What you must know about Beacon Trusteeship IPO?

About Beacon Trusteeship Ltd

Beacon Trusteeship Ltd was incorporated in the year 2015 to act as a trustee for financial securities. Beacon Trusteeship Ltd  currently offers trustee services as debenture trustees, security trustee services, trustee to Alternate Investment Fund (AIF), Trustee to ESOP, Securitization Trustee, Bond Trusteeship, Escrow Services etc. In terms of specific services, Beacon Trusteeship Ltd offers due diligence, custodial services, compliance monitoring, documentation, disclosure, and record retention, etc. On the debenture trusteeship, the company covers NCDs and convertibles. It also acts as a security trustee for loans as also providing due diligence services for alternate investment funds (AIFs). As a security trustee for escrow accounts, Beacon Trusteeship Ltd ensures that transfers from the Escrow account are made only to the designated collection account as specified in the formal agreement. Beacon Trusteeship Ltd  helps in drafting the Escrow agreement and in setting up the Escrow mechanism; including documentation and monitoring. Beacon Trusteeship Ltd currently employees nearly 70 people on its rolls.

Highlights of the Beacon Trusteeship IPO

Here are some of the highlights of the Beacon Trusteeship IPO on the SME segment of the National Stock Exchange (NSE).

• The issue opens for subscription on 28th May 2024 and closes for subscription on 30th May 2024; both days inclusive.
   
• The stock of the company has a face value of ₹10 per share and it is a book built issue. The price for the book building issue is set in the price band of ₹57 to ₹60 per share. Being a book built issue, the final price will be discovered within this band.
   
• The IPO of Beacon Trusteeship Ltd has a fresh issue component and an offer for sale (OFS) component. While the fresh issue portion is EPS dilutive and equity dilutive, the OFS is just a transfer of ownership and  hence is not EPS or equity dilutive.
   
• As part of the fresh issue portion of the IPO, Beacon Trusteeship Ltd will issue a total of 38,72,000 shares (38.72 lakh shares), which at the upper band IPO price of ₹60 per share aggregates to fresh fund raising of ₹23.23 crore.
   
• As part of the offer for sale (OFS) portion of the IPO, there will be a sale / offer of total of 15,48,000 shares (15.48 lakh shares), which at the upper band IPO price of ₹60 per share aggregates to OFS size of ₹9.29 crore.
   
• Therefore, the overall IPO size (fresh issue + OFS) will comprise of the issue and sale of 54,20,000 shares (54.20 lakh shares) which at the upper band IPO price of ₹60 per share will aggregate to overall IPO size of ₹32.52 crore.
   
• Like every SME IPO, this issue also has a market making portion with a market maker inventory allocation of 2,72,.000 shares. The name of the market maker is yet to be announced for the IPO. The market maker provides two-way quotes to ensure liquidity on the counter and low basis costs, post listing.
   
• The company has been promoted by Prasana Analytics Private Ltd and Pratap Nathani. The promoter holding in the company currently stands at 67.88%. However, post the fresh issue of shares, promoter equity holding share will get diluted %.
   
• The fresh issue funds will be used by the company for building the technology infrastructure of the existing business, acquisition of Beacon RTA Services, an commence DP operations, as well as for purchase of new office premises.
   
• Beeline Capital Advisors Private Ltd will be the lead manager to the issue, and KFIN Technologies Ltd will be the registrar to the issue. The market maker for the issue is yet to be officially announced by the company.

Beacon Trusteeship IPO – Key Dates

The SME IPO of Beacon Trusteeship IPO opens on Tuesday, 28th May 2024 and closes on Thursday, 30th May 2024. The Beacon Trusteeship Ltd IPO bid date is from 28th May 2024 at 10.00 AM to 30th May 2024 at 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is 30th May 2024.

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. The credit of shares to the demat account on June 03rd 2024, will be visible to investors under the ISIN Code – (INE639X01027). This allocation to the demat account is only applicable to the extent of the allocation of shares and if no allocations are made in the IPO, then no credit would be visible in the demat account.

IPO allocation and minimum investment lot size

Beacon Trusteeship Ltd has already announced the market maker allocation at 2,72,000 shares as inventory for market making. The name of the IPO market maker is yet to be announced. The net offer (net of market maker allocation) will be divided between the QIB investors, retail investors and the HNI / NII investors. The breakdown of the overall IPO of Beacon Trusteeship Ltd in terms of allocation to various categories are captured below.

Data Source: Company RHP

The minimum lot size for the IPO investment will be 2,000 shares. Thus, retail investors can invest a minimum of ₹1,20,000 (2,000 x ₹60 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 4,000 shares and having a minimum lot value of ₹2,40,000. There is no upper limit on what the QIBs as well as what the HNI / NII investors can apply for. The table below captures the break-up of lot sizes for different categories.

There are no upper limits for investments by HNIs / NIIs in the IPO of Beacon Trusteeship Ltd.

Financial highlights: Beacon Trusteeship Ltd

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

Data Source: Company RHP filed with SEBI

Here are some of the key takeaways from the financials of the company for the last 3 years.

• The revenues have grown at a quick pace in the last 2 years and in the latest year FY23, the total sales have nearly tripled over FY21. More importantly, this has been accompanied by growth in the net profit net profit margins (PAT margins).
   
• While net margins of the company are fairly attractive at 25.98%, it has fallen over the previous year. The return on equity (ROE) stands at 27.45% in FY23, while the return on assets (ROA) is robust at 17.06% in FY23.
   
• The asset turnover ratio or the sweating ratio has been very low at around 0.60X although in this kind of service business it may not matter much. However, this sweating ratio also gets supported by the robust levels of return on assets (ROA).

The company has latest year EPS of ₹2.71 and we have not included the weighted  average EPS, since the previous year data is not exactly comparable. The latest year earnings are being discounted by the IPO price of ₹60 per share at 22-23 times P/E ratio. One has to look at the P/E ratio from two perspectives. Since the company is yet to announce the FY24 results, we can use available data to extrapolate. The 6-month EPS for FY24 stands at ₹2.82 per share and when extrapolated to full-year EPS of ₹5.64, it translates into a more reasonable P/E ratio of 10-11 times earnings.

The concerns on Beacon Trusteeship Ltd IPO could be something slightly different. It is a comprehensive debenture trusteeship service provider, an area that has been traditionally dominated by banks like IDBI, Axis and Central Bank. That will continue to be a risk for the company. Secondly, it has been a high volume and low margin business with a high risk quotient. Thirdly, the utilization of proceeds of the fresh portion of the IPO does not inspire much confidence, especially using IPO funds to purchase new office. Investors will have to carefully evaluate the pros and cons before taking a view on this IPO.