Phantom Digital Effects Limited is another company coming up with an IPO. The only difference is that its shares will list on the NSE EMERGE platform instead of the main NSE platform.
The company’s IPO will remain pen for subscription between12th to 14th October, 2022. The SME IPO issue price band is between ₹91-95 per share. Each lot of the company’s IPO consists of 1200 shares. Mr. Bejoy Arputharaj Sam Manohar is the company’s promoter. The promoter’s stake will fall from current 87.83% to 63.92% post the IPO. The company will raise ₹29.10 crore though the IPO, which is comprised of a fresh issue worth ₹25.08 crore, and an offer for sale worth ₹4.02 crore.
About the company
Phantom Digital Effects Limited was formed in the year 2016 and is a creative VFX studio specializing in film, web series, and commercial. The company has delivered more than 1000 shots for domestic and international feature films, web series, and commercials in the past few years. The company periodically takes up subcontracts from larger visual effects studios as well. The company has offices operating in India, US, and Canada.
Phantom Digital Effects Limited offers all sorts of creative VFX works, ranging from final compositing and Roto to creating 3D elements, photo real creatures and environments, 3D, match move, and animations. The company supports production houses by providing end to end services.
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Objectives of the IPO:
Following are the objectives of the company’s IPO:
- The company will use the proceeds from the IPO for capital expenditure on setting up new studios in Chennai, Mumbai, Cochin, and Hyderabad.
- The company will also use the proceeds for its general corporate purposes.
- Further, the company believes that it will receive benefits from listing of equity shares on the EMERGE Platform of the NSE.
Key risks
Following are the key risks in the company’s business:
- The company operates in a constantly evolving VFX market, which is subject to rapidly changing client behavior and tastes, and depends on audience acceptance of content for which the company provides VFX services and the long run popularity of brands.
- In the past, the company has delayed filing certain statutory form under the Companies Act.
- The company has reported negative operating cashflows in the year FY21.
- The company is also subject to fluctuations in foreign currency movements.
- The company has entered into certain related party transactions and may continue to do so in the future.
- The company’s business is dependent on the relationships with production houses and film directors and other industry participants to exploit their film content.
Key strengths
Following are the key strengths in the company’s business:
- The company is well equipped with advanced technologies, which provides an edge over its competitors.
- The company has experienced promoters and technically sound operations team.
- The company has worked with a large number of marque clients such as KJR Studios, VFX Cloud, Sun TV Network, 24AM Studios, Eros International Media Limited, and the rest.
Fundamentals of the company
Following are the fundamentals of the company:
- The company’s total revenues increased from ₹13.26 crores in FY20 to ₹22.36 crores in FY22.
- The company’s profit after taxes increased from 0.11 crore in FY20 to ₹4.90 crores in FY22.
- The company’s total assets increased from ₹5.37 crores in FY20 to ₹14.91 crores in FY22.
- The company’s total borrowings decreased from ₹298 crore in FY20 to ₹2.51 crore in FY22.
- The company’s earnings per share increased from ₹0.13 in FY20 to ₹5.45 as of FY22.
- The company’s net asset value per share stood at ₹10.41 as of June 30, 2022.
- The company’s reserves and surplus increased from ₹0.26 crore in FY20 to ₹5.24 crore in FY22.
Valuations
Based on the upper band of the price range, the company will list at a PE ratio of 17.43 as per its FY22 EPS. The industry average PE ratio according to the company’s prospectus stands at 9.53. The company’s return on net worth stood at 93.28% as of FY22.
Peer comparison
According to the prospectus filed by the company, it has one peer company by the name Prime Focus Limited, which is engaged in a similar line of business as itself. Prime Focus Limited earned a total income of ₹193 crores in FY22. Its EPS for FY22 stood at ₹9.71. And it had a return on net worth of 18.34% as of FY22.
Conclusion
These were the fundamentals of the company an investor should know before investing in its shares in the IPO. An important point to note here is that as the company’s shares will list on the NSE EMERGE platform, the liquidity in its shares will be limited. Hence, an investor should take into account this factor and his/her risk appetite in sync when deciding to invest in the company’s shares.
