What you must know On Door Concepts IPO?

On Door Concepts Ltd was incorporated in the year 2014 as an e-commerce website catering to the needs of grocery and home essentials. It used to handle the order collation and the delivery and fulfilment of the goods ordered. The company, later, also opened its first store in Bhopal and has since expanded its network to 55 stores across various cities in Madhya Pradesh in the last 8 years. Currently, out of the 55 stores, a total of 17 stores are owned and operated by the company, while the remaining 38 stores are operated through the franchisee model. The company has tried to create an omnichannel kind of experience by providing goods across the digital and also the physical platform. It deals across 3 broad product categories viz, food products, FMCG products and general merchandise.

Here is what the product categories of On Door Concepts look like. The Food category includes groceries, fruits, vegetables, beverages dairy products and confectionery, which are generally for daily household usage. The fast moving consumer goods (FMCG) category cover personal care and toiletries as well as other OTC (over the counter) products. Finally, the general merchandise category comprises of crockery, plastic products, other items of daily necessity etc. The company currently offers its ecommerce transaction platform across Android and IOS Application. In addition, orders can also be placed using the web portal or even by using the telephonic orders interface, which is backed up by back-end logistics to deliver the order at the customer's doorstep. Its underlying retail principle has been to ensure low prices everyday in order to create a strong mindshare among the consumers.

Key terms of the On Door Concepts IPO (SME)

Here are some of the highlights of the On Door Concepts IPO on the SME segment of the National Stock Exchange (NSE).

• The issue opens for subscription on 23rd October 2023 and closes for subscription on 27th October 2023; both days inclusive.
   
• The company has a face value of ₹10 per share and it is a fixed price issue. The issue price for the fresh issue IPO has been fixed at ₹208 per share. Being a fixed price issue, there is no question of price discovery in this IPO.
   
• The IPO of On Door Concepts Ltd has only a fresh issue component with no book built 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 portion of the IPO, On Door Concepts Ltd will issue a total of 14,98,800 shares (14.99 lakh shares approximately), which at the fixed IPO price of ₹208 per share aggregates to a fresh issue fund raising of ₹31.18 crore.
   
• Since there is no offer for sale portion, the total size of the fresh issue will also be the total size of the IPO. Hence the total IPO size will also comprise of 14,98,800 shares (14.99 lakh shares approximately), which at the fixed IPO price of ₹208 per share aggregates to a total IPO size of ₹31.18 crore.
   
• Like every SME IPO, this issue also has a market making portion with a market maker portion allocation of 86,400 shares. The market maker for the issue is BHH 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 NSB BPO Solutions Private Ltd, Narendra Singh Bapna, Pramod Ramdas Ingle, Swati Bapna, and Vaishali Ingle. The promoter holding in the company currently stands at 51.92%. However, post the fresh issue of shares, the promoter equity holding share will reduce to 38.14%.
   
• The fresh issue funds will be used by the company for meeting its additional working capital needs and for general corporate expenses. Part of the monies raised will also go towards meeting the expenses of the issue.
   
• First Overseas Capital Ltd will be the lead manager to the issue and Bigshare Services Private Ltd will be the registrar to the issue. The market maker for the issue is BHH Securities Ltd.

IPO allocation and minimum lot size for investment

The company has allocated 5.76% of the issue size for the market makers to the issue, BHH Securities Ltd. The net offer (net of market maker allocation) will be divided equally between the retail investors and the non-retail investors, comprising predominantly of the HNI / NII investors. The breakdown of the overall IPO of On Door Concepts Ltd in terms of the allocation to various categories are captured in the table below.

The minimum lot size for the IPO investment will be 600 shares. Thus, retail investors can invest a minimum of ₹124,800 (600 x ₹208 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 ₹249,600. 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 On Door Concepts IPO (SME)

The SME IPO of On Door Concepts Ltd opens on Monday, October 23rd, 2023 and closes on Friday, October 27th, 2023. The On Door Concepts Ltd bid date is from October 23rd, 2023 10.00 AM to October 27th, 2023 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is October 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 On Door Concepts Ltd

The table below captures the key financials of On Door Concepts Ltd for the last 3 completed financial years.

Data Source: Company DRHP filed with SEBI

Here are some of the key takeaways from the financials of the company for the last 3 years.

• Let us start with the revenues. Over the last 2 years, the revenues have actually been flat, with the growth being neutralized. However, despite loses in the last 2 years, the net margins in the current year are fairly impressive at 7.25% for retail business.
   
• Apart from the net margins, the other profitability ratios of ROE and ROA have also been attractive in the latest year. However, the company had losses and negative net worth in the previous two years, so they are not exactly comparable with previous years.
   
• Being a capital light business, the asset turnover ratio or the asset sweating ratio has been above 2 on a consistent basis. This may not be too representative as here the expenses ratio would matter more than the asset turnover ratio.

The company has latest year EPS of ₹56.77 and weighted average EPS for the last 3 years is not really relevant here. This makes the company valuation at about 4 times based on past earnings, so on future earnings, it should be more attractive. The company has also done a pre-IPO placement at a price of ₹259 per share, which is at a premium to the current IPO price. Investors can look at the IPO, but with a higher risk appetite and from a longer term delivery perspective.