What you must know about Shree OSFM E-Mobility IPO?

OSFM E-Mobility Ltd was incorporated in the year 2006 and the company was previous known as Om Sai Fleet Management (India) Private Ltd. The company is engaged in providing employee transportation services to large MNCs with a presence across major cities in India. OSFM E-Mobility Ltd has adopted an "asset light" engagement model with its customers. It directly offers these fleet services to the corporates using the monthly lease model wherein the billing is done on a per kilometre, per passenger trip mode as well as on package mode. The company has a comprehensive fleet of over 1475 vehicles and this includes small cars, sedans, SUVs, luxury cars, and Buses. Nearly one-sixth of these vehicles are owned by the company while the balance fleet is leased from various vendors. OSFM E-Mobility Ltd has a network of 42 offices major Indian business districts like Mumbai, Navi Mumbai, Pune, Bengaluru, and Kolkata.

OSFM E-Mobility Ltd offers a complete portfolio of services to its clients which includes Travel Desk Management, Roster Management Services as well as Logistics for Events and comprehensive event management services. To add comfort for the customers, OSFM E-Mobility Ltd assures its customers thorough vehicle inspection, stringent vehicle selection criteria, a modern fleet of vehicles, driver screening, driver training & skill enhancement as well as ongoing fleet monitoring. With over 21 years of experience in catering to corporate clients, OSFM E-Mobility Ltd offers its services largely to IT/ITES companies, aviation companies and for data centres. Some of the premium clients of OSFM E-Mobility Ltd include names like JP Morgan, Morgan Stanley, Cap Gemini, Accenture, Citibank, Barclays, Firstsource, Cisco, Deutsche Bank and DHL, among others.

Key terms of the OSFM E-Mobility IPO (SME)

Here are some of the highlights of the OSFM E-Mobility IPO on the SME segment of the National Stock Exchange (NSE).

• OSFM E-Mobility IPO opens for subscription on 14th December 2023 and closes for subscription on 18th December 2023; both days inclusive.
   
• The company stock has a face value of ₹10 per share and it is a fixed price issue. The issue price for the IPO has been fixed at ₹65 per share. Being a fixed price issue, there is no question of price discovery in this case.
   
• OSFM E-Mobility IPO 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 OSFM E-Mobility IPO will issue a total of 37,84,000 shares (37.84 lakh shares), which at the fixed IPO price of ₹65 per share aggregates to a total fund raising of ₹24.60 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 37.84 lakh shares, which at the fixed IPO price of ₹65 per share will aggregate to ₹24.60 crore.
   
• OSFM E-Mobility IPO also has a market making portion with a market maker portion allocation of 2,00,000 shares. The market maker for the issue is BHH Securities Private Ltd and they will provide two-way quotes to ensure liquidity on the counter post listing and low basis costs.
   
• OSFM E-Mobility Ltd has been promoted by Ramnath Chandar Patil and Nitin Bhagirath Shanbhag. The promoter holding in the company currently stands at 76.02%. However, post the fresh issue of shares in the IPO, the promoter equity holding share will get diluted to 55.88%.
   
• The fresh issue funds will be used by the company for purchase of passenger vehicles and for funding the working capital gaps. Part of the monies raised will also go towards meeting the general corporate expenses of the company.
   
• First Overseas Capital Ltd will be the lead manager to the issue, and Bigshare Services Private Ltd will be the registrar to the issue. The market maker for the issue is BHH Securities Private Ltd.

IPO allocation and minimum lot size for investment

OSFM E-Mobility Ltd has allocated 5.28% of the issue size for the market makers to the issue, BHH Securities Private Ltd. 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 OSFM E-Mobility 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 ₹130,000 (2,000 x ₹65 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 ₹260,000. 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 OSFM E-Mobility IPO (SME)

The SME IPO of OSFM E-Mobility IPO opens on Thursday, December 14th, 2023 and closes on Monday, December 18th, 2023. The OSFM E-Mobility IPO bid date is from December 14th, 2023 10.00 AM to December 18th, 2023 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is December 18th, 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 OSFM E-Mobility Ltd

The table below captures the key financials of OSFM E-Mobility 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 exactly comparable over the last 3 years. The latest year has seen a near 2.6-fold growth in sales.
   
• The net margins have been 3-4% on an average, which is quite low. However, this is a low margin and high volume business. Even ROE is only meaningful for the latest year of FY23 and that is fairly strong at 15.11%. Sustenance of these profit margins and ROE would be the key.
   
• Being a capital light business, the asset turnover ratio or the asset sweating ratio has been close to 2 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 ₹2.94 and weighted average EPS of ₹2.11 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. The IPO P/E ratio of 22.11X assumes that the current net margins and the ROE sustain. By latest year valuations, the company looks fully priced, so it is the sustainable EPS that will matter.

The focus would be on the next few quarters. This is generally a 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. However, investors must appreciate that pricing is quite aggressive in this case, especially considering the low net margins of the company. The demat ISIN code of the company is (INE02S501018).