Atishay Infotech IPO – SME – Can we invest?
Atishay Infotech IPO – SME – Can we invest?
Atishay Infotech IPO would hit the market on 25th September, 2014. This SME company earned 15% net profit in FY 2013-14 which is good among the SME IPO’s which came in last 1 year. Revenues are grown by 23% in last financial year. There are several good factors about Atishay Infotech IPO. Can we invest in such Atishay Infotech IPO or not? What are the negative points to be seen before investing in Atishay Infotech Limited IPO?
About Atishay Infotech Limited
Atishay Infotech Limited offers wide range of Information Technology Database Management and E-Governance Services including Large Scale Data Entry and Scanning Solutions, Digitization Services, Document Conversion, Data Base Management of highest quality to their clients who are mainly PSU and Government Entities. This company operates from their registered office located at Mumbai and corporate office located at Bhopal, Madhya Pradesh. They are currently providing services in the states of Maharashtra, Rajasthan, Uttar Pradesh, Bihar & Madhya Pradesh.
Issue details of Atishay Infotech IPO
- IPO opens: 25-Sep-2014
- IPO closes: 29-Sep-2014
- Face Value: Rs 10 per share
- Issue price: Rs 16 per share
- Minimum shares to be applied: 8,000 and in multiples of 8,000
- Minimum investment: Rs 128,000
- No of shares: 23.2L shares
- Issue size: Rs 3.71 Crores
- Lead Managers: Hem Securities Limited
- Listing: BSE SME platform
- Download Atishay Infotech IPO Prospectus from SEBI website here
Purpose of the IPO: The funds would be used for the following purposes.
- To Meet Working Capital Requirement.
- To Meet the Issue Expenses.
- Company generated revenue of Rs 1,960 Lakhs for the year ended Mar-10 and Rs 1,560 Lakhs for the year ended Mar-14.
- Company posted a profit of Rs 184 Lakhs for the year ended Mar-10 and a profit of Rs 230 Lakhs for the year ended Mar-2014.
- EPS for FY2014 is Rs 3.56
- Average EPS for the past 3 years is Rs 3.11
Reasons to invest Atishay Infotech IPO
- Though revenues are low in FY2014 compared to FY10, revenues showing good growth in last 3 years. Revenues in FY12 are Rs 1,189 Lakhs and FY14 are Rs 1,560 Lakhs.
- Good profitability growth in last 5 years. Its profits in FY 10 are Rs 184 Lakhs Vs Rs 230 Lakhs in FY14.
- Another important factor is about good profit % stands at 14.8%. Majority of SME’s are earning less than 5% margin.
Reasons not to invest in an Atishay Infotech IPO
- The company claims that there is an erroneous Income Tax Demand appearing on the website of Income Tax Department for the various Assessment Years. This is yet to be re-certified and removed from IT site by IT Dept.
- One of their property located at Plot No. C-09, Manipuram Colony, Char Imli, Bhopal-462 016, Madhya Pardesh is in name of their employee (Mr. Ankit Jain), however the consideration for the said property is paid by company. Though there is MoU agreed between company and employee indicating the rights against the company, in the future any legal issues arising would have an impact on such asset of the company.
- There are certain non compliances of Accounting Standards (AS) issued by the Institute of Chartered Accountants of India for previous financial years / periods.
- The company has entered into a partnership deed in 2011 with Mr. K.L. Malone & Mrs. Rekha Moolani for the purpose of carrying out activities of civil constructions, building developers and other activities connected and incidental to it etc. under the partnership firm name viz. M/s. Bhojpal Dwellings. However, these activities were not covered under the object clause of the company Memorandum of Association prior to July 3, 2014.
- They are highly dependent on one of their customers for a significant portion of the income.
- It has negative cash flows in 5 years. This indicates that it need to borrow loans for high rate of interest and has difficulty in managing working capital requirements. This would affect the profits of the company.
- Business and profitability will suffer if they fail to anticipate and develop new products and services and enhance existing products and services in order to keep pace with rapid changes in technology and the industries in which they operate.
- Attempts to secure Government and PSU projects may not always be successful. Their financial condition would be materially and adversely affected if they fail to obtain new contracts.
- Excessive dependence on the Bank of Baroda, in respect of obtaining financial facilities
- SME IPO’s are trading on low volume. Liquidity of such shares could be an issue. Stock brokers can easily manipulate the price of the stock.
Recommendation / Investment strategy
- On an issue price of Rs 16 per share, based on FY 2014 EPS of Rs 3.56, P/E Ratio works out to be 5.14 times. Last 3 years EPS is Rs 3.11 and P/E ratio works out to be 4.5. Its competitors P/E Ratio is 173 (Highest-Starcom Infotech Limited) and 3.10 (Lowest-Rolta India) and industry average is 14.10. Considering 4.50 to 5.14 P/E ratio of Atishay Infotech IPO for the issue price of Rs 16 is reasonable. Post the issue, Net Asset Value (NAV) would be Rs 20.10 and since issue price is below this level, this is another plus point.
- Atishay Infotech IPO has several positive factors. Company revenues are growing in last 3 years. Company’s margins are improving and currently at 15% for FY14. The issue price is also reasonable. The Major negative point I could see is dip in revenues in FY12 and FY13 compared to previous years.
- Considering all positive factors and negative factors indicated above, one can invest in this IPO.
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Atishay Infotech IPO – SME
Note: I have seen some comments on my blog indicating that I reject the majority of SME IPO’s which are coming to public for investments. While on this blog (myinvestmentideas.com) I aim to explore best investment options and best saving ideas, I felt it was equally important that I should tell “What are bad investments” too. Investors should not get into a trap and burn their fingers. I welcome any suggestions to improve these SME IPO articles in future.