Powerful Technologies NSE SME IPO review (Apply at your own risk)

Review By Dilip Davda on Aug 6, 2018

•    Company operates in highly competitive field
•    Lot of cheap Chinese products are available
•    Superb profits for FY18 raises eyebrows
•    Two LMs shown different valuation for the same size of issue
•    Sustainability of profits in cut throat competition  raises concern.

Two Lead Managers Shows Different Valuation

In Powerful Technologies Ltd. (PTL) IPO process, something interesting has happened. It is worth mentioning for the information of investors.

  • The company started its IPO process in March 2018 when Lead Manager (LM) Sarthi Capital Advisors Pvt. Ltd. filed draft prospectus with NSE on 15th March 2018 for issue of 664,000 equity shares of Rs. 10 each at a fixed price of Rs. 175 per share to mobilize Rs. 11.62 crore with dilution of 26.50% shares. Bigshare Services Pvt. Ltd. appointed registrar to the issue.
  • On 30th May 2018 revised draft prospectus was filed with NSE for issue of 2655000 equity shares at a fixed price of Rs. 43 per share to mobilize Rs. 11.42 cr. LM and Registrar were the same. But when we are checking for the final draft prospectus filed on 27th June 2018, the issue size remain same but the asking price was raised to Rs. 51 per share for fund mobilization of Rs. 13.55 crore.
  • This time while registrar remained the same, LM was changed. Last draft prospectus is filed by Finshore Management Services Pvt. Ltd.
  • At the time of first draft prospectus PTL had issued bonus shares in the ratio of 6 for 1 in January 2018 and also issued fresh 371429 fresh equity shares at a price of Rs. 175 per share in the same month taking the total paid up equity as on 25.01.18 to Rs. 1.84 crore.
  • In May 2018 it again issued bonus shares in the ratio of 3 for 1 that took the paid up equity to Rs. 7.37 crore and perhaps due to this the price reduction was considered by old LM for IPO process at Rs. 43 per share at the first instance that now stands revised to Rs. 51 per share by new LM. 
  • In first two drafts offer documents Choice Equity Broking Pvt. Ltd. were the market maker and for the third draft offer document, no name was indicated for market maker.
  • Financial data for second and third draft offer documents remained same.
  • As per final prospectus, it has now appointed Share India Securities Ltd. as its market maker. Thus LM as well as market makers have changed for this IPO.

About the company

Powerful Technologies Ltd. (PTL) is formed to focus exclusively on consumer electronics products like LED TVs & mobile power banks and IT hardware products like LED monitors. Company is into manufacturing of LED TV, LED monitors and mobile power banks. Its first shipment for mobile adapter has recently been delivered to distributors under "Powereye" brand. Company’s manufacturing unit is set up in Noida, which has been a hub for IT and consumer electronics products.  Initially, it started selling products under brand names "Powereye" and "Lappy Master" and also used to make power banks for other brands. After getting approval from American brands Kodak and Polaroid in year 2016-17 to manufacturer mobile power banks and LED TVs respectively, it scaled up its volumes over last one year from these brands. The company is authorized licensee for Polariod LED TVs and LED Monitors and Kodak Power banks in India. PTL is also trading in mobile power banks and LED TVs as when demand is more than supply.

Capital history/Issue details

To part finance its working capital and general corpus fund needs, PTL is coming out with a maiden IPO of 2656000 equity shares of Rs. 10 each at a fixed price of Rs. 51 per share to mobilize Rs. 13.55 crore. Issue opens for subscription on 09.08.18 and will close on 14.08.18. Minimum application is to be made for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge.

Issue is lead managed by Finshore Management Services Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue.

Issue constitutes 26.50% of the post issue paid up capital of the company. Having raised initial equity at par, it raised further equity in the price range of Rs. 50 and Rs. 175 per share between March 2016 and January 2018. It has also issued bonus shares in the ratio of 6 for 1 in January 2018 and 3 for 1 in May 2018.

Post issue, PTL’s current paid up capital of Rs. 7.37 crore will stand enhanced to Rs. 10.02 crore. Average cost of acquisition of shares by the promoters is Rs. 1.72 per share.

Financial performance

On performance front, for last three fiscals, PTL has posted turnover/net profits of Rs. 24.97 cr. / Rs. 0.18 cr. (FY16), Rs. 35.61 cr. / Rs. 0.41 cr. (FY17) and Rs. 62.62 cr. / Rs. 4.50 cr. (FY18). Thus it posted many fold jumps in net profit which is astonishing and raising concern as the field it operates is highly competitive one.

For last three fiscals, it has posted an average EPS of Rs. 4.09 and average RoNW of 29.03% on paid up equity base of Rs. 1.84 crore as on 31.03.18. (This is now Rs. 7.37 cr. and will stand enhanced to Rs. 10.02 cr. post issue).

Asking price is at a P/BV of 2.98 on the basis of its NAV of Rs. 17.11 as on 31.03.18 and at a P/BV of 1.95 on its post issue NAV of Rs. 26.09. If we attribute latest earnings on fully diluted equity post issue, then asking price is at a P/E of around 11 plus and thus appears reasonable. As per offer documents, it has no listed peers to compare with.

Merchant banker’s track record

On merchant banker’s front, this is the 3rd mandate from its stable and the only listing took place so far opened at a premium of 0.02% on the day of listing.


Conclusion / Investment Strategy

While management has clarified that due to many product launch in concluded fiscal, it has posted higher turnover and net profits, its happening in the year just before IPO raises concerns. Will it be able to sustain such margins going forward in the highly competitive and cheap Chinese products dumping, is a million dollar question. With no change in financial data for FY16 to FY18 how the new LM found higher valuation compared to the previous LM it perhaps a matter of ddiscussion. Although issue pricing appears reasonable, sustainability of bottom line in highly competitive segment remains major concern. In light of these, risk savvy investors may consider investment at their own risk.

Review By Dilip Davda on Aug 6, 2018

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

Powerful Technologies IPO FAQs

  1. 1. Why Powerful Technologies IPO?

    The initial public offer (IPO) of Powerful Technologies Limited offers an early investment opportunity in Powerful Technologies Limited. A stock market investor can buy Powerful Technologies IPO shares by applying in IPO before Powerful Technologies Limited shares get listed at the stock exchanges. An investor could invest in Powerful Technologies IPO for short term listing gain or a long term.

  2. 2. How is Powerful Technologies IPO?

    Read the Powerful Technologies IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Powerful Technologies IPO what should investors do?

    Powerful Technologies IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Powerful Technologies IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.

  4. 4. Is Powerful Technologies IPO good?

    Sorry, we didn't rate the Powerful Technologies IPO.

  5. 5. Is Powerful Technologies IPO worth Investing?

    Our lead analyst Mr. Dilip Davda didn't rate the Powerful Technologies IPO.

  6. 6. When will Powerful Technologies IPO allotment status?

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

  7. 7. When will Powerful Technologies IPO list?

    The Powerful Technologies IPO will list on Tuesday, August 28, 2018, at NSE SME.








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