced with the super profits of FY23.

DIVIDEND POLICY:
The company has not declared any dividends since incorporation. It will adopt a prudent dividend policy based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per the offer documents, the company has shown Cerebra Integrated as its listed peer. It is trading at a P/E of 00 (as of September 20, 2023). However, they are not comparable on an apple-to-apple basis. 

MERCHANT BANKER'S TRACK RECORD:
This is the 4th mandate from Indorient Financial in the last three fiscals (including the ongoing one). Out of the last 2 listings, 1 opened at a discount and 1 at a premium of 5.86% of the date of listing.

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