What you must know about Synoptics Technologies IPO

Synoptics Technologies Ltd, is a fixed price SME IPO on the NSE which is opening for subscription on 30th June 2023. The company, Synoptics Technologies Ltd, was incorporated in 2008 to provide IT related services and solutions. The company offers specialized solutions in very niche areas like IT infrastructure, branch connectivity, network implementation, network support, route set-up, switch set-up, configuration etc. Synoptics Technologies Ltd also designs solutions for clients who are looking to put their applications on the cloud, which includes cloud migration and cloud set-up.

Synoptics Technologies helps small businesses, and the Government in their Digital journey with various use cases of specific industry verticals. It has a premium B2B client list which includes names like TATA Communications, BOB Financial Services, Blue Dart Express, Lifestyle International, Shoppers Stop Limited, H&M Retail, GIC Housing Finance, Motilal Oswal Financial Services etc. It has also recently signed up to become the authorized private LTE partner for 5G services nationally. It is headquartered in Mumbai and has 17 regional offices.

Key terms of the SME IPO of Synoptics Technologies Ltd

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

• The issue opens for subscription on 30th June 2023 and closes for subscription on 05th July 2023; both days inclusive.
   
• The company has a face value of ₹10 per share and the issue price for the fresh issue portion has a fixed price of ₹237 per share. The issue will be mix of fresh issue and OFS.
   
• The company will issue a fresh issue portion of 14.80 lakh shares at the price of ₹237 per share aggregating to a total fund raising of ₹35.08 crore.
   
• The offer for sale (OFS) by the company will entail the sale of 8.00 lakh shares at the price of ₹237 per share aggregating to an OFS size of ₹18.96 crore.
   
• The overall size of the IPO, therefore, would entail the issue of 22.80 lakh shares, which hat the fixed price of ₹237 per share aggregates to a total issue size of ₹54.03 crore
   
• The company has allocated 50% of the issue size for the retail investor while the balance 50% is allocated to HNI / NII investors.
   
• Like every SME IPO, this issue also has a marketing making portion with a market maker portion allocation of 114,000 shares. NNM Securities Ltd 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 Jagmohan Shah,  Jatin Shah and Janvi Shah. The promoter stake in the company stands currently at 100%. Post the IPO, being a fresh issue of shares and OFS, the promoter stake will be get diluted proportionately 73.11%.
   
• While First Overseas Capital Ltd will also be the lead manager to the issue, Bigshare Services Private Limited will be the registrar to the issue.

The minimum lot size for the IPO investment will be 600 shares. Thus, retail investors can invest a minimum of ₹142,200 (600 x ₹237 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 1,200 shares and having a minimum lot value of ₹284,400. There is no upper limit on what the HNI / NII investors can apply for. The table below captures the gist.

Key dates to be aware of in the Synoptics Technologies Ltd IPO (SME)

The SME IPO of Synoptics Technologies Ltd IPO opens on Friday, June 30th, 2023 and closes on Wednesday July 05th, 2023. The Synoptics Technologies Ltd bid date is from June 30th, 2023 10.00 AM to July 05th, 2023 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is the 05th of July 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 Synoptics Technologies Ltd

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

Data Source: Company DRHP filed with SEBI

The profit margins have been fairly stable in the range of 7-8% on an average which is fairly positive. However, this is only data up to FY22. We have the profits showing further growth in the first nine months of FY23, which could justify better valuations for the company. It is important to note here that the company will be using the fresh funds for repayment of borrowings, working capital needs and for making strategic buyouts in the sector.

The weighted average EPS of the last 3 years is ₹4.65 while for the 9 months to December 2022, the EPS is ₹7.51. If we use the latest EPS, we are looking at an annualized EPS of close to ₹10 per share which discounts the IPO price in the range of 20 times to 23 times the EPS for FY23 on an annualized basis. That is not a very steep discounting and does leave room for investors on the table. Also, the RONW has been in the range of 19% to 21% in the last four years, which should be able to justify the current P/E ratio. The IPO can be considered by investors with a higher risk appetite, but with a longer term perspective only.