Safa Systems & Technologies Limited IPO

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The Company was originally incorporated as “Safa Systems & Solutions”, a Partnership firm in the state of Kerala on October 18, 2012. Subsequently, they have converted the Partnership firm into a Public Limited Company in the name of “Safa Systems & Technologies Limited” on September 21, 2021 bearing Corporate Identification Number U52100KL2021PLC071051 vide Certificate of Incorporation issued by Registrar of Companies – Central Registration Centre.

Brief Overview of Company and its Business:

Safa Systems & Solutions, the erstwhile partnership firm, started its business in the year 2012 as a new entrant in the field of consumer durable like Mobile phones and its accessories. They were appointed for all Kerala distribution for Micromax Smartphones and the initial year net turnover (after considering sales return) i.e., in the financial year 2012-13 was Rs.7.84 crores. In the financial year 2013-14, we crossed a net turnover of Rs.51.24 Crores. In the year 2015, they also made an arrangement with Micromax for its Feature Phones distributions in the State of Kerala, and in the financial year 2014-15 and 2015-16, we crossed a net turnover of Rs.94.98 Crores and 90.90 crores respectively. In the Financial year 2016-17, the net turnover dropped to Rs.73.30 crores because of the brand issues with Micromax. Until then they were only dealing with the products of Micromax. In the year 2017-18, they decided to create a portfolio of brands rather than sticking to one brand and  were looking forward to capture 25% to 30% of the Smartphones market size in the state of Kerala. In the same year they signed up with the brand OPPO and crossed a net turnover of Rs.169.41 Crores. In the financial year 2018-19 they signed up with more brands like Xiaomi, Vivo, LG, etc. and our net turnover was Rs.254.92 Crores. Further, In the Financial Year 2019-20 we also signed up with more brands like Huawei, Motorola, etc. and we crossed a net turnover of Rs.255.12 Crores. In the Financial Year 2020-21 we signed up with the brand One Plus for the Kerala region. The net turnover in financial year 2020-21 dropped to Rs. 208.51 crores due to Covid-19, pandemic.

Presently, they company is in the business of distributorship of consumer durable products like Mobile phones, Mobile phone accessories, Tablets, LED TVs, Home appliances and wearable devises of various brands like Xiaomi, OPPO, TECNO, Micromax, One Plus in Kerala. The company works in B2B (Business to Business) model.

Objects of the Safa Systems & Technologies Limited IPO:

Company is raising Rs.4 Cr from the IPO to use for Working Capital requirement. Company's total working capital requirement is 15.44 Crores, and out of that ~12 Crores will be met through Internal Accrual and ~3 Crores from IPO proceeds.
RHP of Safa Systems & Technologies Limited IPO

Safa Systems & Technologies Limited IPO Details:

Open Date: Jan 28 2022
Close Date: Feb 01 2022
Total Shares: 4,000,000
Face Value: ₹ 10 Per Equity Share
Issue Type: Fixed Price Issue
Issue Size: 4 Cr.
Lot Size: 10000 Shares
Issue Price: ₹ 10 Per Equity Share
Listing At: BSE SME
Listing Date: Feb 09 2022

Promoters And Management:

(i) Mr. Bavaraparambil Abdhulkadher Hydrose, aged 67 years, is the Founder Promoter and Non-Executive Director of the company. Education qualification is Under Graduate. (ii) Mr. Faizal Bavaraparambil Abdul Khader aged 42 is the son of Bavaraparambil Abdhulkadher Hydrose is one of the Founder Promoters and Managing Director of the company. His education qualification is CA Intermediate.

Financials of Safa Systems & Technologies Limited IPO:

Safa Systems & Technologies Ltd
Particulars (in Lakhs) 6MFY22 Mar-21 Mar-20 Mar-19
Sales 14,513 20,851 25,512 25,492
Cost of Material Consumed 14,184 20,406 24,774 24,911
Employee Benefits Expense 95 131 195 256
Other Expenses 73 96 233 180
Operating Profit 167 233 320 226
OPM % 1.15% 1.12% 1.25% 0.89%
Other Income 6 15 11 82
Interest 123 179 262 138
Depreciation 7 15 16 17
Profit before tax 37 39 42 71
Total Tax Exp. 9 10 11 35
Net Profit 27 29 31 36
NPM % 0.19% 0.14% 0.12% 0.14%
No. of shares 150.78 150.78 150.78 150.78
EPS in Rs 0.18 0.19 0.21 0.24
 

Comparison With Peers:

Company believe that none of the listed companies in India offer products or services across the various business segments in which they operate. Hence a strict comparison is not possible.

Recommendation on Safa Systems & Technologies Limited IPO:

Review and Recommendation of Safe Systems and Technologies by InvestorZone is 3/10 1. There is hardly any growth in the company in the last 3 years. In fact the revenue is de-growing. 2. Business does not have any moat and and competition is very high. Because of that margins are very low in the business. 3. Online e-commerce companies such as Amazon and Flipkart are threat to offline distributors. 4. EPS of FY21 is Rs.0.19 and issue price is Rs.10, so P/E is 52x, which is very high for the business. 5. Mcap = 15 Crores.

Lead Manager of Safa Systems & Technologies Limited IPO:

  1. Finshore Management Services Limited

Registrar of Safa Systems & Technologies Limited IPO:

  1. Cameo Corporate Services Limited

Discussion on Safa Systems & Technologies Limited IPO:

3 Comments

    They operate in the highly competitive industry. There are no entry barriers in the industry which puts company to the threat of competition from new entrants. There are numerous players operate in the industry.

    They face tough competition in the business from a large number of unorganized and a few organized players.

    Reply

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