Alphalogic Techsys BSE SME Startup IPO

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Overview of the Company

(i) M/s. ALPHALOGIC TECH SYS LIMITED is promoted by Mr. Anshu Goel, who has around 13 years of experience in the information technology industry and Mr. Dhananjay Subhash Goel, who has over 8 years of experience in the information technology industry. The company is having its registered office at 405, Pride Icon, Near Columbia Asia Hospital, Kharadi Bypass Road, Pune, Maharashtra.

(ii) They commenced operations from Pune, India, and have serviced clients in multiple geographies viz. United States of America, United Kingdom, Australia.

The business operations may broadly be categorized as technology services and technology solutions. They believe they are among the few technology service providers with a deep understanding of technology along with specific domain expertise.

Services

They provide Technology Consulting services, offering end-to-end technology solutions and support. They provide a wide range of services, including, Web Application Development, Mobile Application Development, UI/UX Consulting, Business Intelligence, and Data Analytics services.

Alphalogic helps its clients with automating their business processes. Alphalogic’ BPA suite helps businesses automate, monitor and optimize business processes for better outcomes. Business process management software (BPMS) is a software in which people use various methods to discover, model, analyze, measure, improve, optimize, and automate business processes. BPMS focuses on improving an organization’s performance by managing business processes

Clients

The clients range from start-ups to established companies, engaged in Healthcare, Saas Software, E-commerce, Fintech, Social Networking, and other industries.

Objects of the Alphalogic Techsys BSE SME Startup IPO:

A. To meet the working capital requirements of the company. B. To meet the Issue Expenses. C. General Corporate Purposes

Alphalogic Techsys BSE SME Startup IPO Details:

Open Date: Aug 26 2019
Close Date: Aug 28 2019
Total Shares: 736,000
Face Value: ₹ 10 Per Equity Share
Issue Type: Fixed Issue
Issue Size: 6.18 Cr.
Lot Size: 1600 Shares
Issue Price: ₹ 84 Per Equity Share
Listing At: BSE SME
Listing Date: Sep 04 2019

Promoters And Management:

The promoters are Anshul Goel and Dhananjay Subhash Goel. (i) Mr. Anshu Goel, aged about 35 years, is the Managing Director, CFO, and Promoter of our Company. He has been on the board of the company since incorporation and has more than 13 years of experience in Information Technology industry. He has a successful track record of leading go-to-market teams across all types of markets from large enterprises to emerging and medium-sized tech companies. (ii) Mr. Dhananjay Subhash Goel, aged about 30 years, is the Executive Director and Promoter of our Company. He has been on the board of the company since incorporation and has more than 8 years of experience in Information Technology industry. He has a long time full-stack developer and dev-ops specialist. He helps lead our development teams and enjoys working with clients to build scalable products with a solid market fit. The Average cost of acquisition of shares by promoters is Rs. 3.40 per share.

Financials of Alphalogic Techsys BSE SME Startup IPO:

Year Revenue(Cr) EBITDA(cr) OPM PAT(Cr) NPM EPS
2017 1.9 0.50 26% 0.34 18% 1.22
2018 2.2 0.53 24% 0.37 17% 1.34
2019 5.1 2.84 56% 2.19 43% 7.89

Recommendation on Alphalogic Techsys BSE SME Startup IPO:

Review and Recommendation of InvestorZone is:  2/10 1. The IPO issue price at P/E multiple of 10.89x looks highly overvalued at the current market condition. The Issue price somewhere around Rs. 50-60 per share would have been fairly valued. 2. There is a very high competition in the sector in which the company is doing its business. 3.  In spite of revenue growth from 2.2 Cr in FY17-18 to 5.1 Cr in FY18-19, the employee benefit expense has gone down which is not a good sign for a growing company. 4.  The peer Xelpmoc Design & tech ( though strictly not comparable) is trading below its issue price.

Lead Manager of Alphalogic Techsys BSE SME Startup IPO:

  1. Finshore Management Services Limited

Registrar of Alphalogic Techsys BSE SME Startup IPO:

  1. Cameo Corporate Services Limited

Bid Details of Alphalogic Techsys BSE SME Startup IPO as on
28 Aug 2019 | 11:55:02 PM

Category No.of shares offered No. of shares bid
349,600 684,800
349,600 187,200
36,800 36,800
736,000 908,800
QIBs No
QIBs+HNIs Subscription 1.96X
Retail Subscription 0.54X
Total Subscription 1.25X

Discussion on Alphalogic Techsys BSE SME Startup IPO:

    Alphalogic Techsys, India’s first startup IPO, could not open for subscription on Friday due to some ‘unavoidable’ reasons. The issue will now open on Monday.

    “Due to unforeseen circumstances, the public issue could not open on August 23, 2019. We have been duly in touch with BSEofficials regarding the same and are working tirelessly to resolve the matter,” the boutique software consulting firm said.

    The Pune-based software consulting firm has fixed the issue price at Rs 84 per share and the minimum units one needs to buy is 1,600 shares, requiring a minimum investment of Rs 1,33,400. Overall, 7.36 lakh shares are on the block, worth Rs 6.18 crore.

    My Observation( Alphalogic Techsys)

    1. The company is raising funds from the market to the tune of 6.18 Cr. They are raising the funds for their working capital requirement.

    If you see the Balance Sheet of 2018-19, they have only 89 Lakh of Working Capital Requirement. If you dig more in the balance sheet, they have done a fixed Deposit of 3.04 Cr as on 31.03.2019. So instead of raising funds from the market, they would have easily met the working capital requirement from their internal accrual.

    2. On 31.03.2019, they have converted the loan into equity. They have issued 35,998 Equity Shares at whopping Rs.165 per share. Thereby, converted loan into equity. There is nothing wrong in the conversion of loan into equity that is usual practice. However, the price at which they have converted looks very high.

    Their FY18-19 EPS stands at 7.89. So P/E at which they have issued shares for converting the loan into equity is 20.91( which is highly overvalued).

    Now the question is why they have not to convert shares at fair value say Rs. 65-70 ?

    If they have done at Fair Value, the size of Share capital would have increased which would make ROE low.

    3. The IPO is highly overvalued. The Mcap at which the company is issuing shares is 23.31 Cr. Their total revenue in FY18-19 was 5.1 Cr. So Mcap/Sales= 4.57( very high).

    4. Employees cost has also reduced from 1.17 Cr last to 1.14 in FY18-19.

    5. So better avoid.

    This is the first company to list on BSE Startup Exchange.