Fourth Dimension Solutions IPO – Revenue up by 38 times in 3 years – Should you invest?

Fourth Dimension Solutions IPOFourth Dimension Solutions IPO

Delhi based, Fourth Dimension Solutions IPO would open for subscription on 30th December, 2015. Fourth Dimension Solutions is engaged in designing, developing, deploying and delivering IT infrastructure and services. It revenues grown aggressively at 38 times in last 3 years. What are the positive factors of Fourth Dimension Solutions IPO? What are its hidden factors in Fourth Dimension Solutions IPO? Should you invest in such IPO or not?

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About Fourth Dimension Solutions Limited

Company is engaged in designing, developing, deploying and delivering IT infrastructure and services. They provide range of information technology and consultancy services, including infrastructure services, end user IT support, IT asset life cycle, and integrated solutions. FDS enables large and medium enterprises, Government organization and institutes to reduce their total cost of ownership using an onsite and on-call services, deliver strategic, personalized, full-service Technical Support services solutions with quality, value and commitment to total customer satisfaction Its enterprise offerings include compute infrastructure solutions that involve the supply and installation of mission-critical IT assets in Application Delivery, Network and Data Security, Surveillance and whole suite of data storage and back-up solution apart from servers, operating systems, and commercial off-the-shelf software and hardware. Its service assignments are mostly tender based contracts awarded to us by Local/State/Central Government bodies. In certain cases, they bid the tender in consortium with another party which primarily includes RICOH India limited. Company also started merchant trading of IT and electronic products like tablets, LED TV, Mobile Phone etc.

Issue details of Fourth Dimension Solutions IPO

  • IPO opens: 30-Dec-2015
  • IPO closes: 7-Jan-2016
  • Face Value: Rs 10 per share
  • Issue price: Rs 30 per share
  • Minimum Shares: 4,000 shares and multiples of 4,000 shares there-of
  • Minimum amount: Rs 120,000
  • Issue size: Rs 8.67 Crores.
  • Lead Managers: Sarthi Capital Advisors Private Ltd
  • Listing: NSE Emerge Platform
  • Download Fourth Dimension Solutions IPO Prospectus from SEBI Website at this link

Purpose of the IPO

1. To meet the working capital requirements of the Company;

2. Issue Expenses

Company Financials (standalone and reinstated)

  • Company generated revenue of Rs 24.07 Lakhs for the year ended Mar-12 and Rs 65,231 Lakhs for the year ended Mar-15. 
  • Company posted a loss of Rs 0.08 Lakhs for the year ended Mar-12 and Rs 1,296 Lakhs for the year ended Mar-2015.
  • Its restated standalone EPS for FY 2015 is Rs 80.38 and last 3 years average EPS of Rs 74.15.

Fourth Dimension IPO - Financials

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Reasons to invest Fourth Dimension Solutions IPO

  • Aggressive revenue growth in last 3 years. Its revenues have grown by 38 times in last 3 years.

Reasons not to invest in Fourth Dimension Solutions IPO

  • It generates thin margins of around 2% in last couple of years.
  • Company is involved in Information Technology industry which is the fastest evolving industry in the world, (risk of obsolescence in current technology).
  • Company top five clients contribute approximately 99.23% of its revenues from sale of products and 89.46% from sale of services for the period ended June 30, 2015. Any loss of business from one or more of them may adversely affect its revenues and profitability.
  • Company has a negative cash flow in the past 4 years and for the period ended June 30, 2015
  • Company business may suffer if we fail to complete projects on time.
  • Company is involved in certain legal proceeding(s). Any adverse decision in such proceeding(s) may render us/them liable to liabilities/penalties and may adversely affect its business and results of operations.
  • Some of the Key Management Personnel are associated with the Company less than one year.
  • Subsidiary Company has objects similar to this Company.
  • Other risk factors (Internal and external) can be viewed in prospectus Page no. 19 onwards.

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Recommendation / Investment strategy

  • EPS in last 3 years is very high as paid up capital is low, hence one should not look it for comparison purpose. If we consider first 6 months EPS and estimate yearly EPS, it would come to approx Rs 10 per share. On issue price of Rs 30, P/E ratio works out to be 3. Its peers TVS Electronics EPS is 67.12 (highest) and Compuage Infocom P/E ratio is 8.43 (Lowest). Hence, its issue price at Rs 30 is reasonably priced.
  • Fourth Dimension Solutions Limited revenues have grown aggressively in last 3 years, however generates thin margins of around 2% only. I would have been excited if margins are on higher side. Investors with high risk appetite can invest in this IPO.

Disclaimer: I do not have an interest in investing in this IPO. The idea of giving positive and negative factors to investors in this article is to create awareness and education about this IPO. One should NOT constitute this as investment advice to buy or not to buy. Please consult your investment advisor before you invest in such high risk investment options.

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Fourth Dimension Solutions IPO

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