News Analysis

Jonjua Overseas coming with an IPO to raise Rs 1.30 crore

Updated on 11 February 2019 04:52 PM

Jonjua Overseas

  • Jonjua Overseas is coming out with an initial public offering (IPO) of 13,00,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 10 per equity share.
  • The issue will open on February 12, 2019 and will close on February 15, 2019.
  • The shares will be listed on SME Platform of BSE.
  • The share is priced 1 times of its face value of Rs 10.
  • Book running lead manager to the issue is Finshore Management Services.
  • Compliance Officer for the issue is Aman Priya.

Profile of the company

The Company was originally incorporated as Jonjua Overseas Private Limited on February 16, 1993 under the provisions of the Companies Act, 1956 with the Registrar of Companies, Punjab, Himachal and Chandigarh. Subsequently, the Company was converted from Private Limited to Public Company and a fresh certificate of incorporation consequent upon Conversion from Private Limited Company to Public Limited Company was issued on January 02, 2018 by the Registrar of Companies, Chandigarh.

The Company is engaged in IT enabled services and are certified service providers to its global clients of IT Solution & Business Services which includes Startup consultancy, Outsourcing Services that includes Import and Export Consultancy, International Project Finance and IPO, Legal and Accounts Outsourcing, Digital Solutions includes Website and Software Development and Cross Border Marketing, Brand Building and Business Plan service provider to its clients. With the right balance of technical expertise and vast industry knowledge it strives to create customer satisfaction considering the nature of work with an innovative approach maintaining integrity and confidentiality of the business. Currently, it is mainly engaged in Outsourcing Services of overseas clients primarily located in North America and Africa.

Proceed is being used to:

  • Meet working capital requirement;
  • Meet the Issue Expenses; and
  • Meet General corporate purpose.

Industry Overview

India is the world's largest sourcing destination for the Information Technology (IT) industry, accounting for approximately 67 percent of the $124-130 billion market. The IT industry has more than 16,000 firms; of which 1,000 plus are large firms with 50 delivery locations in India. The $167 billion Indian IT industry employs nearly four million people. India ranks third among global start-up ecosystems with more than 5,300 start-ups. Indian IT and BPM industry is expected to grow to $350 billion by 2025. BPM segment had around 19.2 percent share in Indian IT sector revenues in FY18.

More importantly, the industry has led the economic transformation of the country and altered the perception of India in the global economy. India's cost competitiveness in providing IT services, which is approximately 3-4 times cheaper than the US, continues to be the mainstay of its Unique Selling Proposition (USP) in the global sourcing market. However, India is also gaining prominence in terms of intellectual capital with several global IT firms setting up their innovation centers in India. The IT industry has also created significant demand in the Indian education sector, especially for engineering and computer science. The Indian IT and ITES industry is divided into four major segments -- IT services, Business Process Management (BPM), Software Products and Engineering services, and Hardware. The sector is also expected triple its current annual revenue to reach $350 billion by FY 2025. India ranks third among global start-up ecosystems with more than 4,200 start-ups. India’s internet economy is expected to touch Rs 10 trillion ($146.72 billion) by 2018, accounting for 5 percent of the country’s GDP.

Increased penetration of internet (including in rural areas) and rapid emergence of e-commerce are the main drivers for continued growth of data centre co-location and hosting market in India. The Indian Healthcare Information Technology (IT) market is valued at $1 billion currently and is expected to grow 1.5 times by 2020. India's business to business (B2B) e-commerce market is expected to reach $700 billion by 2020 whereas the business to consumer (B2C) e-commerce market is expected to reach $102 billion by 2020.

Pros and strengths

Experienced Promoters: The Company is benefited from the vision, strategic guidance, experience, skills and relationships of Promoters and CFO, who have vast experience in this industry. The Company is managed by a team of experienced personnel. Its management experience and their understanding of its industry will enable it to continue to take advantage of both current and future market opportunities. Its Management’s experience and knowledge enables it in addressing and mitigating various risks inherent in its business, including competition, the global economic crisis related effects and fluctuations in the prices.

Cordial relationship with Clients: The Company has strong and established relationships with its customers. Majority of its clients have been associated with it for more than 5 years and these long-term relationships have enabled it to understand and cater to diverse requirements of the clients.

Extensive range of Service Issuing: The Company has developed an extensive range of service issuing in order to address the varied and expanding requirements of its clients. Its comprehensive range of Issuing helps its clients achieve their business objectives and enable it to obtain additional business from existing clients as well as address a larger base of potential new clients.

Risks and concerns

Faces significant competition: The Company’s industry is highly competitive and its results of operations and financial conditions are sensitive to, and may be materially and adversely affected by competitive pricing and other factors. Competition may result in pricing pressures, reduced profit margins or lost market share or a failure to grow its market share, any of which could substantially harm its business and results of operations. Competition in its industry is significant. It operates in highly competitive and fragmented markets, and competition in these markets is based primarily on market trends and customer preferences. It competes directly against other companies with substantial market share, established companies in the outsourcing field, as well as against domestic, regional competitors and local unorganised players. Many of its competitors are large outsourcing companies with strong brand recognition. It competes primarily on the basis of price range, brand image, performance and quality. In order to compete effectively, it must continue to maintain its brand image and reputation, be flexible and innovative in responding to rapidly changing market demands and offer clients services at affordable prices. Further, foreign investment in the ITeS business has been liberalized, and it could be adversely affected by new entrants or foreign investment in existing competitors, which would enhance their economic condition. Some of its competitors may be larger than the Company in terms of business volume. In addition, its competitors that are smaller specialized companies may compete effectively against the Company based on price and their concentrated size and focus.

High working capital requirements: The Company’s business requires significant amount of working capital and major portion of its working capital is utilized towards debtors and other expenses. It has been sanctioned a working capital limit of Rs 5 lakhs and the other working capital requirements have been met through the internal sources only. Its inability to maintain sufficient cash flow, credit facility and other sourcing of funding, in a timely manner, or at all, to meet the requirement of working capital or pay out debts, could adversely affect its financial condition and result of its operations.

Outlook

Jonjua Overseas is engaged in IT enabled services and are certified service providers to its global clients of IT Solution & Business Services which includes Startup consultancy, Outsourcing Services that includes Import and Export Consultancy, International Project Finance and IPO, Legal and Accounts Outsourcing, Digital Solutions includes Website and Software Development and Cross Border Marketing, Brand Building and Business Plan service provider to its clients. With the right balance of technical expertise and vast industry knowledge it strives to create customer satisfaction considering the nature of work with an innovative approach maintaining integrity and confidentiality of the business. Currently, it is mainly engaged in Outsourcing Services of overseas clients primarily located in North America and Africa. The Company has established itself as a reliable brand from Punjab serving the global market wherein its clients trust the Company for its quality, consistency and continuous performance. On the concern side, the Company had negative cash flows from its operating activities, investing activities as well as financing activities in some of the previous year(s). Sustained negative cash flow could impact its growth and business in the future. Further, insufficient cash flows to meet required working capital requirements could adversely affect its Company’s operations and financial results.

The company is coming out with a maiden IPO of 13,00,000 equity shares of Rs 10 each at a fixed price of Rs 10 per share to mobilize Rs 1.30 crore. On the performance front, the Company’s total revenue from the period 01-04-2018 to 30.09.2018 is Rs. 48.61 Lakhs, while Profit before Tax for these 6 months is Rs 6.35 Lakhs on a total turnover of Rs 48.76 lakhs. The Company reported Restated profit after tax for the FY 2018 of Rs 3.19 Lakhs in comparison to Restated profit after tax Rs 2.06 Lakhs in FY2017 representing increase of 54.45%.

There are significant opportunities for additional growth within its existing client base and to enter into the local business. Further given the knowledge-oriented nature of its business which is sold through it that are able to deliver without compromising on the quality of products or incurring significant capital expenditure. It intends to leverage its knowledge expertise, understanding of its target industry and close relationship with its clients to expand the scope of current services as well as provide services in new areas and businesses. It will continue to build its account management teams working within client organizations, to deepen relationships with its clients and to identify new business opportunities.

(Financials in Rs Million)

ParticularsMar 2018Mar 2017Mar 2016Mar 2015Mar 2014
Net Sales6.33 3.61 3.14 2.36 1.55 
Total Income6.56 3.73 3.17 2.38 1.57 
PBIDT1.53 1.14 1.00 0.45 0.08 
PBT0.51 0.21 0.17 0.01 0.00 
PAT0.32 0.21 0.14 0.00 0.00 
Reserves and Surplus32.16 31.31 29.99 -0.12 -0.12 
Net Worth46.12 37.07 31.81 0.08 0.08 
Total Debt0.99 0.97 1.29 0.42 0.38 
ROCE1.51 1.12 2.35 10.26 5.58 
RONW0.77 0.60 0.86 5.46 -1.45 
PATM(%)5.04 5.72 4.39 0.19 -0.07 
CPM(%)19.04 26.21 23.68 17.13 3.13 
CEPS0.09 0.16 0.41 2.03 0.24 
Enterprise Value11.29 4.95 2.03 0.24 0.40