Positron Energy NSE SME IPO review (Apply)

Review By Dilip Davda on August 8, 2024

•    The company has established its niche place in oil and gas related services and EPC projects.
•    It posted exponential growth in its top and bottom lines for the reported periods. 
•    Considering Government of India’s plans and spending, this segment is poised for a leap forward.
•    Based on FY24 earnings, the issue appears fully priced. 
•    The company is poised for bright prospects ahead.
•    Investors may park funds for medium to long term. 

ABOUT COMPANY:
Positron Energy Ltd. (PEL) is engaged in Management & Technical Advisory Services of Oil and Gas Industry. It provides end to end solutions for Gas distribution to the Industries across India. The company provides Management Consultancy Services like commercial and financial advisory, technical services including Project Management and O&M (Operation and Management) Services, across the Gas Sector in India. It has successfully developed a Gas aggregation business volume of 35 MMSCM (approx.), especially Natural Gas. Its technical qualifications and empanelment with most industrial customers attest to its reliability and competence. Moreover, distribution of Natural gas is facilitated through common carrier pipeline networks operated by major public and private sector players in the Indian market.

The Company is an ISO 9001:2015 and ISO 45001:2018 certified company. The quality certification is towards providing consultancy services, O&M services to the Oil & Gas sector. It has in-house capabilities to deliver a project from conceptualization to completion with fast turnaround time from acquisition to launch to completion, which focuses on de-risking and improving return on investment. Its core competence lies in professional management and attracting and retaining talent to maximize value creation. Since incorporation, it has provided services to major companies which are engaged in the Oil & Gas Sector, including both PSUs and private companies. The Company has demonstrated a prominent presence in the Oil and Gas Sector and has developed significant expertise and competencies in this field. It aims to leverage its strength and continue expansion into the Oil and Gas sector lead company to desired growth trajectory.

Company for the initially 11 years was mere engaged in the Management & Technical Advisory Services of Oil and Gas Industry. Later on, in the FY 2018-19, it planned to commence the aggregation business of Coal Bed Methane Gas (CBM) for supplying to industrial unit. After having successful business of CBM Gas aggregation also, as per the demand of industrial units, the Company in July 2022 decided to aggressively commence the business of Natural Gas aggregation for such industrial unit.

In addition to its operational endeavors, its business is secured with the Indian Gas Exchange (IGX) through its clearing member. This client membership enables it to source natural gas on-demand for short-term requirements from the free market, where prices are determined through a transparent exchange mechanism. Moreover, it also provides flexibility to offload excess Gas if necessary.

The Company has entered into collaboration agreement with ICOM North America LLC (New Hudson, MI) for installation of ICOM Dual Fuel LNG conversion systems in on-road trucks weighing over 3.5 tons in India. The new system will result in reduction in emissions with the utilization of LNG contributing to environmental sustainability. The dual-fuel system allows for cost-effective operation with the flexibility of fuel ratios. Currently, the company has 124 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 2048400 equity shares of Rs. 10 each to mobilize Rs. 51.21 cr. at the upper cap. It has announced a price band of Rs. 238 – Rs. 250 per share. The issue opens for subscription on August 12, 2024, and will close on August 14, 2024. The minimum application to be made is for 600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.95% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, it will utilize Rs. 38.20 cr. for working capital, and the rest for general corporate purposes.

The issue is solely lead managed by Beeline Capital Advisors Pvt. Ltd., and Link Intime India Pvt. Ltd. is the registrar to the issue. Beeline Group’s Spread X Securities Pvt. Ltd. is the market maker for the company.

Having issued initial equity shares at par value, the company issued further equity shares in the price range of Rs. 51.50 – Rs. 56.50 between November 2013 and February 2019. It has also issued bonus shares in the ratio of 15 for 1 in February 2024. The average cost of acquisition of shares by the promoters is Rs. 0.82, and Rs. 0.89 per share.

Post-IPO, company’s current paid-up equity capital of Rs. 5.55 cr. will stand enhanced to Rs. 7.60 cr. Based on the upper IPO price band, the company is looking for a market cap of Rs. 190.01 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a consolidated basis) posted a total income/net profit of Rs. 8.97 cr. / Rs. 0.58 cr. (FY22), Rs. 52.03 cr. / Rs. 2.13 cr. (FY23), and Rs. 135.42 cr. / Rs. 8.79 cr. (FY24).

For the last three fiscals, it has reported an average EPS of Rs. 6.90 (simple average), and an average RoNW of 44.74%. The issue is priced at a P/BV of 9.32 based on its NAV of Rs. 26.82 as of March 31, 2024, and at a P/BV of 2.88 based on its post-IPO NAV of Rs. 86.97 per share (at the upper cap).

If we attribute FY24 super earnings to its post-IPO fully diluted paid-up capital, then the asking price is at a P/E of 21.63. Thus the issue appears fully priced.

For the reported periods, the company has posted PAT margins of 6.67% (FY22), 4.14% (FY23), 6.52% (FY24), and RoCE margins of 11.33%, 26.37%, 61.55% respectively for the referred periods.

DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy based on its financial performance and future prospects.

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has no listed peers to compare with.

MERCHANT BANKER’S TRACK RECORD:
This is the 44 mandate from Beeline Capital in the last three fiscals (including the ongoing one), out of which 2 issued closed below the issue price on listing date.