What you must know about Macobs Technologies IPO: Price Band ₹71 to ₹75 per Share

Macobs Technologies Ltd – About the company

Macobs Technologies Ltd was incorporated in the year 2019 to engage in the business  of offering products for male grooming. Macobs Technologies Ltd does not have any physical brick-and-mortar presence and its sales are entirely conducted through the ecommerce mode only. Many of the products offered are extremely niche products like specialized trimmers for sensitive areas, hygiene products tailored to male skin, briefs, and a variety of self-care items. These grooming products are sold through its online website https://menhood.in/ and it is entirely sold only through the digital channel. 

The company has a 5-pronged strategy for this market. Firstly, it focuses on under-the-belt grooming for men, a market that is largely neglected. Secondly, it is a pure ecommerce company, so it is scalable at low costs. Thirdly, it has an innovative product range for niche needs of males. Fourthly, the customer is made the centre of its product ideation and design. Finally, the company extensively uses educational content to bring about a mindset change. The company currently operates with 15 employees on its rolls.

Highlights of the Macobs Technologies Ltd SME IPO

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

•    The issue opens for subscription on 16th July 2024 and closes for subscription on 19th July 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 book building price band for the IPO has been set in the range of ₹71 to ₹75 per share. The final price discovery will happen in the above price band only.

•    The IPO of Macobs Technologies Ltd has only a fresh issue component and no offer for sale (OFS) portion. 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, Macobs Technologies Ltd will issue a total of 25,95,200 shares (25.95 lakh shares approximately), which at the upper band IPO price of ₹75 per share aggregates to fresh fund raising of ₹19.46 crore.

•    Since there is no offer for sale, the fresh issue will also double up as the overall size of the IPO. Therefore, the overall IPO size will also comprise of the issue of 25,95,200 shares (25.95 lakh shares approximately) which at the upper band IPO price of ₹75 per share aggregates to overall IPO size of ₹19.46 crore.

•    Like every SME IPO, this issue also has a market making portion. The company has set aside a total of 1,31,200 shares as quota for market inventory. SKI Capital Services Ltd has already been appointed as the market makers to the issue. The market maker provides two-way quotes to ensure liquidity on the counter and low basis costs.

•    The company has been promoted by Shivam Bhateja, Dushyant Gandotra, and Divya Gandotra. The promoter holding in the company currently stands at 65.00%. However, post the fresh issue of shares, promoter equity holding share will get diluted to 47.78%.

•    The fresh issue funds will be used by the company for customer acquisition, repayment of debt and for working capital requirements of the business. A small part of the IPO proceeds has also be set aside for general corporate purposes. 

•    SKI Capital Services Ltd will be the lead manager to the issue, and Maashitla Securities Private ltd will be the registrar to the issue. The market maker for the issue is SKI Capital Services Ltd. 

Macobs Technologies IPO – Key Dates

The SME IPO of Macobs Technologies IPO opens on Tuesday, 16th July 2024 and closes on Friday, 19th July 2024. The Macobs Technologies IPO bid date is from 16th July 2024 at 10.00 AM to 19th July 2024 at 5.00 PM. The Cut-off time for UPI Mandate confirmation is 7.00 PM on the issue closing day; which is 19th July 2024.

Data Source: Company RHP

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 July 23rd 2024, will be visible to investors under the ISIN Code – (INE0R0J01010). 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

Macobs Technologies Ltd has announced a market maker allocation of 1,31,200 shares, which will be used as inventory for market making. SKI Capital Services Ltd will be the market maker for the IPO. The net offer (net of market maker allocation) will be divided between the retail investors and the HNI / NII investors. The breakdown of the overall IPO of Macobs Technologies 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 1,600 shares. Thus, retail investors can invest a minimum of ₹1,20,000 (1,600 x ₹75 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 3,200 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 Macobs Technologies Ltd.

Financial Highlights: Macobs Technologies Ltd

The table below captures the key financials of Macobs Technologies 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; i.e., from FY22 to FY24, being the latest year. 

•    The revenues over the last 3 years have grown at a healthy clip, with FY24 revenues more than three times of the revenues of FY22, albeit on a very small base. As net profit traction has picked up over the last two years, the net margins are robust, but have tapered in the last one year.

•    While net margins of the company have been relatively strong at 10.73%, the other return margins have also shown growth traction in latest year. The return on equity (ROE) stands robust at 22.51% in FY24, while the return on assets (ROA) is also strong at 15.33% in FY24. Both are up sharply from the previous years.

•    The asset turnover ratio or the sweating ratio has been healthy in the latest year at 1.43X and that only gets further accentuated when you look at the healthy levels of the ROA. It remains to be seen how the additional capital base is handled by sales growth.

The company has latest year EPS of ₹4.43, after adjusting for capital actions. The FY24 earnings are being discounted by the IPO price of ₹75 per share at 16-17 times P/E ratio. That is not too expensive if you factor in the robust levels of the ROE, net margins, and the return on assets. Also, if this growth continues into FY25, then justifying the valuations should not be too difficult. It is into the niche men’s grooming business and the model is a pure ecommerce model, which makes it scalable with minimal incremental costs. 

To be fair, Macobs Technologies Ltd some bring some intangible advantages to the table. It has a niche product offering and caters to a very focused audience which has purchasing power. Also, the ecommerce based model is scalable rapidly. The investors can look at the IPO from a longer term perspective with a holding period of 1-2 years. Ideally, investors must be prepared for the higher risk implicit in such ecommerce plays; but the business model does look promising. However, investors must be prepared for the higher risk implied in such niche stocks.