The Alkosign Limited IPO has set the stage for many more companies to come up with their public offerings in 2022. Although there are mainstream IPOs such as that of NSE and LIC which have been lined up and all investors are glued to them, there are SME IPOs as well.
SME IPO is a way for Small and Medium Enterprises (SME) to raise money through public. These companies are listed separately on the BSE SME platform. One such SME company that is going to be listed on this platform is Alkosign Limited. So in this article, let’s discuss in detail about the company’s business.
About Alkosign Limited
Alkosign Limited is engaged in manufacturing of visual presentation systems that include writing boards, display boards, and notice boards of different types along with its associated accessories and stands used for these boards, school benches, desks, and their accessories. The company has a manufacturing plant situated in Bhiwandi, Maharashtra.
The company has established its presence across the country by supplying products in 22 states. It also aims to establish its presence in the international markets and has supplied products to Saudi Arabia during FY21. The company has around 50 registered dealers, and it supplies products to various educational institutions directly on a purchase order basis. The company has also tied up with international e-commerce platform for the export of their products.
Alkosign Limited IPO details
The subscription period for the company’s IPO is January 18-21, 2022. The issue price of the IPO is ₹45 per equity share. One market lot consists of 3000 shares. The company is raising an amount of ₹24 crores through the IPO, out of which half will be fresh issue of shares, and the other half will be an offer for sale. Post the IPO, the promoter’s shareholding in the company will drop to 50% from the current 100% shareholding.
|IPO Open Date||Jan 18, 2022|
|IPO Close Date||Jan 21, 2022|
|IPO Raise Amount||₹24 crores|
|IPO Issue Price||₹45 per equity share|
|IPO Lot size||3000|
|Face Value||Rs. 10 Per Equity Share|
|IPO Type||SME IPO|
Alkosign Limited IPO Subscription Details
|18-01-22 (Day 1)||1.91x||0.45x||1.18x|
|19-01-22 (Day 2)||2.03x||3.91x||2.97x|
Objectives of the IPO
The following are the objectives of the IPO as stated in the company prospectus:
- The company will prepay/repay certain secured borrowings taken by it.
- The company will fund working capital requirements for FY22 and FY23 through the proceeds.
- It will also use the amount (not exceeding 25% of the gross proceeds) raised through IPO for other general corporate purposes.
The following are the key risks that the company faces in its business:
- There are certain legal proceedings going on that involves this company. Any adverse decision pertaining to these scenarios could disrupt business operations.
- The company has a limited operating history.
- The promoters are new and have relatively little experience in handling business operations.
- Raw material costs constitute a significant portion of the company’s revenues. High volatility is raw material costs could affect the company’s profitability.
- The top 10 customers contributed 76% to the company’s revenues in FY21, Thus posing a concentration risk.
- The company generated 64% of its total sales in FY21 in Maharashtra alone, which again poses a geographical risk.
- Advancement in technology can lead to the company’s products becoming outdated.
The following are the strengths in the company’s business:
- The company has a widespread sales and dealer network. It has 50 registered dealers and has a Pan India presence.
- The company is accredited with many quality certifications for manufacturing and supply of various display and writing boards.
- The company has a portfolio of recognized products under various trademarks such as “Alkosign”, “Sit and Study”, and “Ultra”.
- The company’s distribution model is based on e-retailing. Such a distribution model helps in achieving many competitive advantages through wider each to customers.
Fundamentals of the company
The revenue from operations for the company for the year ended March 2021 was ₹13.2 crores, and for the quarter ended June 2021, the figure was ₹2 crores. The company’s EBITDA for the year ended March 2021 was ₹1.41 crores, and for the quarter ending June 2021, it was ₹0.76 crore. The company’s profit after tax (PAT) was ₹66 lakhs and ₹30 lakhs for the year ended March 2021 and the quarter ended June 2021 respectively.
The company’s return on net worth was 98.5% for FY21. And the earnings per share were ₹11 for the same tenure. The net asset value per equity share was ₹16.17 for FY21.
As per the company prospectus, there are no listed companies in India which are engaged in manufacturing of white boards and its components. Also, there are no listed entities which are focused exclusively on the segment in which the company operates. Hence, peer comparison is not possible.
So that was all about the Alkosign Limited IPO. From risks to strengths, all aspects have been discussed above. But an important thing to note here is that the company will list on the BSE SME platform, where liquidity is very limited. Investors hoping of making profits on the listing day might not be able to get out of their positions due to limited liquidity. Hence, this should be taken care of before subscribing to the company’s IPO.