Salebhai Internet BSE SME IPO review (May apply)

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Review By Dilip Davda on July 22, 2018

• Maiden IPO by B2C online marketing service company for BSE SME listing.
• Issue constitutes 26.58% of the post issue paid up capital of the company.
• Due to losses for all these years since incorporation, it has negative P/E.
• Financial data is non impressive. Pricing is very aggressive.
• Risk savvy cash surplus investors may consider investment at their own risk.

About the Company

Salebhai Internet Ltd. (SIL) is the owner of Salebhai.com e-commerce portal. This portal is an Indian e-commerce portal that enables people living away from home order a range of specialties directly from their hometowns. It is also a one-stop solution for those who want to discover regional products from across India. People can pick from a wide variety of delicious consumable items like sweets, namkeen, chocolates, bakery, spices, dry fruits, beverages, and pickles. Salebhai also offers other products such as handicrafts, paintings, puja items, handloom goods, and herbal & wellness items.

Salebhai identified the market gap led by people migrating within Indian and abroad and goods representing their culture resulting in short supply. After studying migration trends among Indian citizens, it was observed that most people moved to fast growing cities like Ahmedabad, Bangalore, Chennai, Delhi, Kolkata, and Mumbai – either due to employment opportunities, education, or marriage.

The market gap also demonstrated that migration created a void in people‘s lives. Therefore, driven by back-to-roots philosophy, this E-commerce marketplace focuses on requirements of over 17 Diaspora communities living in big Indian cities as well as those who live abroad. With 8500 products sourced from over 100 cities and 300 select vendors, the company provides people with an opportunity to buy products in various categories from sellers across India as well as discover new items from different communities and cultures.

Furthermore, the products available on Salebhai.com are priced exactly as displayed on the shops where they are available. All products listed on this platform come with detailed description, which include – popularity, benefits, facts, place of origin, usage, etc. Apart from these, all consumable products come with serving ideas from reputed chefs. The platform also lists complete information about vendors such as their history, lineage, and reputation.

Future plans

Salebhai.com plans to further deepen its offerings to customers by penetrating into smaller towns for sourcing, will widen our offering by adding new categories which are missed by people. The company has a strong team which consists of professionals with proven expertise in IT, marketing, content development, innovation, disruptive thinking, channel management, logistics, and customer support.


Current Capital history:
Having raised initial equity at par, it raised further equity in the price range of Rs. 950 to Rs. 1500 per share between April 2016 and February 2018. It has also issued bonus shares in the ratio of 9 shares for every 1 share held in March 2018. As on 31.03.18 it’s paid up equity capital was Rs. 6.24 crore.

Issue details:
To meet operating expenditures, customer acquisition, IT development, Brand Building & Promotion, general corpus fund needs, SIL is coming out with a maiden IPO of 2259600 equity shares of Rs. 10 each at a fixed price of Rs. 105 per share to mobilize Rs. 23.73 crore. Issue opens for subscription on 27.07.18 and will close on 02.08.18. Minimum application is to be made for 1200 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue is solely lead managed by Monarch Networth Capital Ltd. Skyline Financial Services Pvt. Ltd. is the registrar to the issue. Post issue, its current paid up equity capital of Rs. 6.24 crore will stand enhanced to Rs. 8.50 crore.

Financial Performance:
For last two years SIL posted turnover/net profits/ – (loss) of Rs. 0.04 cr. / Rs. – (1.11) cr. (FY16), Rs. 0.46 cr. / Rs. – (2.88) cr. (FY17). For 10 months ended on 31.01.18 of the current fiscal, it has posted loss of Rs. – (1.60) cr. on a turnover of Rs. 1.13 cr. Thus company has been incurring losses for all these years. For last two years it has posted an average negative EPS of Rs. (416.14) and an average RoNW of (148.31%). Hectic premiums collected for further equity helped company to have a NAV of Rs. 97.93 as on 31.01.18. However, as on 31.03.18 its NAV is around Rs. 18.88 and on the basis of it, asking price at a P/BV of 5.56. Due to negative earnings, its P/E remains negative.  

Peer comparison:
As per offer document, it is showing Infibeam Incorporation as its listed peers. Infibeam is trading at a P/E of around 672 (standalone) as on 20.07.18. (as per 31.03.18 earnings). Peer is not comparable in stricter norms.

Merchant banker track record:
On merchant banker’s front, this is the 10th mandate from its stable in last five fiscals. Out of last 9 listings 2 opened at discount, 2 at par and the rest with a premium ranging from 1.42% to 45% on the day of listing.

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