What you must know about Newjaisa Technologies IPO?

Newjaisa Technologies Ltd was incorporated in the year 2020 to provide refurbished electronics at discounted prices. This is how the business model of Newjaisa Technologies Ltd works. It procures used gadgets such as laptops, desktops, and peripherals and then it refurbishes them, upgrades the hardware, and sells them directly to end-use customers. These customers could either be retail customers looking for a good price or businesses looking for low price computers for routine tasks or even government agencies for large scale data entry operations. Apart from laptops and desktops, it also handles other peripherals like USB ports, external drives, key boards, mouse etc. Its customer base is spread pan-India and includes students, home users, SMEs, and working professionals. Being a cost-centric model, much of its sales happen through the online and ecommerce sales platforms. Its employee count of 347 is dominated by interns. On an average, the company delivers close to 5,500 refurbished SKUs each month to customers.

Key terms of the Newjaisa Technologies IPO (SME)

Here are some of the highlights of the Newjaisa Technologies IPO on the SME segment of the National Stock Exchange (NSE).

• The issue opens for subscription on 25th September 2023 and closes for subscription on 27th September 2023; both days inclusive.
   
• The company has a face value of ₹5 per share and it is a book built issue. The issue price for the IPO has been fixed in the price band of ₹44 to₹47 per share. Since it is a book built issue, the eventual price of the IPO will be decided through book building process.
   
• The IPO of Newjaisa Technologies Ltd entirely comprises of a fresh issue component with no offer for sale (OFS) 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 issue portion of the IPO, Newjaisa Technologies Ltd will issue a total of 84,96,000 shares (84.96 lakh shares), which at the upper band IPO price of ₹47 per share aggregates to a total fund raising of ₹39.93 crore.
   
• Since there is no OFS portion, the fresh issue portion will also be the total size of the IPO. As a result, the total issue size of Newjaisa Technologies Ltd will also entail the issue and sale of 84,96,000 shares (84.96 lakh shares), which at the fixed IPO price of ₹47 per share aggregates to a total fund raising of ₹39.93 crore.
   
• Like every SME IPO, this issue also has a market making portion with a market maker portion allocation of 4,26,000 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 Vishesh Handa and Mukunda Raghavendra. The promoter holding in the company currently stands at 94.23%. However, post the fresh issue of fresh shares as part of the IPO, the promoter equity holding share will get diluted to 69.35%.
   
• The fresh issue funds will be used by the company for meeting its capex needs at its refurbishing facility, including purchase of plant and machinery. Part of the funds will also go towards investing in the technology stack and in branding while a small portion will be towards repayment of bank facilities and general corporate expenses.
   
• While Indorient Financial Services Ltd will be the lead manager to the issue, Bigshare Services 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

Out of the total shares on offer, the company has allocated 4,26,000 shares for the market maker, Nikunj Stock Brokers Ltd for providing liquidity post listing and reducing basis risk. The net offer (net of market maker allocation) will be distributed between the QIB investors, retail investors and the non-retail investors. In the below table, net offer refers to the offer size, net of market maker allocation.

The minimum lot size for the IPO investment will be 3,000 shares. Thus, retail investors can invest a minimum of ₹141,000 (3,000 x ₹47 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 6,000 shares and having a minimum lot value of ₹282,000. 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 Newjaisa Technologies IPO (SME)

The SME IPO of Newjaisa Technologies Ltd IPO opens on Monday, September 25th, 2023 and closes on Wednesday, September 27th, 2023. The Newjaisa Technologies IPO bid date is from September 25th, 2023 10.00 AM to September 27th, 2023 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is September 27th, 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 Newjaisa Technologies Ltd

The table below captures the key financials of Newjaisa Technologies Ltd for the last 3 completed financial years.

Data Source: Company DRHP filed with SEBI

Here are some key takeaways from the financial numbers of Newjaisa Technologies Ltd as captured below. The company has shown good traction in sales with the sales growing nearly 5-fold in the last 2 years, showing there is a strong market for this product. Secondly, the net margins are comfortable in the range of 10-15%, although the competition from the unorganized segment is always a threat in this segment. But it looks like there is a market for such refurbished products. The business is largely asset light and that should help the company to sustain the ROE at above 50% as it is currently. It is a niche business with a safe model. Investors can look at the stock considering the P/E is just about 13 to 15 times earnings. That should make it cheaper in forwards earning terms.