DJ Mediaprint SME IPO Financial Analysis (Subscribe for Long Term)

Key Operational highlights

• ISO (International Standards Organization) certificates and CRISIL rating (Rating of “CRISIL MSE 3” (micro and small enterprises) by CRISIL on August 29, 2019, and valid till August 27, 2020) reflects the good quality of services, good financial performance and strength.
• The majority of revenues (88% in FY 2019) come from the printing activities of DJML’s business operations.
• Good potential for paper and print industry in India, though the business environment is competitive with the presence of organized and unorganized players.
• Entry in digital record management system through a takeover of M/s. Pansecure is a positive step as digitization is becoming the need of the hour.
• All the business premises are taken on a rental agreement basis.

Key Financial Highlights

• Strong EBITDA to total revenues which shows an increasing trend since the last three financial years.
• High leverage ratio.
• High-interest coverage ratio, 3.65x for FY 2019.
• As per IPO prospectus, DJML has contingent tax liabilities up to Rs 0 .26 crores which may arise in the future.

DJ Mediaprint& Logistics IPO details

DJML plans to come up with an issue of 12, 00,000 equity shares of face value of Rs 10 each for cash at a price of Rs 20 per share (includes a premium of Rs 10 each) amounting to Rs 2.40 crores. Market Maker reservation portion is Rs 0.12 crores (60,000 shares) and the rest amounting to Rs 2.28 crores (11, 40,000 shares) is available for subscription by the public. The net issue will constitute 27.05% of the post issue paid-up capital of the company.

The lead manager of the issue is Finshore Management Services Limited and the registrar of the issue is Purva Sharegistry Private LTD.

Objects of the offer:

1. Finance working capital (Rs 1.9 crores)
2. To meet corporate expenses (Rs .15 crores)

Company Background

DJ Mediaprint & Logistics Ltd. (DJML) was incorporated in the year 2009, its primary business activities include integrated Printing, logistics and courier solutions in India and overseas with a well networked transport operations, pre-eminent quality standards and processes & operations. It also provides bulk mailing, speed post, records management, manpower supply, return of post management, bulk scanning, moving, newspaper print advertising services and other related services. Its areas of operations include Mumbai, Thane, Bhiwandi, Delhi and Goa. It has a wide customer base across various sectors like banking, airlines, shipping, logistics, education, and finance among others. DJML has renowned names as its clients like LIC, Bharti Axa, Citi Bank, Bank of India, State Bank of India, Infosys, Wipro, Britannia, Aditya Birla group, NSDL and several others.

In the year 2018, DJML took over the business operation of M/s. Pansecure Record Storage Management LLP. The LLP had business of providing customized solutions for records, documents and files storage and management including micro fiche and micro filming, software storage on electronic media, paper, pictures and conversion of data to electronic media. It has been decided that the business of the LLP shall be gradually transferred/shifted to DJML into Record Management segment of DJML in a time bound but practicable and convenient manner as acceptable to the clients of the LLP.

DJ Mediaprint& Logistics Financial profile

Total revenues of DJML have grown by 19% (Rs20.67 crores) in the FY 2019 from Rs 17.34 crores in FY 2018. DJML has posted revenues of Rs13.12crores for nine months of FY 2020. EBITDA has remained strong for all the three years (FY17-FY19) and it is showing an increasing trend as seen in table 1, financials and ratios. DJML has high Interest coverage ratio (ICR), it being more than 3 times in all the last three years, it indicates strong ability of DJML to pay off its financing cost however it needs to be noted that DJML is using more short term borrowings in its debt mix.

Further, DJML has a high leverage of 1.25 times of equity which would come down to 0 .76 times after the IPO. There are outstanding litigations involving DJML, the outcome of which may have an adverse effect on its financial position.

DJML has posted an average return on net worth of 28% for the last three financial years. The issue is priced at Price/Book value of 1.62 based on its NAV of 12.36 in FY 2019. If the EPS for 9M FY 2020 is annualised then P/E at issue price comes to 8.06 and hence the IPO is fairly priced.

No peer information has been provided in the IPO prospectus for DJML.

Summary and Conclusion

DJML is showing a growth pattern in the last three financial years and has further scope of growth with the acquisition of M/s Pansecure Record Storage Management LLP. It has an established track record of 11 years with a good branded customer base. Further MSE rating of 3 by CRISIL indicates good creditworthiness in relation to other MSE’s. Also, the print market in India is bound to grow because of the growing demand of high qualitative printed products. Financial risk is Moderate with expected decent returns. Hence it is advisable to subscribe for the IPO but please note that those looking for short term gains should refrain seeing the volatility in global equity markets due to COVID 19 pandemic!

Review By CA Priyanka Choudhary on 24th Mar 2020

Review Author

About CA Priyanka Choudhary

Priyanka Choudhary Jain is a Chartered Accountant and an experienced credit analyst. She has worked with CRISIL as Senior Credit Analyst on ratings assignments including business and financial analysis in Corporates as well as the Public Finance Sector.

Email: [email protected]

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 prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.