What you must know Falcon Technoprojects India IPO?

About Falcon Technoprojects India Ltd

Falcon Technoprojects India Ltd was incorporated in the year 2014 with the business model designed to provide mechanical, electrical, and plumbing services to its clients across India at an institutional level. Falcon Technoprojects India Ltd operates in a plethora of sectors like petroleum refineries, housing estates, nuclear power, construction, etc. The company specializes in offering end-to-end MEP (mechanical, electrical, plumbing) services, essentially for onsite execution. This encompasses a broad range of services comprising of the design, selection and installation of integrated mechanical, electrical and plumbing systems. To cater to the institutional and corporate requirements, Falcon Technoprojects India Ltd  offers the full gamut of services with focus on installation of air conditioning, power and lighting systems, water supply and drainage, fire protection and fire extinguishing systems and even the installation of complex telephones and EPABX systems at the client site. The company employs 24 personnel on its rolls.
Highlights of the Falcon Technoprojects India IPO. 

Here are some of the highlights of the Falcon Technoprojects India IPO on the SME segment of the National Stock Exchange (NSE).

•    The issue opens for subscription on 19th June 2024 and closes for subscription on 21st June 2024; both days inclusive.

•    The stock of the company has a face value of ₹10 per share and it is a fixed price issue. The fixed price for the IPO has been set at ₹92 per share. Being a fixed price issue, the question of price discovery does not arise.

•    The IPO of Falcon Technoprojects India IPO 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, Falcon Technoprojects India Ltd will issue a total of 14,88,000 shares (14.88 lakh shares), which at the upper band IPO price of ₹92 per share aggregates to fresh fund raising of ₹13.69 crore.

•    Since there is no OFS, the fresh issue size will also double as the overall issue. Therefore, the overall IPO size will also comprise of the issue of 14,88,000 shares (14.88 lakh shares) which at the upper band IPO price of ₹92 per share will aggregate to overall IPO size of ₹13.69 crore.

•    Like every SME IPO, this issue also has a market making portion. The company has set aside a total of 74,400 shares as quota for market inventory. Nikunj Stock Brokers 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 Bharat Parihar and Sheetal Parihar. The promoter holding in the company currently stands at 84.20%. However, post the fresh issue of shares, promoter equity holding share will get diluted to 60.81%.

•    The fresh issue funds will be used by the company for meeting the working capital needs of the company as part of its regular operations. A small part of the IPO proceeds has also be set aside for general corporate purposes.

•    Kunvarji Finstock 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 Nikunj Stock Brokers Ltd.

The IPO of Falcon Technoprojects India Ltd will be listed on the SME IPO segment of the NSE.

Falcon Technoprojects India IPO – Key Dates

Falcon Technoprojects India IPO opens on Wednesday, 19th June 2024 and closes on Friday, 21st June 2024. The Falcon Technoprojects India IPO bid date is from 19th June 2024 at 10.00 AM to 21st June 2024 at 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is 21st June 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 25th 2024, will be visible to investors under the ISIN Code – (INE0PQK01013). 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

Falcon Technoprojects India Ltd has announced a market maker allocation of 3,27,600 shares, which will be used as inventory for market making. SS Corporate Securities Ltd will be the market maker for the IPO. 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 Falcon Technoprojects India 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 1,200 shares. Thus, retail investors can invest a minimum of ₹1,10,400 (1,200 x ₹94 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 2,400 shares and having a minimum lot value of ₹2,20,800. 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 Falcon Technoprojects India Ltd.

Financial highlights: Falcon Technoprojects India Ltd

The table below captures the key financials of Falcon Technoprojects India 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 been fairly volatile in terms of growth with the company showing negative sales growth in FY23. However, if you look at the sales of FY23 and compare with FY21, then the net revenues are still higher by 75% during this period. That is a robust story. However, net profits have shown moderate growth traction; despite the PAT margins improving over the last two years.

•    While net margins of the company are modest at 6.28% in the latest year, the margins have grown modestly in the last 3 years. The return on equity (ROE) stands at 31.07% in FY23, while the return on assets (ROA) is moderate at 4.76% in FY23. The numbers have been fairly steady in the last 2 years.

•    The asset turnover ratio or the sweating ratio has been modest in the latest year at 0.76X and that is not too positive, especially if you consider that the return on assets or ROA has also not been too attractive.  However, sweating ratio is likely to improve as sales builds up in the coming quarters.

The company has latest year EPS of ₹3.10 and we have not included the weighted  average EPS, since the growth has been quite steady. The latest year earnings are being discounted by the IPO price of ₹92 per share at 29-30 times P/E ratio. That looks slightly on the higher, especially if you consider the consistently tepid net margins on the stock. The data is up to FY23 and if you take the 10 months EPS for FY24 of ₹2.44, then it gives an annualized EPS of ₹2.93 per share. That means, even on extrapolated earnings, the stock would only look a little more expensive than what it is now.

To be fair, Falcon Technoprojects India Ltd some bring some intangible advantages to the table. It has established relationships, a strong management bandwidth and a narrative of improving operating efficiency. However, this is a segment that does see a lot of competition from the unorganized sector. Investors in the IPO must be prepared for a higher level of risk and a waiting period of over a year on this IPO. Before investing in this IPO, investors are advised to focus more on the risk factors, since that is where the valuation catch is.