Sigma Solve NSE SME IPO review (May apply)

Review By Dilip Davda on Sep 26, 2020

•    SSL engaged in IT and IT-enabled services for global clients.
•    SSI is a subsidiary of the company where SSL is going to have a 60% stake post issue.
•    The issue expenses indicates the fully structured format of the IPO.
•    Cash surplus, risk savvy investors may invest at their own risk.

ABOUT COMPANY:
Sigma Solve Ltd. (SSL) (erstwhile known as Presha Software Pvt. Ltd.) is engaged in providing the IT and IT-enabled services and to accelerate the business opportunities of Sigma Solve Inc. (SSI), a Florida (USA) based IT Company which is a subsidiary.

At present, the company is having 51.04% stake in the subsidiary company i.e. Sigma Solve Inc. By additional investment of Rs. 0.70 cr., its stake will be approximately 60.00% of the total capital of the subsidiary company; as a result profit/loss earned by the subsidiary company will be forming part of SSL on a consolidated basis.

"Sigma" and "Sigma Solve Inc."(Erstwhile group concern and now subsidiary company w.e.f. October 23, 2019) having their offices at Florida (USA), Atlanta (Home Office), and Australia (Home Office) jointly make efforts for new business acquisitions. Company's 100% of the revenue is from the export of services, and in order to provide hassle-free payment facilities to clients, SSL channelizes payment through "Sigma Solve Inc., having their presence in Florida (USA), Atlanta (Home Office) and Australia (Home Office). SSL does not have any identified customers being almost 100% of sales is booked by Sigma Solve Inc., and subsequently, "Sigma" is charging on monthly basis to Sigma Solve Inc. for providing the execution facilities on per man-hour basis in conjunction with efficiency level achieved on monthly basis. Moreover, "Sigma" also occasionally serves directly to clients.

ISSUE DETAILS/CAPITAL HISTORY:
To meet its plans for acquisitions and other strategic initiatives (Rs . 2.30 cr.), investment in a subsidiary (Rs. 0.70 cr.) and general corpus find (Rs. 1.20 cr.) needs, SSL is coming out with a maiden IPO of 1101000 equity shares of Rs.10 each at a fixed price of Rs. 45 per share to mobilize Rs. 4.95 cr. The issue opens for subscription on September 29, 2020, and will close on October 09, 2020. The market is surprised for such a long duration for the IPO subscription period. Minimum application is to be made for 3000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge platform.

Issue constitutes 26.78% of the post issue paid-up capital of the company. The company will be spending Rs. 0.75 cr. for this IPO process. This indicates that the issue is pre-structured and will get through with arranged funds.  

The issue is solely lead managed by Beeline Broking Ltd. and Link Intime India Pvt. Ltd. is the registrar to the issue. Nikunj Stock Brokers Ltd. is acting as a Market Maker for this company. So far the company has raised entire equity at par and has issued bonus shares in the ratio of 100 shares for 1 share held in May 2019.

The average cost of acquisition of shares by the promoters is Rs. 4.15 per share. Post issue, SSL's current paid-up equity capital of Rs. 3.01 cr. will stand enhanced to Rs. 4.11 cr. With this IPO, the company is looking for a market cap of Rs. 18.50 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, on a standalone basis, SSL has posted turnover/net profits of Rs. 2.57 cr. / Rs. 0.23 cr. (FY18), Rs. 3.49 cr. / Rs. 0.35 cr. (FY19) and Rs. 5.69 cr. / Rs. 0.65 cr. (FY20). As the company has invested in its own subsidiary in October 2019, on the basis of consolidated performance, for fiscal 2019-20, it has posted a turnover of Rs. 10.97 cr. with a net profit of Rs. 1.94 cr.

For the last three fiscals, on a standalone basis, SSL has posted an average EPS of Rs. 2.76 and an average RoNW of 29.69%. On a consolidated basis, this figure stands at Rs.5.73 and 28.23% respectively.

The issue is priced at a P/BV of 2.53 on the basis of its NAV of Rs. 17.78 as on March 31, 2020, and at a P/BV of 1.94 on the basis of post-issue NAV of Rs. 23.23. (On a consolidated basis).

If we attribute FY20 earnings (on a consolidated basis) on fully diluted post issue equity, then asking price is at a P/E of around 9.53 against peers group average of 11.75, making it fully priced offer.

COMPARISION WITH LISTED PEERS:
As per offer documents, SSL has shown Dev Information, InfoBeans Techno and Innovana Thinklabs as its listed peers. They are currently trading at a P/Es of around 31.91, 12.95 and 8.33 (as on September 25, 2020). However, they are not strictly comparable on an apple to apple basis.

MERCHANT BANKER'S TRACK RECORDS:
On merchant banker's performance front, this is the 6th mandate from its stable in the last four fiscals (including the ongoing one). Out of last 5 listings, 1 at par and the rest at premiums ranging from 1.37% to 10% on the day of listing. 


Conclusion / Investment Strategy

SSL has posted growth in top and bottom lines for the last three fiscals. However, on the basis of P/E and P/BV parameters, the issue is fully priced. The issue expenses indicate the structured format of the IPO. Cash surplus, risk savvy investors may consider investment at their own risk.

Review By Dilip Davda on Sep 26, 2020

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

Sigma Solve IPO FAQs

  1. 1. Why Sigma Solve IPO?

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

  2. 2. How is Sigma Solve IPO?

    Read the Sigma Solve IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Sigma Solve IPO what should investors do?

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

  4. 4. Is Sigma Solve IPO good?

    Our recommendation for Sigma Solve IPO is to subscribe for long term.

  5. 5. Is Sigma Solve IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the Sigma Solve IPO.

  6. 6. When will Sigma Solve IPO allotment status?

    The Sigma Solve IPO allotment status will be available on or around Oct 14, 2020. The allotted shares will be credited in demat account by Oct 15, 2020. Visit Sigma Solve IPO allotment status to check.

  7. 7. When will Sigma Solve IPO list?

    The Sigma Solve IPO will list on Monday, October 19, 2020, at NSE SME.








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