What you must know about Spectrum Talent Management IPO

Spectrum Talent Management Ltd, is an SME IPO on the NSE which is opening for subscription on 09th June 2023. The company, Spectrum Talent Management Ltd, was incorporated in 2012 to provide high quality human resource and staffing services to corporates. Spectrum Talent Management Ltd boasts of over 275 corporate and institutional clients serviced over the years; both in the domestic and the offshore market. It employs more than 15,600 personnel deployed across various locations of its clients.

The company was promoted by two veterans of the staffing and HR services space; Vidur Gupta and Sidharth Agarwal; sharing a combined experience of more than 28 years in the staffing vertical. In terms of its service offerings, Spectrum Talent Management Ltd offers an array of services across payroll, recruitment, onboarding, and facilitating flexible staffing. The business model of Spectrum Talent Management Ltd is aimed at satisfying the staffing, and recruitment needs of clients with their specialized knowledge, domain skills and their networks spread across the industry, domestically and globally.

Key terms of the SME IPO of Spectrum Talent Management Ltd

Here are some of the highlights of the Spectrum Talent Management IPO on the SME segment of the National Stock Exchange (NSE).

• The issue opens for subscription on 09th June 2023 and closes for subscription on 14th June 2023; both days inclusive.
   
• The company has a face value of ₹10 per share and the issue price band for the book building IPO has been set in the range of ₹169 to ₹173.
   
• The issue of the company will be a combination of fresh issue and offer for sale by the promoters and early investors in the company.
   
• As part of the fresh issue, Spectrum Talent Management Ltd will issue a total of 51,85,600 shares, which at the upper end of the price band at ₹173 per share translates into total fresh issue size of ₹89.71 crore.
   
• As part of the offer for sale (OFS), Spectrum Talent Management Ltd will issue a total of 8,92,000 shares, which at the upper end of the price band at ₹173 per share translates into total offer for sale (OFS) size of ₹15.43 crore.
   
• As a result, the total size of the overall IPO of Spectrum Talent Management Ltd will entail the issue of a total of 60,77,600 shares, which at the upper end of the price band at ₹173 per share translates into total IPO issue size of ₹105.14 crore.
   
• The minimum lot size for the IPO investment will be 800 shares. Thus, retail investors can invest a minimum of ₹138,400 (800 x ₹173 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 1,600 shares and having a minimum lot value of ₹276,800. There is no upper limit on what the HNI / NII investors can apply for. The respective allocation can be captured as under.

• The reservation of shares for the various categories of investors can be captured as per the table given below.

• Like every SME IPO, this issue also has a marketing making portion with a market maker portion allocation of 304,000 shares. Rikhav Securities will act as the market maker to the issue providing two-way quotes to ensure liquidity on the counter.
   
• The company has been promoted by Vidur Gupta and Siddharth Agarwal and the promoter stake in the company stands currently at 100.00%. Post the IPO, being a fresh issue of shares cum OFS, the promoter stake will be get diluted to 72.25%.

While Sarthi Capital Advisors Private Limited will also be the lead manager to the issue, Skyline Financial Services Private Limited will be the registrar to the issue. The total shareholdings post the IPO would be 51.86 lakh shares.

Key dates to be aware of in the Spectrum Talent Management Ltd IPO (SME)

The SME IPO of Spectrum Talent Management Ltd opens on Friday, June 09th, 2023 and closes on Wednesday June 14th, 2023. The Spectrum Talent Management Ltd IPO bid date is from June 09th, 2023 10.00 AM to June 14th, 2023 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is the 14th of June 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 Spectrum Talent Management Ltd

The table below captures the key financials of Spectrum Talent Management Ltd for the last 3 completed financial years.

Data Source: Company DRHP filed with SEBI

The profit margins in the latest fiscal year FY22 have been just about 3.2%, largely being a client driven business. While FY20 and FY21 were hit by the COVID woes, the signals from FY23 is quite positive if we look at the nine months data. Based on nine months data, one can project over 60% growth in revenues on yoy basis while the profits are expected to grow at 71% resulting in a marginal improvement in the net profit margins in FY23 at 3.42%.

However, the company has an established model with a matured market. The low capital intensiveness of the business allows for much better sweating of physical assets in the company. The IPO is priced at under 18 times FY23 earnings, which makes the issue fairly attractive for a medium to long term investors. However, investors must remember that this is a traditionally low margin business. That could be an overhang on valuations.