ROX Hi-Tech Ltd. (RHL) IPO Review: Apply or Not?

ROX Hi-Tech Ltd. (RHL) is set to make its debut in the stock market with an initial public offering (IPO) that has caught the attention of investors. RHL is not just another IT company; it stands out as a customer-centric IT solutions provider with a rich history spanning over 22 years in the industry. In this blog, we’ll delve into RHL’s unique positioning, financial performance, and other key aspects that potential investors should consider when evaluating this IPO.

Also Read: ROX Hi-Tech Limited IPO Details

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About ROX Hi-Tech Ltd.

RHL is more than just a run-of-the-mill IT firm; it is a company that’s committed to excellence. Over the years, it has evolved from being an IBM Business Partner to becoming a significant player in the IT sector. What sets RHL apart is its comprehensive range of distributed IT solutions, which includes consulting, enterprise and end-user computing, managed print, and network services. The company is in the business of providing end-to-end IT solutions, and its offerings are diverse, including Digital Transformation Solutions (such as software services, AI, RPA, and ML), Network and Collaboration, IT and OT Security, Data Center Solutions (both on-premises and in the cloud), IoT, SMART, and MEDIA solutions, as well as Smart Edge Devices.

Also See: ROX Hi-Tech IPO GMP

Furthermore, RHL is empaneled as a preferred partner with giants like SAP, Cisco, IBM, Google, and Lenovo, which speaks volumes about the company’s reputation and the trust these industry leaders place in its capabilities.

One of RHL’s key strengths is its scalability. The company can adapt to changing market demands, thanks to the countless digital possibilities that the online world offers. RHL is involved in designing, developing, deploying, and maintaining IT solutions for various industries, and its clientele includes well-known names like CAMS, Vestas, BHEL, Murugappa Group, Nippon Paints, L&T, Trivitron, and more. As of July 31, 2023, RHL had 110 employees on its payroll.

Also See: IPO Subscription Status Live Today

Issue Details and Capital History

RHL’s IPO comprises a total of 6,564,800 shares with a total worth of Rs. 54.49 crores at the upper price cap. This offering consists of 6,017,600 fresh equity shares (valued at Rs. 49.95 crores) and an Offer for Sale (OFS) of 547,200 shares (valued at Rs. 4.54 crores) at a price band of Rs. 80 to Rs. 83 per share, each with a face value of Rs. 10. The subscription period for the IPO opens on November 7, 2023, and closes on November 9, 2023. The minimum application for this IPO is 1,600 shares, and subsequent multiples.

From the net proceeds of the fresh equity shares issue, RHL plans to allocate Rs. 22.01 crores for capital expenditure, Rs. 15.00 crores for working capital, and the rest for general corporate purposes. Swaraj Shares & Securities Pvt. Ltd. is the sole lead manager for the IPO, and Purva Sharegistry India Pvt. Ltd. is the registrar. Share India Securities Ltd. is the market maker for the company.

Notably, RHL has issued its entire equity shares at par value and issued bonus shares at various ratios in the past. Post-IPO, the company’s current paid-up equity capital of Rs. 16.82 crores will increase to Rs. 22.83 crores. Based on the upper price band of the IPO, the company will aim for a market cap of Rs. 189.52 crores.

Also See: All IPO GMP Today

Financial Performance

RHL has demonstrated steady growth in its top-line revenue over the years, but the most significant boost in its bottom line began in FY23. To give you a snapshot of its financial performance, here are the figures for the last three fiscal years:

  • FY21: Total Revenue – Rs. 65.48 crores, Net Profit – Rs. 0.66 crores
  • FY22: Total Revenue – Rs. 102.97 crores, Net Profit – Rs. 1.51 crores
  • FY23: Total Revenue – Rs. 133.99 crores, Net Profit – Rs. 15.33 crores

Furthermore, for the first four months of FY24, ending on July 31, 2023, RHL reported a net profit of Rs. 6.76 crores on a total revenue of Rs. 50.01 crores.

The average Earnings Per Share (EPS) for the last three fiscal years stood at Rs. 4.92, with an average Return on Net Worth (RoNW) of 38.97%. The issue is priced at a Price-to-Book Value (P/BV) of 4.52 based on its Net Asset Value (NAV) of Rs. 18.38 as of July 31, 2023, and a P/BV of 2.34 based on its post-IPO NAV of Rs. 35.41 per share (at the upper price band).

Also See: ROX Hi-Tech Financial Performance Graph

When attributing annualized FY24 earnings to post-IPO fully diluted paid-up equity capital, the asking price results in a Price-to-Earnings (P/E) ratio of 9.35. Thus, the issue appears to be reasonably priced based on these metrics.

Dividend Policy

RHL has not declared any dividends since its incorporation. However, it intends to adopt a prudent dividend policy that will be based on its financial performance and future prospects. This gives the company the flexibility to focus on its growth and expansion in the near term.

Comparison with Listed Peers

The offer document compares RHL with Dynacons Systems, a listed peer in the industry. As of November 2, 2023, Dynacons Systems was trading at a Price-to-Earnings (P/E) ratio of 19.22. However, it’s essential to note that comparing RHL and Dynacons Systems may not be entirely accurate since they might have differing business models and financial performance. Investors should exercise caution when drawing comparisons between these companies.

Merchant Banker’s Track Record

The IPO is being handled by Swaraj Shares & Securities Pvt. Ltd., and it’s noteworthy that this is the fifth mandate from the merchant banker in the current fiscal year. While one SME IPO of Shoora Designs opened at a premium of 90% on the day of listing, two IPOs mentioned in the offer document are yet to hit the market. It’s important for investors to consider this information cautiously, as it could be a marketing tactic rather than a concrete track record.

In conclusion, ROX Hi-Tech Ltd.’s IPO presents an intriguing opportunity for investors to partake in the growth of a customer-centric IT solutions provider with a promising track record. While the sudden boost in the company’s bottom line in the past 16 months might raise some concerns, the reasonably priced issue and the potential for medium to long-term rewards make it an option worth exploring for those interested in the IT sector. As with any investment decision, it’s advisable to conduct thorough research, consult with financial experts, and consider your investment goals before participating in

ROX Hi-Tech IPO Apply or Not ?

The ROX Hi-Tech IPO is a good investment opportunity for investors who are looking for exposure to the growing oil and gas, power, and infrastructure sectors. The company has a strong track record of growth and profitability, and it is expected to continue to grow in the coming years. However, investors should be aware of the risks associated with investing in a small-cap company, such as reliance on a few key customers and exposure to fluctuations in commodity prices.

Overall, the ROX Hi-Tech IPO is a good investment opportunity for high-risk investors who have a long-term investment horizon.

Please note that this is not a recommendation to buy or sell securities. Please consult with a financial advisor before making any investment decisions.

Disclaimer: This review is not a recommendation to buy or sell securities. The information provided is for informational purposes only, and investors should make their own decisions based on their financial goals and risk tolerance.

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