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Quadpro ITeS NSE SME IPO review (Avoid)

Review By Dilip Davda on Sep 16, 2021

•    QIL is in the highly competitive and fragmented segment of the service industry.
•    It has posted declining trends in its top line for the last three fiscals.
•    FY21 super performance in the pre-IPO years raises eyebrows.
•    The issue is aggressively priced and may be ignored. 

ABOUT COMPANY:
Quadpro ITeS Ltd. (QIL) is an Airan group company. It is providing Information Technology (IT) and Information Technology (IT) enabled services, cash management services (CMS), Cheque Truncation System (CTS), Doorstep Banking services, Software Development Services, Banking transaction processing services, Document management services for telecommunication companies, Non-Banking Finance companies, internet services providers, Database Management Services, Digital Document verification for payment banks, Supply of IT and ITeS Hardware, Skilled and unskilled manpower supply services etc.

The area-wise network created in each city facilitates the best doorstep banking services. Collection of cheques executed by field staff at customer pick-up points as well as from various bank branches on a daily basis. The cheques are carried in secured lockboxes/lock pouches which are inside a waterproof backpack.

The mode of transportation used is majorly private two-wheeler vehicles and in some distant cases, four-wheelers are used. The vehicles used are not owned by the company, it's owned by the employees or the person providing the services for which company reimburses the expenses for the vehicle used by the employee/person providing the services. The collected cheques are deposited for further processing at processing centres/bank branches /centralized service branches. QIL also provides E2E (End to End) service provider right from Know Your Customer (KYC) spot audit/pickup of forms from the distributor's point, thorough Know Your Client (KYC) audit at nearest spoke office, data entry of application form into the online portal, opening an account, verifying the voter ID / Aadhaar number from their web portal, and activating the SIM of the customer in a limited Turn Around Time (TAT), outward from spoke, transporting forms to the centralized HUB, inward at HUB, Bar Coding, Gumming Photograph, De-stapling, Scanning, Re-stapling, Image Splitting, File Naming, Batch preparing up to final warehousing.

The company is operating in a highly competitive and fragmented segment with many small players in the fray. 

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its plans for capital expenditure (Rs. 3.30 cr.), acquisition and other strategic initiatives (Rs. 6.20 cr.) and general corpus fund (Rs. 3.10 cr.), QIL is coming out with a maiden IPO of 7050000 equity shares of Rs. 2 each with a fixed price of Rs. 20 per share to mobilize Rs. 14.10 cr. Minimum application is to be made for 6000 shares and in multiples thereon, thereafter. IPO comprises 6300000 fresh equity shares (Rs. 12.60 cr.) and 750000 shares (Rs. 1.50 cr.) by way of offer for sale (OFS).  The issue opens for subscription on September 20, 2021, and will close on September 22, 2021. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 27.89% of the post issue paid-up capital of the company. 

Perhaps for the first time, we are witnessing that Promoter Selling stakeholders will be spending Rs. 0.40 cr. for this entire IPO process. Resultantly, fresh equity issue amount of Rs. 12.60 cr. is going to the company in full and promoter selling stakeholders will receive net of proceeds i.e. Rs. 1.10 cr. in their hands. 

The issue is solely lead managed by Beeline Broking Ltd. and KFin Technologies Pvt. Ltd. is the registrar to the issue. Beeline Broking Ltd. is also the market maker for this issue. 

Having issued initial equity at par, QIL raised further equity at a price of Rs. 4.80 per share (based on FV of Rs. 2 per share) in July 2021 and has also issued bonus shares in the ratio of 1 for 2 in October 2017 and again in the ratio of 1 for 2 in July 2021. The average cost of acquisition of shares by the promoters is Rs. - (0.72) and Rs. 3.20 per share. 

Post issue, QIL's current paid-up equity capital of Rs. 3.80 cr. will stand enhanced to Rs. 5.06 cr. Based on the issue price, the company is looking for a market cap of Rs. 50.55 CR. 

FINANCIAL PERFORMANCE: 
On the financial front, for the last three fiscals, QIL has posted turnover/net profit-(loss) of Rs. 15.07 cr. / Rs. - (0.66) cr. (FY19), Rs. 12.91 cr. / Rs. 0.21 cr. (FY20) and Rs. 10.35 cr. / Rs. 0.73. (FY21). While it posted declining trends for its top line, surprisingly it has posted growth in its bottom lines. 

For the last three fiscals, the company has posted an average EPS of Rs. 0.21 and an average RoNW of 10.29%. The issue is priced at a P/BV of 13.25 based on its NAV of Rs. 1.51 and at a P/BV of 1.80 based on its post-issue NAV of Rs. 11.13.

If we attribute FY21 super earnings on the post issue fully diluted paid-up capital, then the asking price is at a P/E of 68.96 making it an aggressively priced offer. 

DIVIDEND POLICY: 
The company does not have any formal dividend policy and has not paid any dividends so far. It will adopt a prudent dividend policy post listing based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per offer documents, QIL has shown Riddhi Corporate Services and Airan Limited as its listed peers. They are currently trading at a P/E of 58.6 and 42.27 (as of September 16, 2021). However, they are not truly comparable on an apple to apple basis.

MERCHANT BANKER'S TRACK RECORDS:
This is the 10th mandate from Beeline in the last four fiscals (including the ongoing one). Out of the last 9 listings, 2 opened at discount, 1 at par and the rest at the premiums ranging from 1.37% to 10% on the date of listings. 


Conclusion / Investment Strategy

QIL is in a highly competitive and fragmented segment. The last three fiscalââ‚-â„¢s financial data have shown declining trends in the top line. Super profits for FY21 i.e. in the pre-IPO year raises eyebrows. IPO pricing is very aggressive though based on such super earnings. The company is way behind its peers in turnover aspects. Considering all these, one may ignore this issue.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Sep 16, 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

Quadpro ITES IPO FAQs

  1. 1. Why Quadpro ITES IPO?

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

  2. 2. How is Quadpro ITES IPO?

    Read the Quadpro ITES IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Quadpro ITES IPO what should investors do?

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

  4. 4. Is Quadpro ITES IPO good?

    Our recommendation for Quadpro ITES IPO is to avoid.

  5. 5. Is Quadpro ITES IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the Quadpro ITES IPO.

  6. 6. When will Quadpro ITES IPO allotment status?

    The Quadpro ITES IPO allotment status will be available on or around Sep 27, 2021. The allotted shares will be credited in demat account by Sep 28, 2021. Visit Quadpro ITES IPO allotment status to check.

  7. 7. When will Quadpro ITES IPO list?

    The Quadpro ITES IPO will list on Thursday, September 30, 2021, at NSE SME.

1 Comments

1. AvinashMB  Sep 20, 2021 11:18:47 AM
If Davada says avoid , then i am surely applying for it !