What you must know about Micropro Software Solutions IPO?

The company, Micropro Software Solutions Ltd , was incorporated in 1988, so it has a real long pedigree and history. Micropro Software Solutions Ltd is an IT (information technology) services company engaged in the business of software development, data processing, and software training. Micropro Software Solutions Ltd  has a technology team comprising of more than 150 professionals on its rolls. The company currently serves more than 4,000 customers across geographies like India, USA, UAE, and Africa. The company also provides granular and customized software solutions for the government sector, PSUs, and also for the corporate clients. Micropro Software Solutions Ltd designs software solutions across various business verticals including infrastructure management, manpower services and network security, which are the mainstays of its business model. It brings key strengths to the table like tailored solutions, deep insights into verticals, proven track record and a client centric approach to software development and IT solutions.

Some of the major array of services provided by Micropro Software Solutions Ltd to its client base includes IT Infrastructure Management Services, Server Management, Virtualization Services, Storage and Backup Management, Network Management, Security Management, Database Management, Middleware Administration as well as Data Centre Operations Management. Some of its key business partners include Adobe, Autodesk, Broadcom, Trend Micro, Veritas, Aruba, SOPHOS, Hewlett Packard Enterprises, Amazon Web Services (AWS), Oracle, Red Hat, Cisco, and Team Viewer, among others. It is also a winner of the Digital India Award initiated by the government of India.

Key terms of the SME IPO of Micropro Software Solutions Ltd

Here are some of the highlights of the Micropro Software Solutions IPO on the SME segment of the National Stock Exchange (NSE).

• The issue opens for subscription on 03rd November 2023 and closes for subscription on 07th November 2023; both days inclusive.
   
• The company has a face value of ₹10 per share and it is a fixed price issue. The issue price for the fresh issue IPO has been fixed at ₹81 per share. Being a fixed price issue, there is no question of price discovery in this issue.
   
• The IPO of Micropro Software Solutions Ltd 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 IPO, Micropro Software Solutions Ltd will issue a total of 37,90,400 shares (37.90 lakh shares approximately), which at the fixed IPO price of ₹81 per share aggregates to a total fund raising of ₹30.70 crore.
   
• Since there is no offer for sale portion, the total size of the issue will also be the total size of the IPO. Hence the total IPO size will also comprise of 37,90,400 shares, which at the fixed IPO price of ₹81 per share will aggregate to total issue size of ₹30.70 crore.
   
• Like every SME IPO, this issue also has a market making portion with a market maker portion allocation of 1,90,400 shares. The market maker for the issue is Nikunj Stock Brokers Ltd and they will provide two-way quotes to ensure liquidity on the counter post listing and low basis costs.
   
• The company has been promoted by Sanjay Yadavrao Mokashi, Hitesh Dhirajlal Parikh, Prashant Renukadas Rajurkar, Meenakshi Sanjay Mokashi, Shefali Hitesh Parikh, and Swati Prashant Rajurkar. The promoter holding in the company currently stands at 63.40%. However, post the fresh issue of shares in the IPO, the promoter equity holding share will get diluted to 45.17%.
   
• The fresh issue funds will be used by the company for funding some of its capex plans and for working capital funding gaps. Part of the monies raised will also go towards meeting the general corporate expenses of the company.
   
• Swaraj Shares & Securities Private Ltd will be the lead manager to the issue, and Purva Share Registry India Private Ltd will be the registrar to the issue. The market maker for the issue is Nikunj Stock Brokers Ltd.

IPO allocation and minimum lot size for investment

Micropro Software Solutions Ltd has allocated 5.02% of the issue size for the market makers to the issue, Nikunj Stock Brokers 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 Micropro Software Solutions 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 1,600 shares. Thus, retail investors can invest a minimum of ₹129,600 (1,600 x ₹81 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 3,200 shares and having a minimum lot value of ₹259,200. 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 Micropro Software Solutions Ltd IPO (SME)

The SME IPO of Micropro Software Solutions Ltd IPO opens on Friday, November 03rd, 2023 and closes on Tuesday, November 07th, 2023. The Micropro Software Solutions Ltd IPO bid date is from November 03rd, 2023 10.00 AM to November 07th, 2023 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is November 07th, 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 Micropro Software Solutions Ltd

The table below captures the key financials of Micropro Software Solutions 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 comparable over the last 3 years. The latest year has seen a near 7-fold growth in sales.
   
• The net margins have been in the range of 11-12% in the latest year. However, here again, the comparisons are tough since the company had been making net losses till FY22 and hence margins are tough to calculate. Even ROE is only meaningful for the latest year of FY23 as the net worth was negative in the previous two years.
   
• Being a capital light business, the asset turnover ratio or the asset sweating ratio has been above 1 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 ₹91.08 and weighted average EPS of ₹45.85 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. By latest year valuations, the company looks reasonably priced, so it is the sustainable EPS that will matter. The focus would be on the next few quarters. This is generally a cyclical and 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.