Xelpmoc Design and Tech IPO – Should you invest or Avoid?

Xelpmoc Design and Tech IPO – Should you invest or AvoidXelpmoc Design and Tech IPO – Should you invest or Avoid?

After 5 months, there is another main line IPO in India. Xelpmoc Design and Tech IPO would open for subscription on 23rd January, 2019. Xelpmoc Design and Tech is a provider of professional and technical consulting services, offering technology services and end-to-end technology solutions and support in India. Company revenues increased from Rs 2 Lakhs to Rs 5.5 Crores in the last 3 years. What are the hidden factors in Xelpmoc Design and Tech IPO? Should you invest in an Xelpmoc Design and Tech IPO? Let me provide some insights about this IPO and do the review.

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About Xelpmoc Design and Tech Limited

They are a provider of professional and technical consulting services, offering technology services and end-to-end technology solutions and support. Their clients range from entrepreneurs and start-up enterprises to established companies, engaged in e-commerce, transportation and logistics, recruitment, financial services, social networking, and various other industries. They provide a wide range of services, including, mobile and theyb application development, prototype development, thematic product development and data science and analytics assistance. They grow their portfolio of services and products as the needs of their clients evolve.

Xelpmoc Design and Tech IPO Issue details

IPO opening date: 23-Jan-2019

IPO closure date: 25-Jan-2019

Face Value: Rs 10 per share

Issue price band: Rs 62 to Rs 66 per share. Retail investors would get Rs 3 per share discount

Issue size: 23 Crores

IPO Lot size: 200 shares and 200 shares, there-off

Minimum investment: Rs 13,200 on higher price band

Leading Managers: ITI Capital Limited

Listing: BSE / NSE

Download Xelpmoc Design and Tech IPO RHP Prospectus at this link.

Objects of the Xelpmoc Design and Tech IPO issue

The Objects of the issue are:

1) Purchase of IT hardware and network equipment’s for development centers in Kolkata and Hyderabad;

2) Purchase of fit outs for new development centers in Kolkata and Hyderabad;

3) Funding working capital requirements

4) General corporate purposes.

Company Promoters

The promoters of the company are 1) Sandipan Chattopadhyay 2) Srinivas Koora and 3) Jaison Jose.

Company Financials (Reinstated-Standalone)

1) The company generated revenue of Rs 2 Lakhs for the year ended Mar-16 and Rs 5.5 Crores for the year ended Mar-18. Its revenues are Rs 3.76 Crores for 6 months ended Sep-2018.

2) The company posted a LOSS of Rs 1.67 Crores for the year ended Mar-16 and loss of Rs 3.43 Crores for the year ended Mar-18. It posted a loss of 2.24 Crores for 6 months ended Sep-2018.

3) Its EPS is negative as it is incurring losses.

Xelpmoc Design and Tech IPO - Financial summary FY2016-2019

What are the key strengths of Xelpmoc Design and Tech Limited?

Here are the key strengths of the company.

1) End-to-end solutions and support

2) Accessibility to domain experts

3) Organization structure that enhances client service

4) Experienced management and entrepreneurial culture

What are the Strategies of Xelpmoc Design and Tech Ltd?

Here are the key strategies of the company.

1) Grow their business by enhancing their technological capabilities and expanding their domain expertise

2) Expand their operations in other geographies

3) Cross-sell and up-sell to their existing client base

4) Continue to focus on public sector clients while building a private sector client base

5) Strengthen and support their human capital

6) Evaluate strategic acquisition and alliance opportunities

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What is the Grey Market Price (GMP) of Xelpmoc Design and Tech?

Since it is a small main line IPO, there is no Grey market trading happening in the market.

Reasons to invest in an Xelpmoc Design and Tech IPO

1) Company revenues shown significant growth from Rs 2 Lakhs in FY16 to Rs 5.5 Crores for FY18.

2) The company is offering Rs 3 per share discount for retail investors.

Risk Factors / Reasons not to invest in an Xelpmoc Design and Tech IPO

1) They have been incurring losses in the last 3.5 years. Investors would not get anything.

2) They have a limited operating and financial history, which makes it difficult to accurately assess their future growth prospects. Further, their restated financial statements for Fiscal 2016 (September 16, 2015 to March 31, 2016) and Fiscal 2017 (12 months ended March 31, 2017) are not comparable due to company’s formation in September 2015.

3) They are dependent on their ability to develop new services and products, and enhance their existing services and products. If their products and services do not gain market acceptance, their operating results may be negatively affected.

4) The business practices of their customers with respect to the collection, use and management of personal information could give rise to operational interruption, liabilities or reputational harm as a result of governmental regulation, legal requirements or industry standards relating to consumer privacy and data protection.

5) Interruptions or performance problems associated with their technology and infrastructure may harm their business and results of operations.

6) The length of their sales cycle may fluctuate significantly and depends on several external factors which may result in significant fluctuations in their revenues.

7) The Promoter Group of company does not include Digamber Koora, brother of Srinivas Koora, their individual Promoter, or any entity in which Digamber Koora may have an interest.

8) They may become liable to their customers and lose customers if they have defects or disruptions in their service or if they provide poor service. They may also be liable in the event of misuse of their services or platforms.

9) Their results of operation are dependent on the ability of companies in which they have acquired a stake to grow their business.

10) Their failure to adapt to technological developments or industry trends could affect the performance and features of their products and services, and reduce their attractiveness to their customers.

11) They incurred losses in the past. In the event their losses continue to increase, it may adversely affect their business and financial condition.

12) Their business is dependent on developing and maintaining continuing relationships with their clients and customers. The loss of any significant client or customer could have a material adverse effect on their business, financial condition and results of operations.

13) Any negative cash flows in the future would adversely affect their cash flow requirements, which may adversely affect their ability to operate their business and implement their growth plans, thereby affecting their financial condition.

14) One of the members of their Promoter Group is engaged in a similar line of business as the company. Any conflict of interest which may occur between their business and the business of the member of their Promoter Group, could adversely affect their business, prospects, results of operations and financial condition.

15) They issued Equity Shares during the last one year at a price that may be below the Issue Price.

16) For complete internal and external risk factors, you can refer the DRP of the company.

Xelpmoc Design and Tech IPO Schedule

23rd January – Offer Opens

25th January – Offer Closes

30th January – Finalization of Basis of Allotment

31st January – Unblocking of ASBA

1st Feburary – Credit of shares to Demat Accounts

4th Feburary – Listing on NSE & BSE

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Xelpmoc Design and Tech IPO – Should you invest?

We cannot check EPS for financial valuations as the company has incurred losses in the last 3.5 years. Also, there are no listed peers doing similar business. Considering them, we cannot ascertain whether the issue price is under priced or overpriced.

The company has shown significant improvement in revenues in the last 3.5 years. However, it is incurring losses. Investors would not get anything with such loss making company. Its issue is very small (Rs 23 Crores only) which can create liquidity issue in the stock market. Considering all these factors, investors should stay away from such IPO.

Disclaimer: I do not have an interest in investing in this IPO and above analysis is based on my personal views. 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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Xelpmoc Design and Tech IPO – Should you Invest or Avoid

Suresh KP

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