What you must know about Slone Infosystems IPO?

Slone Infosystems Ltd was incorporated in 1999 and has emerged as a premier destination for IT hardware solutions. The company offers hardware, hardware selectin guidance, software support and maintenance. On the hardware front, Slone Infosystems Ltd offers cutting edge hardware selection across an extensive range of hardware options of marquee brands like HP, Lenovo, Dell, and others. In addition, Slone Infosystems Ltd also offers tailored business IT solutions that personalize the experience for your business. In addition, Slone Infosystems Ltd also helps the process of continuous business evolution through constant upgrades. In short, Slone Infosystems Ltd is able to provide the complete gamut of IT hardware, software, and maintenance solutions for customers. The clients can shop for IT hard ware products, get the benefit of seamless server installation, enable add-on services like laptop rentals and maintenance as well as get reliable server maintenance.

In terms of specific products, Slone Infosystems Ltd offers desktops, laptops, servers, switches, CCTV, SAN storage, workstations, CCTV cables, computer peripherals and other support software services. The company brings to the table an experience stack of 24 years, more than 50 delighted clients, and a round-the-clock customer support. Apart from offering a diverse product range, the company also brings to the table a trusted dealer network, a pedigree of service and pan-India presence. In the last few years, Slone Infosystems Ltd has emerged as a favoured IT solutions partner for customers looking to upgrade IT infrastructure, or looking for technical support or even tailor made solutions on the hardware, software, and server side, apart from regular maintenance offerings.

Key terms of the Slone Infosystems IPO

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

• The issue opens for subscription on 03rd May 2024 and closes for subscription on 07th May 2024; both days inclusive.
   
• The stock of the company has a face value of ₹10 per share and it is a fixed price issue. The price for the fixed price issue is set at ₹79 per share. Being a fixed price issue, there is no question of price discover in this case.
   
• The IPO of Slone Infosystems Ltd has only a fresh issue component and 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, Slone Infosystems Ltd will issue a total of 14,00,000 shares (14.00 lakh shares), which at the fixed IPO price of ₹79 per share aggregates to fresh fund raising of ₹11.06 crore.
   
• Since there is no offer for sale (OFS) portion, the fresh issue size will also double up as the overall IPO size. Therefore, the overall IPO size will also comprise of the issue of 14,00,000 shares (14.00 lakh shares) which at the fixed IPO price of ₹79 per share will aggregate to overall IPO size of ₹11.06 crore.
   
• Like every SME IPO, this issue also has a market making portion with a market maker inventory allocation of 70,400 shares. Aftertrade Share Broking Private Ltd will be the market maker to the issue. The market maker provides two-way quotes to ensure liquidity on the counter and low basis costs, post listing.
   
• The company has been promoted by Rajesh Srichand Khanna, Manisha Rajesh Khanna, and Mohit Rajesh Khanna. The promoter holding in the company currently stands at 99.43%. However, post the fresh issue of shares in the IPO, the promoter equity holding share will get diluted to 73.01%.
   
• The fresh issue funds will be used by the company towards capex for purchase of laptops, desktops, SSD and RAM. The funds would also be applied for repayment / prepayment of high cost loans in the books of the company.
   
• Jawa Capital Services Private Ltd will be the lead manager to the issue, and KFIN Technologies Ltd will be the registrar to the issue. The market maker for the issue is Aftertrade Share Broking Private Ltd.

IPO allocation and minimum lot size for investment

Slone Infosystems Ltd has already announced the market maker allocation at 70,400 shares as inventory for market making. Aftertrade Share Broking Private Ltd will be the market maker for the IPO. The net offer (net of market maker allocation) will be divided between the retail investors and the HNI / NII investors. The breakdown of the overall IPO of Slone Infosystems Ltd in terms of allocation to various categories are captured in the table below.

The minimum lot size for the IPO investment will be 1,600 shares. Thus, retail investors can invest a minimum of ₹126,400 (1,600 x ₹79 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 3,200 shares and having a minimum lot value of ₹252,800. 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 Slone Infosystems IPO

The SME IPO of Slone Infosystems IPO opens on Friday, 03rd May 2024 and closes on Tuesday, 07th May 2024. The Slone Infosystems Ltd IPO bid date is from 03rd May 2024 at 10.00 AM to 07th May 2024 at 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is 07th May 2024.

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. The credit of shares to the demat account on May 09th 2024, will be visible to investors under the ISIN Code – (INE0SMA01017).

Financial highlights of Slone Infosystems Ltd

The table below captures the key financials of Slone Infosystems 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.

• The revenues have grown at a steady p[ace in the last 2 years and in the latest year, the total sales has actually tripled over FY21. That is robust growth in top line over the last two years. That has been accompanied by a proportionate growth in net profits too.
   
• While net margins of the company have been relatively volatile, they have stabilized in the latest year. PAT margins at 2.47% is still low, but that is the nature of the margins you can expect in the retail business. The return on equity (ROE) has grown sharply to over 35% in the latest year, although this will get diluted post the IPO.
   
• The asset turnover ratio or the sweating ratio has been above 2.50 and that is a good sign that sales have picked up to cover the asset outlays. More so, considering that this is a business where a lot of capital outlays happen upfront. OPMs  would be more useful in terms of its analytical value.

The company has latest year EPS of ₹4.05 and we have not included the weighted  average EPS, since the previous year data is not exactly comparable. The latest year earnings are being discounted by the IPO price at 19-20 times P/E ratio. One has to look at the P/E ratio from two perspectives. Firstly, the 9-months EPS for FY24 is much higher at ₹13.58, which makes the valuations look a lot more reasonable if the EPS is annualized and extrapolated. However, the real big news for the investors is that the story becomes a lot more enticing once the economies of scale start to reflect on the bottom line numbers. That is likely to take some time, but this is an area that is worth betting on for the next 10-15 years, as this entire business goes through transition into a more organized sort of business model. Investors with a higher risk appetite and a longer time frame can surely look at this IPO. One must look at a time frame of around 1 year for this IPO to yield returns.