What you must know about Maxposure IPO?

Maxposure IPO was incorporated in the year 2017 to provide personalized media and entertainment services across various platforms. The core competencies of Maxposure Ltd include in-flight entertainment, content marketing, technology, and advertising. The company runs a full-fledged and fully equipped modern specialize media house. The range of services offered by Maxposure Ltd include custom editing, metadata creation, duplication, audio enhancement, encoding/transcoding in any format for any system. In addition, Maxposure Ltd also offers post-production services. Its four main verticals include in-flight entertainment, content marketing, technology, and advertising. The company has a wide sales network across India and has established offices in Delhi, Mumbai, Bengaluru, and Kolkata.

For its in-flight entertainment business, the company offers its services to global players like the Gulf Air (Kingdom of Bahrain), Air Arabia (Sharjah), VFS (UAE), Jazeera Airways (Kuwait), among others. Maxposure Ltd earns about 85% of its revenues from the domestic market while anywhere between 10% to 15% of revenues come from abroad. The company currently has 81 employees on its payroll as of October 31, 2023. The media and MARTECH business are about the increase usage of technology to drive media, especially in the area of leveraging content to get marketing bytes.

Key terms of the Maxposure IPO

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

• The issue opens for subscription on 15th January 2024 and closes for subscription on 17th January 2024; both days inclusive.
   
• The company has a face value of ₹10 per share and it is a book built issue. The price band for the book built issue has been set in the range of ₹31 to ₹33 per share. The final price of the IPO will be decided by book building within this price band.
   
• Maxposure IPO 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, Maxposure Ltd will issue a total of 61,40,000 shares (61.40 lakh shares), which at the upper band of the book building band of ₹33 per share aggregates to fresh fund raising of ₹20.26 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 61,40,000 shares (61.40 lakh shares) which at the upper IPO band price of ₹33 per share will aggregate to overall IPO size of ₹20.26 crore.
   
• Like every SME IPO, this issue also has a market making portion with a market maker inventory allocation of 3,72,000 shares. Giriraj Stock 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 Prakash Johari and Sweta Johari. The promoter holding in the company currently stands at 84.35%. However, post the fresh issue of shares in the IPO, the promoter equity holding share will get diluted to 61.58%.
   
• The fresh issue funds will be used by the company for securing necessary licenses and approvals from the Federal aviation authorities in the US and Europe for wireless streaming hub. Part of the monies raised will also go towards repayment of loans and funding of working capital gaps.
   
• GYR Capital Advisors Private 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 Giriraj Stock Broking Private Ltd.

IPO allocation and minimum lot size for investment

Maxposure Ltd has already announced the market maker allocation at 3,72,000 shares as inventory for market making. Giriraj Stock Broking Private Ltd will be the market maker for the IPO. The net offer (net of market maker allocation) will be divided between the QIB investors, retail investors and the HNI / NII investors. The breakdown of the overall IPO of Maxposure 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 4,000 shares. Thus, retail investors can invest a minimum of ₹132,000 (4,000 x ₹33 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 8,000 shares and having a minimum lot value of ₹264,000. 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 Maxposure IPO (SME)

Maxposure IPO opens on Monday, 15th January 2024 and closes on Wednesday, 17th January 2024. The Maxposure Ltd IPO bid date is from 15th January 2024 at 10.00 AM to 17th January 2024 at 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is 17th January 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 January 19th 2024, will be visible to investors under the ISIN Code – (INE0ECC01022).

Financial highlights of Maxposure Ltd

The table below captures the key financials of Maxposure 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 about 50% in the last 2 years, but the latest year growth is flat. Hence CAGR growth over two years is still quite tepid. Also, the PAT margins have improved to above 13% only in the latest year, with the PAT margins being around 1% in the last two years. Hence numbers may not be strictly comparable in this case.
   
• While the company has reported robust net margins, ROE and return on assets in the latest year, the numbers in the previous years are fairly tepid. Hence, only the latest year can be really considered for taking any view on valuations.
   
• The asset turnover ratio or the sweating ratio has been subdued and the hope is that as the sales pick up in the next two years, the sweating ration should also pick up accordingly. Due to the robust ROA in lates year, low sweating may not be a concern.

The company has latest year EPS of ₹1.33 and previous data may not really be comparable. Either ways, the valuations look reasonable if you consider latest year EPS at 24 times P/E discounting. The discounting may be slightly unfavourable on average P/E but that does not matter. What matters is the intangibles that the company like promoters with skin in the game and long standing relationships with the customers. Apart from a high growth and high potential market, the company has also built up a scalable model. Investors can look at this IPO from a longer term perspective.