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Nirmitee Robotics SME IPO Financial Analysis
Key Operational Highlights
Key Financial Highlights
NRIL plans to come up with an issue of 1,75,200 equity shares of face value of Rs 10 each for cash at a price of Rs 185 per share (includes a premium of Rs 175 each) amounting to Rs 3.24 crores. Market Maker reservation portion is Rs 0.18 crores (9,600 shares) and the rest amounting to Rs3.06 crores (1, 65,600 shares) is available for subscription by public. The net issue will constitute 27.59% of the post issue paid up capital of the company.
The lead manager of the issue is Aryaman Financial Services Limited and registrar of the issue is Bigshare Services Private LTD.
Objects of the offer:
Incorporated in the year 2016, NRIL is a tech based start up company providing HVAC Duct Cleaning and Ozone sterilization services using robotic technology. NRIL provides professional cleaning services to provide fresh clean air. NRIL makes custom- made robots– operated by machines that clean the inside of HVAC Air Ducts – by scrubbing, polishing, sucking, scraping and removal of the accumulated contaminants like dust, debris, bacteria, mold , dead pests ,rodents and provides ozone treatment to the ducts. The robots are fitted with an advanced controller mechanism and a high resolution camera to do the inspection, cleaning and post-cleaning operations.
NRIL serves a broad range of industries like in offices, convention centres, hospitals, trains and specialize in buildings house sensitive equipment like data centres. NRIL provides services to Railways in various states, Indian Oil Corporation Limited, MCGM but its customer base is limited to few.
The Indian HVAC market is highly competitive in nature and characterized by the presence of globally operating companies, such as Daikin Industries Limited, Voltas Limited, and Johnson Controls International plc, Blue Star limited and several others.
NRIL has posted a massive increase (191%) in the revenue from operations for FY 2019 to Rs 2.04 crores from Rs 0.7 crores in FY 2018. EBITDA as % of revenue has jumped to 16% in FY 2019 (being 7% in FY 2018). The improvement in the financial performance that too in a pre IPO year raises an alarm! EBITDA for H1 FY2020 is Rs 0.06 crores which if annualised comes to Rs 0.12 crores would reduce as against EBITDA of Rs 0.32 crores in FY 2019.
NRIL is highly leveraged. Its debt is 6.95x (times) of equity (redeemable preference shares are considered as long term borrowings for leverage purpose). Though, interest coverage ratio shows inconsistency but it has remained above standard, as seen in table 1, financial and ratios. Bonus shares have been allotted in ratio of 14:1 by capitalizing out of the free reserves on Feb 2020.
Actual equity of NRIL is low, it’s majorly financed through Preference shares owned by NRIL’s promoter. NRIL is repaying the preference shares through the IPO proceeds thus 54% of IPO proceeds is not to be utilised by NRIL rather going to the promoters kitty.
The Net asset Value arrived only considering amounts attributable to equity shareholders of Rs 175.67 per share is high but the same cannot be considered as right basis of valuation as equity is very small component of overall net assets. Further post issue, NAV per share might fall from Rs 175.67 per share, thus the IPO is highly priced at Rs 185.
| Table 1 - Financials and Ratios | H1 FY 2020 | FY 2019 | FY 2018 | FY 2017 |
| Total revenue | 1.00 | 2.04 | 0.70 | 0.06 |
| PAT | 0.03 | 0.21 | 0.02 | 0.01 |
| EBITDA | 0.06 | 0.32 | 0.05 | 0.01 |
| Total Assets | 2.25 | 2.39 | 1.06 | 0.12 |
| EBITDA to total revenues (%) | 5.99 | 15.89 | 6.99 | 13.50 |
| Interest coverage ratio (times) | 2.70 | 55.00 | 2.89 | NA |
Summary and Conclusion
NRIL is a 3 yr old start up company incorporated in the yr 2016. It has come up with IPO when it’s still in establishment stage. Growth pattern could not have been seen at such nascent stage and further NRIL is using the IPO proceeds to repay its existing debt and to acquire business premises which indicates that the funds are being used to aid in business operations rather than for expansion in future which investors would expect. Hence, there is high operating as well as high financial risk which puts a red flag over the IPO!
Review By CA Priyanka Choudhary on 29th Mar 2020
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.
