Veeram Infra BSE SME IPO review (Avoid)

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Review By Dilip Davda on September 26, 2018

•    The company kept venturing into one business to another over the years.
•    Currently it continues to have all vertical business it ventured into.
•    Except FY18, its financial data is not worth considering.
•    Issue is exorbitantly priced and its performance so far does not support.
•    LM has poor track record.

ABOUT COMPANY:
Veeram Infra Engineering Ltd. (VIEL) that started as an Offset Printer later ventured into Graphics and designing and then into mercantile trading and since last 2-3 years into real estate sector. Thus it kept shifting from one business to another over the periods. Currently VIEL is in the process of development and sale of land, residential properties including identification and acquisition of land, development of land & infrastructure, acquisition of development rights of projects, marketing of projects/land. It has entered in to a land development agreement for Land Development and Plotting Project at Village Zamp, Taluka Sanand, District Ahmedabad, Gujarat. However, at present it continues to be in all verticals of business it ventured into so far.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its working capital and general corpus fund needs, VIEL is coming out with a maiden IPO of 2106000 equity shares of Rs. 10 each at a fixed price of Rs. 51 per share to mobilize Rs. 10.74 cr. Issue opens for subscription on 28.09.18 and will close on 083.10.18, thus it has kept a very long period for subscription that has raised eyebrows. Minimum application is to be made for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue constitutes 26.47% of the post issue paid up capital of the company. Issue is solely lead managed by First Overseas Capital Ltd. while Karvy Computershare Pvt. Ltd. is the registrar to the issue.

Having issued initial equity at par, it raised further equity in the price range of Rs. 50 to Rs. 155 per share between December 2017 and May 2018. It has also issued bonus shares in the ratio of 10 for 1 in February 2018 and 7 for 10 in June 2018.  Average cost of acquisition of shares by the promoters is Rs. 0.53 and Rs. 5.06 per share.  Post issue, VIEL’s current paid up capital of Rs. 5.85 cr. will stand enhanced to Rs. 7.96 cr.

FINANCIAL PERFORMANCE:
On performance front, for last four fiscals, VIEL has posted turnover/net profits of Rs. 0.04 cr. / Rs. 0.001 cr. (FY15), Rs. 0.03 cr. / Rs. 0.001cr. (FY16), Rs. 0.04 cr. / Rs. 0.002 cr. (FY17) and Rs. 12.82 cr. / Rs. 0.82 cr. (FY18). Thus for FY18 it has posted improved performance just before IPO that raises concern. For last three fiscals, it has posted an average EPS of Rs. 1.44 and an average RoNW of 5.24%. Issue is priced at a P/BV of 1.82 on the basis of its NAV of Rs. 28 as on 31.03.18 (Pre-bonus and further equity) and at a P/BV of 3.38 on the basis of post issue NAV of Rs. 15.08. If we consider FY18 super earnings and attribute it on fully diluted post issue equity, then asking price is at a P/E of around 49 plus making it exorbitantly priced offer.

PEERS COMPARISION:
As per offer documents, it has no listed peers to compare with.

MERCHANT BANKER’S TRACK RECORD:
On merchant banker’s front, this is 20th mandate from its stable in last five years. Out of last 10 listings 7 opened at discount and the rest with a premium ranging from 1.67% to 25% on the day of listings. Thus it has poor track record.

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