Tranway Techno BSE SME Startup IPO review (Apply at your own risk)

Review By Dilip Davda on Jan 23, 2020

• TTL is in servicing business like staffing, demand development, SAP solutions etc.
• This segment is highly fragmented, poses threat from big players.
• Needs of higher working capitals is a big challenge.
• Lead Manager has poor track records.

ABOUT COMPANY:
Tranway Technologies Ltd. (TTL) is currently in the core business of staffing solutions and payaroll processing. It mulls other offerings like quality engineering and assurance; demand development projects, software developments, start up training etc. TTL has up the sleeve developments of SAP solutions, software products etc.

Currently TTL has limited market reach, threats from big players, dependency on suppliers, inadequate working capital and thus poses major threats.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its needs for working capital (Rs. 3.64 cr.) and general corpus fund (Rs. 0.25 cr.) TTL is coming out with a maiden IPO of 4240000 equity shares of Rs. 10 each at par value to mobilize Rs. 4.24 cr. The issue opens for subscription on 27.01.20 and will close on 29.01.20. The minimum application is to be made for 10000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME Startup. The issue constitutes 40.00% of the post issue paid-up capital of the company. TTL is spending Rs. 0.35 cr. for the entire proceeds of this IPO.

The issue is solely lead managed by Finshore Management Services Ltd. and Link Intime India Pvt. Ltd. is the registrar to the issue. Nikunj Stock Brokers Ltd. is the market maker for this issue. Having issued entire equity at par, TTL converted equity at a price of Rs. 26.82 (based on Rs. 10FV). per share in November 2019. It has issued bonus shares in the ratio of 20 shares for every 1 share held in December 2019 and also split face value of shares from Rs. 100 to Rs. 10.

The average cost of acquisition of shares by the promoters is Rs. 11.96 per share. Post issue, TTL's paid-up capital will stand enhanced from Rs. 6.36 cr. to Rs. 10.60 cr. Thus the company mulls market capitalization of Rs. 10.60 cr.

FINANCIAL PERFORMANCE:
For the last three fiscals, TTL has posted turnover/net profits of Rs. 3.12 cr. / Rs. 0.12 cr. (FY17), Rs. 3.94 cr. / Rs. 0.11 cr. (FY18) and Rs. 5.18 cr. / Rs. 0.24 cr. (FY19). For the first half of FY20, it has clocked in the net profit of Rs. 0.06 cr. on a turnover of Rs. 2.29 cr. TTL's top line has shown growth but bottom line has seen inconsistency.

For the last three fiscals, TTL has posted an average EPS of Rs. 892.93 and an average RoNW of 44.16% (based on pre-bonus/pre-split equity). The issue is priced at a P/BV of 0.68 based on its NAV of Rs. 14.72 as on 30.09.19 and at a P/BV of 0.85 based on post-IPO NAV of Rs. 11.74. As on 30.09.19TTL has shown average EPS of Rs. 1.51 and an average RoNW of 10.26% (considering post restated bonus/split equity). TTL has not paid any dividend so far. Its debtors holding days are 90 days that raises concern.

If we annualize FY20 earnings and attribute it to post issue paid-up equity capital then asking price is at a P/E of 90. Thus even being at par, it is a costly bet.

COMPARISION WITH LISTED PEERS:
As per offer documents, TTL has shown Info Edge as its listed peers. It is currently trading at a P/E of 98.65 (as on 23.01.20). However, it is not strictly comparable.

MERCHANT BANKER'S TRACK RECORD:
On merchant banker's front, this is the 14th mandate from its stable in the last three fiscals (including the ongoing). Out of the last 10 listings, three issues opened at a discount, one at par and the rest with a premium ranging from 1.63% to 20.67% on the day of listings. IPO of Alumilite Arch was withdrawn post closure of the issue. Thus it has poor track records.


Conclusion / Investment Strategy

TTL is in a highly competitive and fragmented segment. It is posing threats from big players. Financial data has no match for the asking price even at par value. Higher equity base post issue with negligible top line raises concern. LM has poor track record. Although it has positive NAV and higher acquisition cost of shares by the promoters, only cash surplus, risk savvy investors may consider investment for long term at their own risk.

Review By Dilip Davda on Jan 23, 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

Tranway IPO FAQs

  1. 1. Why Tranway IPO?

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

  2. 2. How is Tranway IPO?

    Read the Tranway IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Tranway IPO what should investors do?

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

  4. 4. Is Tranway IPO good?

    Sorry, we didn't rate the Tranway IPO.

  5. 5. Is Tranway IPO worth Investing?

    Our lead analyst Mr. Dilip Davda didn't rate the Tranway IPO.

  6. 6. When will Tranway IPO allotment status?

    The Tranway IPO allotment status will be available on or around Feb 3, 2020. The allotted shares will be credited in demat account by Feb 5, 2020. Visit Tranway IPO allotment status to check.

  7. 7. When will Tranway IPO list?

    The Tranway IPO will list on Wednesday, February 5, 2020, at BSE SME.








Search Chittorgarh.com:

Download Our Mobile App

Android App iOS App