What you must know about the VELS Film International IPO

VELS Film International IPO, is an SME IPO on the NSE which is opening for subscription on 10th March 2023. The company, VELS Film International Ltd, was incorporated in 2019 and the company is primarily into the business of production of films and the sale of film rights. VELS Film International was promoted by Dr. Ishari Ganesh with the idea of producing feature films in various languages. South India has been one of the most successful film chambers in India and some of the biggest hits in recent years ranging from RRR to Pushpa to Bahubali and KGF originated from the South with south-based directors. Specifically, the Tamil film industry is the third largest in India after Hindi and Telugu.

Some of the notable movies produced by VELS Film International Limited in the last three years include Mookuthi Amman, Kutty Story, Sumo, Joshua Imai Pol Kaakha, Vendhu Thanindhathu Kaadu. It is currently producing movies like Singapore Salon, Corona Kumar, and Chutney Sambar. Among its various strengths, the company has put together a strong team of experienced directors and a management team to handle the growth. In addition, it also has a strong funding network, distribution network as well as assured revenue streams from the sale of revenue streams, merchandise, franchises etc. The fresh funds raised through the IPO would be largely used for production of new films and corporate purposes.

Key terms of the SME IPO of VELS Film International Ltd

Here are some of the highlights of the IPO of VELS Film International Ltd on the SME segment of the National Stock Exchange (NSE).

• The issue opens for subscription on 10th March 2023 and closes for subscription on 14th March 2023; both days inclusive.
   

• The company has a face value of Rs. 10 per share and the issue price for the fresh issue portion has a fixed price of Rs. 99 per share.
   

• The company will issue a total of 34.08 lakh shares at the price of Rs. 99 per share aggregating to a total fund raising of Rs. 33.74 crore.
   

• The company has allocated 50% of the issue size for the retail investor while the balance 50% is allocated to HNI / NII investors.
   

• The minimum lot size for the IPO investment will be 1,200 shares. Thus, retail investors can invest a minimum of Rs. 118,800 (1,200 x Rs99 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 Rs. 237,600. There is no upper limit on what the HNI / NII investors can apply for.
   

• Like every SME IPO, this issue also has a market making portion with a market maker portion allocation of 172,800 shares. SS Corporate 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 Dr Ishari Ganesh and the promoter stake in the company stands currently at 100%. Post the IPO, being a fresh issue of shares, the promoter stake will be get diluted proportionately.

Khambatta Securities Ltd will also be the lead manager to the issue while Cameo Corporate Services Limited will be the registrar to the issue.

Key dates to be aware of in the VELS Film International Ltd IPO (SME)

The SME IPO of Quality Foils (India) IPO opens on Friday, March 10th, 2023 and closes on Tuesday March 14th, 2023. The VELS Film International Ltd IPO bid date is from March 10th, 2023 10.00 AM to March 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 March 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 VELS Film International Ltd

The table below captures the key financials of VELS Film International. Data is only available for FY22 ending March 2022 and for the 6 months ending September 2022. Hence the six months data has been annualized to get the full year revenues for FY23. This may not be a precise measure but it is broadly indicative for the purpose of analysis.

Data Source: Company DRHP filed with SEBI

A word of caution before taking the financials for a deeper look. Being a company started in 2019, the company does not have a financial history. Hence data and performance is limited on this front. Also, the film business can often be an erratic business as it depends on how the public receives the film. Hence growth and profit margins can be highly uneven.

The profit margins have been fairly low and the sales growth obviously looks like an outlier. However, the company has an established model with a matured market and strong intangibles at its disposal. However, investors must remember that this is a traditionally low margin and a high risk business. This industry has traditionally been an informal industry so formalization may be quite tough. That could be an overhang on valuations.