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Promax Power BSE SME IPO review (May apply)

Review By Dilip Davda on Sep 28, 2021

•    PPL is engaged in power projects related contracts on an EPC work basis.
•    Financial details of the company are not transparent on EPS and RoNW data. 
•    It has posted a lower net on the higher top line for FY21.
•    Though the issue is at par, it is at a high P/E.
•    Cash surplus/risk seekers may consider an investment. 

ABOUT COMPANY:
Promax Power Ltd. (PPL) took over the business of Promax Technologies (a proprietorship concern run by the main promoter) and formed this company in the year 2017. It is into undertaking of EPC projects (Engineering, Procurement and construction) of Electric substation & Transmission line, Power distribution, Hydro, Solar power stations etc. Till FY19 there were no major activities. It started its operation in FY20. Besides EPC works for power and solar, the company also provides turnkey execution of civil infrastructure projects like Industrial buildings, Water Infrastructure etc. As of March 31, 2021, it had an order book of Rs. 109.25 cr. in different stages of implementation. 

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its needs for working capital (Rs. 1.22 cr.) and general corporate purpose (Rs. 0.10 cr.), PPL is coming out with a maiden IPO of 1600000 equity shares of Rs. 10 each at par to mobilize Rs. 1.60 cr. The issue opens for subscription on September 30, 2021, and will close on October 04, 2021. Minimum application is to be made for 10000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 26.67% of the post issue paid-up capital of the company. PPL will be spending Rs. 0.28 cr. for this IPO process. As of the date of filing of the final prospectus, the company has on roll 49 employees including management.

The issue is solely lead managed by Finshore Management Services Ltd. and Cameo Corporate Services Ltd. is the registrar to the issue. Nikunj Stock Brokers Ltd. will be the market maker for this issue.

The company has raised entire equity at par so far. The average cost of acquisition of shares by the promoters is Rs. 10.00 per share. 

Post issue, PPL's current paid-up equity capital of Rs. 4.40 cr. will stand enhanced to Rs. 6.00 cr. Based on IPO pricing, the company is looking for a market cap of Rs. 6.00 cr. 

FINANCIAL PERFORMANCE:
On the financial performance part, for the last two years, PPL has posted revenue/net profits of Rs.7.76 cr. / Rs. 0.31 cr. (FY20) and Rs. 36.89 cr. / Rs. 0.18 cr. (FY21). 

For the last three fiscals, PPL has posted an average EPS of Rs. 105.01 and an average RONW of 34.10%. These data are misguiding as its FY19 and FY 20 EPS is calculated on Rs. 1 lakh equity base while FY21 EPS is on Rs. 4.40 cr. equity. The issue is priced at a P/BV of 0.90 based on its NAV of Rs.11.11 as of March 31, 2021, and at a P/BV of 0.92 based on its post-issue NAV of Rs. 10.82. 

If we attribute FY21 earnings on fully diluted post issue paid-up equity capital, then the asking price is at a P/E of around 33.33 making it an aggressively priced issue.

DIVIDEND POLICY:
The company has not declared any dividend for the period covered in the restatement of accounts as per the offer documents. It will follow a prudent dividend policy post listing based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per the offer documents, PPL has no listed peers to compare with. 

MERCHANT BANKER'S TRACK RECORD:
This is the 17th mandate from Finshore Management in the last five fiscals (including the ongoing one). Out of the last 10 listings, 2 opened at discount, 1 at par and the rest with premium ranging from 1.63% to 20% on the day of listings.


Conclusion / Investment Strategy

The company has posted a lacklustre performance for FY20 and FY21. It posted a lower net on higher turnover for FY21. Based on FY21 earnings, though the issue is at par, it.is at a very high P/E. Hence risk seeker/cash surplus investors may consider parking of funds with a long term perspective.

Review By Dilip Davda on Sep 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

Promax Power Limited IPO FAQs

  1. 1. Why Promax Power Limited IPO?

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

  2. 2. How is Promax Power Limited IPO?

    Read the Promax Power Limited IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Promax Power Limited IPO what should investors do?

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

  4. 4. Is Promax Power Limited IPO good?

    Our recommendation for Promax Power Limited IPO is to subscribe for long term.

  5. 5. Is Promax Power 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 Promax Power Limited IPO.

  6. 6. When will Promax Power Limited IPO allotment status?

    The Promax Power Limited IPO allotment status will be available on or around Oct 7, 2021. The allotted shares will be credited in demat account by Oct 11, 2021. Visit Promax Power Limited IPO allotment status to check.

  7. 7. When will Promax Power Limited IPO list?

    The Promax Power Limited IPO will list on Tuesday, October 12, 2021, at BSE SME.

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