What investors must know about Kore Digital IPO

Kore Digital Ltd is one of the key mid-sized telecom infrastructure provider in India. The company, Kore Digital Ltd, was incorporated in 2009 with the primary objective of offering high-end communication solutions to corporate and Telecom Network Operators. The company essentially operates in the state of Maharashtra. It undertakes a slew of telecom infrastructure related services like installing and commissioning poles, towers, and optical fibre cable (OFC) Systems across the state. The company has a full-fledged Infrastructure Provider (IP-1) license issued by the Department of Telecommunications (DOT), government of India.

The DOT license enables the company, Kore Digital Ltd, to establish and maintain assets; Dark Fibres, right of way, duct space, and towers to grant on lease or rent or sale basis to the licensees of Telecom Network Operators, Broad Band Service Operators, and ISPs. As of date, Kore Digital Ltd has already laid fibre of around 450 Kms for their Telecom Network Operators which include some of the marquee industry names like Vodafone Idea, Bharti Airtel, Reliance Jio, and Tata Teleservices. The fibre lines laid by Kore Digital are done as part of vendor projects and also as a proprietary offering in the Maharashtra region. The company plans to use the fresh funds raised via IPO for working capital needs and to make inorganic acquisitions in the industry.

Key terms of the Kore Digital SME IPO

Here are some of the highlights of the Kore Digital Ltd IPO on the SME segment of the National Stock Exchange (NSE).

• The issue opens for subscription on 02nd June 2023 and closes for subscription on 07th June 2023; both days inclusive.
   
• The company has a face value of ₹10 per share and the issue price for the fresh issue portion has a fixed price of ₹180 per share.
   
• The company will issue a total of 10 lakh shares at the price of ₹180 per share aggregating to a total fund raising of ₹18 crore.
   
• The company has allocated 50% of the issue size for the retail investor while the balance 50% is allocated to HNI / NII investors.
   
• The minimum lot size for the IPO investment will be 800 shares. Thus, retail investors can invest a minimum of ₹144,000 (800 x ₹180 per share) in the IPO. That is also the maximum that the retail investors can invest in the IPO.
   
• HNI / NII investors can invest a minimum of 2 lots comprising of 1,600 shares and having a minimum lot value of ₹288,000. There is no upper limit on what the HNI / NII investors can apply for.
   
• Like every SME IPO, this issue also has a marketing making portion with a market maker portion allocation of 52,000 shares. NNM Securities Ltd will act as the market maker to the issue providing two-way quotes to ensure liquidity on the counter.
   
• The company has been promoted by Ravindra Doshi, Kashmira Doshi and Chaitanya Doshi and the promoter stake in the company stands currently at 99.7%. Post the IPO, being a fresh issue of shares, the promoter stake will be get diluted to 71.38%.
   
• The total outstanding shares of the company stand at 25.20 lakh shares prior to the IPO. Post the issue of 10 lakh fresh shares in the IPO, the total outstanding shares of the company will stand at 35.20 lakh shares.

While First Overseas Capital Ltd will be the lead manager to the issue, Bigshare Services Private Limited will be the registrar to the issue.

Key dates to be aware of in the Kore Digital IPO (SME)

The SME IPO of Kore Digital Ltd opens on Friday, June 02nd, 2023 and closes on Wednesday June 07th, 2023. The Kore Digital Ltd IPO bid date is from June 02nd, 2023 10.00 AM to June 07th, 2023 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is the 07th of June 2023.

It must be noted that in ASBA applications, there is no refund concept. The total application amount is blocked under the ASBA (applications supported by blocked amounts) system. Once the allotment is finalized, only the amount is debited to the extent of the allotment made and the lien on the balance amount is automatically released in the bank account.

Financial highlights of Kore Digital Ltd

The table below captures the key financials of Kore Digital Ltd for the last 3 completed financial years.

Data Source: Company DRHP filed with SEBI

The growth of the company has been frenetic at above 300% in the last two years in terms of revenues but that was on a very small base. We have to see how the company performs once it scales up the capacity and numbers. The business faces a lot of competition from the unorganized sector although the Infra status should ensure steady flow of orders. While debt is low, the ROE and ROCE impress at over 50% on an average. Valuations may be a tad stretched considering the low value add business the company is into.