What you must know about Transteel Seating Technologies IPO?

Transteel Seating Technologies Ltd  was incorporated in February 1995 and has, over the years, developed deep insights and expertise into corporate and B2B furniture solutions. Its manufacturing unit is located in Yeshwantpur, near Bengaluru. The customer has, apart from its offline presence, focused on an omnichannel experience for the customer. The customer journey from the moment they visit the website till the time the furniture is delivered, is largely seamless. Over the years, Transteel Seating Technologies Ltd has built expertise in this side of the business based on its experienced management team with deep domain expertise, strong sales / distribution channels across all Indian states as well as its avowed policy of offering affordable furniture with the principle of value for money.

Transteel Seating Technologies Ltd  had embraced a digital-first approach in 2019, revolutionizing customer engagement in a big way. The company has already served more than 80,000 customers and expanded across seven cities in India. The online experience of the company offers a seamless selection of furniture to transform office spaces according to corporate and B2B requirements, style, and budget. Transteel has emerged as a niche player in the industry with its scale and focus on quality. It has office furniture tailored for corporate offices, SMEs, educational institutions, government workspaces, professional services, and healthcare. Some of its marquee projects accomplished include French Build Mart, Gurugram, JGC Chennai, Telangana Secretariat, Viva Gurugram, Smartwork Bengaluru, etc.

Key terms of the SME IPO of Transteel Seating Technologies Ltd

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

• The issue opens for subscription on 30th October 2023 and closes for subscription on 01st November 2023; both days inclusive.
   
• The company has a face value of ₹10 per share and it is a book built issue. The issue price band for the IPO has been fixed in the range of ₹67 to ₹70 per share. Being a book building issue, the IPO price will be discovered after the book is built.
   
• The IPO of Transteel Seating Technologies Ltd has a fresh issue component as well as an offer for sale (OFS) component. 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, Transteel Seating Technologies Ltd will issue a total of 67,84,000 shares (67.84 lakhs), which at the upper band IPO price of ₹70 per share aggregates to a fresh fund raising of ₹47.49 crore.
   
• As part of the offer for sale (OFS) portion of the IPO, there will be a total sale of 3,56,000 shares (3.56 lakhs), which at the upper band IPO price of ₹70 per share aggregates to a total OFS size of ₹2.49 crore. The entire 3.56 lakh shares are being offered by promoter shareholder, Nasreen Shiraz.
   
• As a result, the total size of the IPO of Transteel Seating Technologies Ltd will entail the issue and sale of 71,40,000 shares (71.40 lakhs), which at the upper band IPO price of ₹70 per share aggregates to total IPO size of ₹49.98 crore.
   
• Like every SME IPO, this issue also has a market making portion with a market maker portion allocation of 7,14,000 shares. The market maker for the issue is Gretex Share Broking 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 Shiraz Ibrahima and Nasreen Shiraz. The promoter holding in the company currently stands at 83.75%. However, post the fresh issue of shares and the OFS, the promoter equity holding share will reduce to 53.83%.
   
• The fresh issue funds will be used by the company for purchase of manufacturing equipment, repayment / prepayment of loans, working capital needs and for general corporate purposes.
   
• Gretex Corporate Services Ltd and Pantomath Capital Advisors Private Ltd will be the lead managers to the issue and Bigshare Services Private Ltd will be the registrar to the issue. The market maker for the issue is Gretex Share Broking Ltd.

IPO allocation and minimum lot size for investment

The company has allocated 10.00% of the issue size for the market makers to the issue, Gretex Share Broking Ltd. The net offer (net of market maker allocation) will be divided between the QIBs, the retail investors and the HNI / NII investors. The breakdown of the overall IPO of Transteel Seating Technologies 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 2,000 shares. Thus, retail investors can invest a minimum of ₹140,000 (2,000 x ₹70 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 4,000 shares and having a minimum lot value of ₹280,000. 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 Transteel Seating Technologies Ltd IPO (SME)

The SME IPO of Transteel Seating Technologies IPO opens on Monday, October 31st, 2023 and closes on Wednesday, November 01st, 2023. The Transteel Seating Technologies Ltd IPO bid date is from October 31st, 2023 10.00 AM to November 01st, 2023 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is November 01st, 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 Transteel Seating Technologies Ltd

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

Data Source: Company RHP filed with SEBI

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

• Sales growth and profit growth have picked up momentum only in the latest year, so a few more quarters would be essential to see if this can really survive. However, the business model of B2B furniture is surely interesting.
   
• The net margins are above 10% in the latest year but rather erratic in the previous year. However, that should stabilize and plus the company has the added advantage of have very positive growth in the ROE in the last 2 years.
   
• Due to being a capital intensive and inventory intensive business, the asset turnover ratio or the asset sweating ratio has been relatively low around the 0.70 mark. That could raise concerns when it comes to sustaining valuations at a future date.

With a latest year EPS of ₹6.80 per share and weighted average EPS of 3 years of ₹3.80, the IPO valuation looks to be between 10 times and 15 times earnings, depending on which EPS measure you use. That is not too high for the segment, especially as it proposes to scale up through a scalable omnichannel model. A lot will depend on how it fends off competition from the large institutional business models with deeper pockets. That will be the challenge.