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Review By Dilip Davda on December 10, 2023
• SOEL is engaged in providing employees transportation services.
• It marked sudden boost in top lines from FY23 onwards.
• The company posted inconsistency in its bottom lines for the reported periods.
• Based on its FY24 earnings, the issue appears greedily priced.
• There is no harm in skipping this pricey bet.
ABOUT COMPANY:
Shree OSFM E-Mobility Ltd. (SOEL) is engaged in providing employee transportation services to large MNCs with a presence across major cities in India. It has over 16+ years of experience in catering to the employee transportation needs of companies in IT/ITES, Aviation and other sectors. The company operates a largely "asset light" engagement model. Typical operating parameters are on monthly lease, per kilometer, per passenger trip and package model.
Presently, it operates with a 1475+ fleet with a variety of vehicles such as Small cars, Sedans, SUVs, Luxury Cars and Buses of which 217 vehicles are owned by it and rest is leased from various vendors.
The Company currently has operations in 42 sites spread across Mumbai, Navi Mumbai, Pune, Bengaluru, and Kolkata. Its clients include major BPM players such as JP Morgan, Morgan Stanley, Cape Gemini, Accenture etc.
Though the company offers services like Travel Desk Management, Roster Management Services, Logistics for Corporate Events, and Fleet Management, it chares all such services under Vehicle Hire Charges. As of October 31, 2023, it had 154 employees on its payroll.
ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden IPO of 3784000 equity shares of Rs. 10 each at a fixed price of Rs. 65 per share to mobilize Rs. 24.60 cr. The issue opens for subscription on December 14, 2023, and will close on December 18, 2023. The minimum application to be made is for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.49% of the post-IPO paid-up capital of the company. It is spending Rs. 1.60 cr. for this IPO process and from the net proceeds, it will utilize Rs. 5.11 cr. for working capital, and Rs. 12.22 cr. for purchase of passenger vehicles, Rs. 5.67 cr. for general corporate purposes.
The issue is solely lead managed by First Overseas Capital Ltd., and Bigshare Services Pvt. Ltd. is the registrar of the issue. BHH Securities Pvt. Ltd. is the market maker for the company. The issue is underwritten 15.06% by the Lead Manager and 84.94% by the Market Maker.
After issuing initial equity shares at par value, the company issued bonus shares in the ratio of 2 for 1 in March 2016, and 6 for 1 in July 2022. The average cost of acquisition of shares by the promoters is Rs. NIL.
Post-IPO, its current paid-up equity capital of Rs. 10.50 cr. will stand enhanced to Rs. 14.28 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 92.85 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company posted a total revenue/net profit of Rs. 29.79 cr. / Rs. 0.74 cr. (FY21), Rs. 30.80 cr. / Rs. 1.63 cr. (FY22), and Rs. 82.61 cr. / Rs. 3.09 cr. (FY23). For H1 of FY24 ended on September 30, 2023, it earned a net profit of Rs. 2.23 cr. on a total revenue of Rs. 55.97 cr.
For the last three fiscals, the company reported an average Eps of Rs. 2.11 and an average RoNW of 11.45%. The issue is priced at a P/BV of 3.34 based on its NAV of Rs. 19.48 as of March 31, 2023, and at a P/BV of 2.06 based on its post-IPO NAV of Rs. 31.54 per share. Surprisingly, the offer document is silent on its NAV as of September 30, 2023.
If we annualize FY24 super earnings and attribute it to post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 20.83. Thus the IPO appears greedily priced.
The company has posted PAT margins of 2.48% (FY21), 5.29% (FY22), 3.74% (FY23), 3.98% (H1-FY24). Thus it has reported inconsistency in its bottom margins.
DIVIDEND POLICY:
The company has not declared any dividends for any reported financial years. It will adopt a prudent dividend policy based on its financial performance and future prospects.
COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown VRL Logistics as their listed peer. It is trading at a P/E of 40.72 (as of December 08, 2023). However, they are not comparable on an apple-to-apple basis. This comparison appears to be an eyewash.
MERCHANT BANKER'S TRACK RECORD:
This is the 22nd mandate from First Overseas in the last three fiscals (including the ongoing one). Out of the last 10 listings, 1 listed at a discount, 1 at par and the rest listed at premiums ranging from 0.04% to 43.53% on the day of listing.
Review By Dilip Davda on December 10, 2023
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. My reviews do not cover GMP market and operators game plans. Readers must consult a qualified financial advisor before making any actual investment decisions, based the on information published here. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the recent past, SME IPOs drew the attention of investors across the board and lead to seer madness. 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 their own risk. The above information is based on information available as of date coupled with market perceptions. The Author has no plans to invest in this offer.
About 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.
(Dilip Davda -SEBI registered Research Analyst-Mumbai,
Registration no. INH000003127 (Perpetual)
Email id: dilip_davda@rediffmail.com ).
The initial public offer (IPO) of Shree OSFM E-Mobility Limited offers an early investment opportunity in Shree OSFM E-Mobility Limited. A stock market investor can buy Shree OSFM E-Mobility IPO shares by applying in IPO before Shree OSFM E-Mobility Limited shares get listed at the stock exchanges. An investor could invest in Shree OSFM E-Mobility IPO for short term listing gain or a long term.
Read the Shree OSFM E-Mobility IPO recommendations by the leading analyst and leading stock brokers.
Shree OSFM E-Mobility IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Shree OSFM E-Mobility IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.
Our recommendation for Shree OSFM E-Mobility IPO is to avoid.
As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the Shree OSFM E-Mobility IPO.
The Shree OSFM E-Mobility IPO allotment status will be available on or around December 19, 2023. The allotted shares will be credited in demat account by December 20, 2023. Visit Shree OSFM E-Mobility IPO allotment status to check.
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