What you must know about Saakshi Medtech and Panels IPO?

Saakshi Medtech and Panels Ltd was incorporated in the year 2001 and the company designs, programs and assembles Electrical Control Panels and Cabinets. These include microcontrollers, programmable logic controllers, and SCADA systems. Such electrical control panels are typically used in elevators, air compressors, at EV charging stations and in the oil & gas exploration industry. The products of Saakshi Medtech and Panels Ltd also find application in the medical X-ray systems, fabrication work for locomotives etc. The company currently has 3 manufacturing units located at Pune in Maharashtra spread across 9,600 square metres (SQM). The company is the recipient of several awards and accolades in this space. Its revenue growth has bene robust in the last 3 years.

Key terms of the Saakshi Medtech and Panels IPO (SME)

Here are some of the highlights of the Saakshi Medtech and Panels 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 ₹10 per share and it is a book built issue. The issue price for the book built issue has been set in the price band of ₹92 to ₹97 per share. The final price of the IPO will be discovered through the process of book building.
   
• The IPO of Saakshi Medtech and Panels Ltd entirely comprises only 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, Saakshi Medtech and Panels Ltd will issue a total of 46,56,000 shares (46.56 lakh shares), which at the upper IPO price band of ₹97 per share aggregates to a total fund raising of ₹45.16 crore.
   
• Since there is no offer for sale (OFS) portion, the fresh issue is also the overall issue. Therefore, the total issue size of Saakshi Medtech and Panels Ltd will entail the issue of 46,56,000 shares (46.56 lakh shares), which at the upper band price of ₹97 per share aggregates to a total fund raising of ₹45.16 crore.
   
• Like every SME IPO, this issue also has a market making portion with a market maker portion allocation of 2,35,200 shares. The market maker for the issue is Hem Securities 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 Aniket Vijay Latkar and Chitra Vijay Latkar. The promoter holding in the company currently stands at 100.00%. However, post the fresh issue of shares, the promoter equity holding share will get diluted to 73.63%.
   
• The fresh issue funds will be used by the company for funding its capex at Factory Unit II and for repayment of borrowings of the company. Part of the funds will also go towards meeting its working capital needs and for general corporate expenses.
   
• While Hem Securities 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 Aryaman Capital Markets Ltd.

IPO allocation and minimum lot size for investment

Out of the total shares on offer, the company has allocated 2,35,200 shares for the market maker, Hem Securities Ltd for providing liquidity post listing and reducing basis risk. The net offer (net of market maker allocation) will be equally distributed between the retail investors and the non-retail investors. Here, the non-retail investors predominantly comprise of the HNI / NII category and to a lesser extent of the institutional category also.

The minimum lot size for the IPO investment will be 1,200 shares. Thus, retail investors can invest a minimum of ₹116,400 (1,200 x ₹97 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 2,400 shares and having a minimum lot value of ₹232,800. 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 Saakshi Medtech and Panels Ltd IPO (SME)

The SME IPO of Saakshi Medtech and Panels IPO opens on Monday, September 25th, 2023 and closes on Wednesday, September 27th, 2023. The Saakshi Medtech and Panels Ltd 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 Saakshi Medtech and Panels Ltd

The table below captures the key financials of Saakshi Medtech and Panels Ltd for the last 3 completed financial years.

Data Source: Company DRHP filed with SEBI (# - 9 months data annualized)

Here are some key takeaways from the financial numbers of Saakshi Medtech and Panels Ltd as captured below.

• The company has reported net margins of 9-10% in the last two years, which is fairly impressive while the ROE at around 30% has also been consistent in the latest two fiscal years. The latest fiscal has been annualized based on 9 months data, but that should still be fairly representative.
   
• If one looks at the annualized EPS for FY23 at ₹8.41, then the P/E ratio works out to around 10-12 times latest earnings, which is a reasonable valuation for the company with strong growth and robust margins on equity and sales. The high levels of ROE should help this level of P/E sustain in the future too.
   
• The asset sweating based on the asset turnover ratio has been hovering consistently above 1 and that is a good sign. Considering it is a niche engineering business, an improvement in this ratio should be on the cards.

To sum it up, the company looks like an interesting play on a niche engineering area. Valuations are reasonable with scope for upsides for the patient investor. However, the volatile nature of the SME business makes the company higher on the risk scale, so investors must be prepared for that. It could be a calculated risk call for the investor.