What you must know about SAR Televenture IPO?

SAR Televenture Ltd is a provider of telecommunication solutions to Telecom Network Operators. SAR Televenture Ltd is engaged in the installation and commissioning of 4G and 5G Towers, Optical Fibre Cable (OFC) Systems, and dealing in network equipment on a pan-India basis. The company is also registered with the DOT (Department of Telecommunications) as a Category 1 Infrastructure Provider. Essentially, SAR Televenture Ltd leases out build sites i.e., GBT/RTT/Pole sites and Out Door Small Cell (ODSC). In addition, the company also establishes and maintains assets like Dark Fibres, Right of Way, Duct Space, and Tower for granting on lease or rent or sale basis to the licensees of Telecom Services. The company expects the business to grow exponentially with the massive 5G expansion that Indian telecom companies like Bharti Airtel and Jio have undertaken.

In addition, SAR Televenture Ltd also provides project management for laying of duct and optic fiber cables (OFC), construction of basic transmission and telecom utilities, dark fiber leasing, etc. It provides a variety of turnkey services to Telecom Network Operators and Broad Band Service Operators; apart from the ISPs across Maharashtra. Till date, SAR Televenture Ltd has provided around 373 towers on lease across the states of West Bengal, Bihar, Uttar Pradesh, and Punjab. Earlier this year, SAR Televenture Ltd also acquired 100% of the paid-up equity share capital of SAR Televenture FZE, United Arab Emirates. This is a Middle East based trading company in a variety of products. SAR Televenture Ltd will be an IPO on the NSE SME-IPO segment.

Key terms of the SAR Televenture IPO (SME)

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

• The issue opens for subscription on 01st November 2023 and closes for subscription on 03rd November 2023; both days inclusive.
   
• The company has a face value of ₹2 per share and it is a book building issue. The issue price for the fresh issue IPO has been fixed in the price band of ₹52 to ₹55 per share. Being a book built issue, the final price will be discovered via book building process.
   
• The IPO of SAR Televenture Ltd has only a fresh issue component with no book built portion. It must be remembered that the fresh issue portion is EPS dilutive and equity dilutive, but OFS is just a transfer of ownership and  hence it is not EPS or equity dilutive.
   
• As part of the fresh portion of the IPO, SAR Televenture Ltd will issue a total of 45,00,000 shares (45 lakh shares), which at the upper IPO band price of ₹55 per share aggregates to a total fund raising of ₹24.75 crore.
   
• Since there is no offer for sale portion, the total size of the fresh issue will also be the total size of the IPO. Hence the total IPO size will also comprise of 45.00 lakh shares, which at the upper price band of ₹55 per share will aggregate to ₹24.75 crore.
   
• Like every SME IPO, this issue also has a market making portion with a market maker portion allocation of 2,30,000 shares. The market maker for the issue is R.K. Stock Holding Private Ltd and they will provide two-way quotes to ensure liquidity on the counter post listing and low basis costs.
   
• The company has been promoted by MG Metalloy Private Ltd. The promoter holding in the company currently stands at 87.8%. However, post the fresh issue of shares in the IPO, the promoter equity holding share will get diluted to 61.46%.
   
• The fresh issue funds will be used by the company for installation of 5G/4G towers, repayment of secured borrowings, and working capital funding gaps. Part of the monies raised will also go towards meeting the general corporate expenses of the company.
   
• Pantomath Capital Advisors Private Ltd will be the lead manager to the issue, and Skyline Financial Services Private Ltd will be the registrar to the issue. The market maker for the issue is R.K. Stock Holding Private Ltd.

IPO allocation and minimum lot size for investment

SAR Televenture Ltd has allocated 5.11% of the issue size for the market makers to the issue, R.K. Stock Holding Private Ltd. The net offer (net of market maker allocation) will be divided between the qualified institutional buyers (QIBs), retail investors and the HNI / NII investors. The breakdown of the overall IPO of SAR Televenture Ltd in terms of the allocation to various categories are captured in the table below.

The minimum lot size for the IPO investment will be 2,000 shares. Thus, retail investors can invest a minimum of ₹110,000 (2,000 x ₹55 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 ₹220,000. 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.

Key dates to be aware of in the SAR Televenture IPO (SME)

The SME IPO of SAR Televenture Ltd IPO opens on Wednesday, November 01st, 2023 and closes on Friday, November 03rd, 2023. The SAR Televenture Ltd IPO bid date is from November 01st, 2023 10.00 AM to November 03rd, 2023 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is November 03rd, 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 SAR Televenture Ltd

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

Data Source: Company DRHP filed with SEBI

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

• The revenue spike has been sharp in the latest year, although that is due to a very low base. That also makes the numbers not comparable over the last 3 years. The latest year has seen a near 7-fold growth in sales.
   
• The net margins have been in the range of 11-12% in the latest year. However, here again, the comparisons are tough since the company had been making net losses till FY22 and hence margins are tough to calculate. Even ROE is only meaningful for the latest year of FY23 as the net worth was negative in the previous two years.
   
• Being a capital light business, the asset turnover ratio or the asset sweating ratio has been above 1 on a consistent basis. This may not be too representative as here the expenses ratio would matter more than the asset turnover ratio, in this sector.

The company has latest year EPS of ₹91.08 and weighted average EPS of ₹45.85 for the last 3 years. However, a lot will depend on what level the EPS sustains in the long run since growth has been quite robust only in the latest year. By latest year valuations, the company looks reasonably priced, so it is the sustainable EPS that will matter. The focus would be on the next few quarters. This is generally a cyclical and low margin business so investors must keep that risk factor while investing. It is suited for the investors willing to take on higher risk and wait for longer.