Network People NSE SME IPO review (May apply)

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Review By Dilip Davda on July 24, 2021

•    NPST is engaged in a banking technology service that provides related solutions.
•    The company is an authorised agent under NPCI for Bharat Bill Payment Services.
•    Last two fiscals top and the bottom line are almost static.
•    Operation scalability and brand promotion hold the key for future prospects.
•    The issue is aggressively priced based on its current financial data.

ABOUT COMPANY:
Network People Services Technologies Ltd. (NPST) is a banking technology service provider (TSP) and is engaged in providing software and mobility solutions to the banking and finance sector primarily focusing on mobile banking applications, digital transaction solutions such as IMPS, UPI, digital wallet, etc. and smart transaction solutions. It is equipped to provide end-to-end services related to payment platforms including mobile banking solutions and are currently rendering services to Canara Bank, Syndicate Bank, Kerala Gramin Bank, Karnataka Gramin Bank, IBM India Private Limited and Cosmos Co-operative Bank. NPST is also engaged in rendering software services consisting of designing, consulting, development, quality and manpower provisioning under software SDLC.

With a mission to create the largest network of technology-enabled merchants/users, the Company has developed a digital ecosystem for the cashless economy through a flagship application named and styled as TimePay®. The company is also registered as a Third-Party Application Provider (TPAP) facilitating UPI payment services through TimePay. In this regard, it has entered into a Tripartite Agreement dated February 05, 2020, with the National Payment Corporation of India, The Cosmos Co-operative Bank Limited for Merchant PSP and Sponsoring company payment handle styled as '@TimeCosmos'. Under this mobile application, NPST has created a digital ecosystem to include society management and merchant digitization, providing digital technology to large, medium and micro setups to transact and operate seamlessly in the financial value chain.

TimePay® smart society provides a comprehensive solution towards management of various societies including housing societies, commercial and industrial complexes where activities are managed by individuals, managing committees, or various service providers which involves multiple activities and thereby creates a digital network for various stakeholders. TimePay® society module provides a single platform for managing needs including society relations, vendor relations, accounting, security, user merchants and local market.

The Company also provides various services and products under one roof through physical centers, doorstep service and web/mobile-based solutions through a project named 'Serve Seva Kendra - A consumer service mall'. NPST is an authorized agent under NPCI for delivering Bharat Bill Payment Services (BBPS) in the form of a strategic alliance with TJSB Bank.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its plans of development of TimePay (Rs. 2.01 cr.), Acquiring IT Hardware and Equipment (Rs. 3.28 cr.), marketing and promotion of TimePay (Rs. 3.70 cr.) and general corpus fund needs, NPST is coming out with a maiden IPO of 1712000 equity shares of Rs. 10 each with a price band of Rs. 76 to Rs. 80 per share to mobilize Rs. 13.70 cr. (at the upper cap). The issue opens for subscription on July 28, 2021, and will close on August 02, 2021. Minimum application is to be made for 1600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on the NSE SME Emerge platform. Issue constitutes 26.49 % of the post issue paid-up equity capital of the company. NPST has already spent around Rs. 0.36 cr., for this IPO process so far, the overall tally will be available only in the final prospectus post issue.

The issue is jointly lead managed by Holani Consultants Pvt. Ltd. and BOI Merchant Banker Ltd., while Link Intime India Pvt. Ltd. Is the registrar to the issue.  Maveric Share Brokers Pvt. Ltd. is the market maker for this issue.

Having issued initial equity at par, NPST raised further equity as pre-IPO placement at Rs. 80 per share in May 2021. It has also issued bonus shares in the ratio of 2 for 1 in March 2017 and 3.5 to 1 in July 2020. The average cost of acquisition of shares by the promoters is Rs. 0.07 and Rs. 1.98 per share.

Post issue, NPST's current paid-up equity capital of Rs. 4.75 cr. will stand enhanced to Rs. 6.46 cr. At the upper cap of IPO pricing, NPST is looking for a market cap of Rs. 51.70 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, NPST has (on a consolidated basis) posted turnover/net profits of Rs. 18.00 cr. / Rs. 1.35 cr. (FY19), Rs. 15.25 cr. / Rs. 1.04 cr. (FY20) and Rs. 15.38 cr. / Rs. 1.06 cr. (FY21).

For the last three fiscals, the company has posted an average EPS of 2.44 and an average RoNW of 18.94%. The issue is priced at a P/BV of 5.37 based on its NAV of Rs. 14.89 as of March 31, 2021, and at a P/BV of 2.31 based on its post-issue NAV of Rs. 34.66.

If we consider FY21 earnings and attribute it to fully diluted post issue equity, then the asking price is at a P/E of around 48.78 thus making it an aggressively priced offer.

COMPARISON WITH LISTED PEERS:
As per the offer documents filed, NPST has shown Oracle Financial Services, Mphasis, RamInfo and Infibeam Avenues as its listed peers. They are currently trading at a P/E of around 21.09, 38.84, 24.03 and 122.16 (as of July 23, 2021). However, they are not truly comparable on an apple to apple basis.

DIVIDEND POLICY:
The company has not paid any dividend in the past three fiscals. It will design a prudent dividend policy based on its financial performance and future prospects.

MERCHANT BANKER'S PERFORMANCE:
This is the fourth mandate from its stable. Out of the last three listings, 1 opened at par and the rest with a premium ranging from 6.88% to 49.12%.

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