Prostram Info Systems
IPO Size: Rs. 168 cr, Entirely Fresh Issue
- For working capital Rs. 72.50 cr
- Debt repayment Rs. 18 cr, of Rs. 59 cr net debt
- Unidentified M&A and general corporate purpose
Price band: Rs. 95-105 per share
M cap: Rs. 618 cr, implying 27% dilution
IPO Date: Tue 27th May to Thu 29th May 2025, Listing Tue 3rd Jun 2025
Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.
Power Solution Products Company
Prostram Info Systems operates into 3 business divisions:
- Manufacturing (30% of 9mFY25 revenue of Rs. 269 cr): UPS (inverter) system, servo voltage controlled stabilizer (SCVS), isolation transformers, solar hybrid inverter systems manufactured at 3 plants in Pune and Navi Mumbai, Maharashtra. However, capacity utilisation is less than 50%.
- Trading (64% of revenue): Batteries, reverse logistics for end-of-life products, solar panels
- Solar EPC (6% of revenue): rooftop solar power projects undertaken on EPC basis
It has a pan-India network of 478 dealers and distributors, contributing to 1/4th revenue. Of 700 customers, top 10 contribute to 70% revenue, with largest accounting for 35%, highlighting huge concentration risk, especially for a small business like Prostram’s.
Working Capital Intensive Business
As 46% revenue is generated from Government institutions, working capital position is quite stretched, with inventory and debtors being ~6 month of turnover.
IPO is being undertaken mainly to fund working capital and unidentified M&A is mere structuring for IPO.
Healthy Margins
Despite 64% revenue being generated from third-party power solutions products, on FY24 revenue of Rs. 258 cr, margins were very healthy at 30% gross, 14% EBITDA and 9% net.
9MFY25 revenue growth was healthy, surpassing last year topline, at Rs. 269 cr, with strong margins maintained. On Rs. 22 cr PAT, EPS stood at Rs. 5.2 for 9MFY25, as against FY24 EPS of Rs. 5.4.
On net worth of Rs. 107 cr, 9MFY25 non-annualised RoE stood at 24%, which is likely to contract to 14-15% going forward, post dilution via IPO. Net debt to equity will also contract from 0.55:1 to 0.15:1.
Nano-Cap Stock
9MFY25 annualised EPS leads to a PE multiple of 14x, which is not seen expensive for high single digit margin and power sector tailwinds. However, small operations with concentrated revenue generation makes it risky for portfolio holding.
27th May 2025 at 05:39 pm