A quick overview of Primech Holdings Ltd.

Primech Holdings Ltd. (PMEC) has applied to raise an undisclosed amount in an IPO of its common stock, according to an F-1 registration statement.

The company provides facilities cleaning and maintenance services in Singapore and Malaysia and wishes to develop in other businesses.

Often, Asian companies seek to diversify their revenue streams and end up operating independent businesses, producing sub-par results due to a lack of specialization.

When we know more about management’s IPO, I will give a final opinion.

Company

Singapore-based Primech was founded to provide a range of janitorial services and supplies primarily in Singapore, with a small operation in Malaysia.

Management is headed by Managing Director, Mr. Khazid bin Omar, who has been with the company since April 2018 and was previously the Housekeeping Manager at Fairmont Hotel Singapore, a global luxury hotel chain.

Primech has recorded an investment at fair market value of $13 million as of September 30, 2021 from investors including Sapphire Universe and various individuals.

Primech – Customer Acquisition

The company seeks clients in the categories of owners and operators of private and public facilities, with private facilities including office buildings, kitchen operators in healthcare, hotels and restaurants and residences. private.

87% of the company’s revenue in the most recent reporting period came from general cleaning and maintenance of public common areas.

Sales and marketing expenses as a percentage of total revenue have increased as revenue has increased, as shown in the figures below:

Sales and Marketing	Expenses vs Income
Period	Percentage
Six months. Completed September 30, 2021	0.8%
FY March 31, 2021	0.6%
FY March 31, 2020	0.2%

(Source)

The sales and marketing effectiveness multiple, defined as the number of incremental new revenue dollars generated by each dollar spent in sales and marketing, increased sharply to 16.0x over the last reporting period, as shown in the table below:

Sales and Marketing	Efficiency rate
Period	Many
Six months. Completed September 30, 2021	16.0
FY March 31, 2021	1.2

(Source)

Primech Market and Competition

According to a 2021 market research report by Allied Market Research, the global cleaning services market was estimated at $55.7 billion in 2020 and is expected to reach $111.5 billion by 2030.

This represents a projected CAGR of 6.5% from 2021 to 2030.

Singapore represents a small fraction of the global market.

The main drivers of this expected growth are a growing awareness of the need for hygiene in the workplace and in public places following the global pandemic.

Additionally, the Asia-Pacific region is expected to grow at the fastest CAGR of all regions at 7.4% through 2030.

Major competitors or other industry participants include:

• ISS Group

• 800 super assets

• Weishen Industrial Services

• Chye Thiam Maintenance Pte Ltd

• Hygieia Group Limited

• Ramky Cleantech Services Pte Ltd.

Financial performance of Primech Holdings Ltd.

The company’s recent financial results can be summarized as follows:

• Revenue growth

• Uneven gross profit and gross margin

• Variable operating profit

• Increase in cash flow from operations

Below are the relevant financial results from the company’s registration statement:

Total revenue
Period	Total revenue	% deviation from before
Six months. Completed September 30, 2021	$26,239,084	15.6%
FY March 31, 2021	$48,088,088	0.7%
FY March 31, 2020	$47,775,187
Gross profit (loss)
Period	Gross profit (loss)	% deviation from before
Six months. Completed September 30, 2021	$5,566,377	-25.5%
FY March 31, 2021	$12,419,177	122.8%
FY March 31, 2020	$5,573,626
Gross margin
Period	Gross margin
Six months. Completed September 30, 2021	21.21%
FY March 31, 2021	25.83%
FY March 31, 2020	11.67%
Operating profit (loss)
Period	Operating profit (loss)	Operating margin
Six months. Completed September 30, 2021	$589,931	2.2%
FY March 31, 2021	$5,784,891	12.0%
FY March 31, 2020	$730,337	1.5%
Net profit (net loss)
Period	Net profit (net loss)	The net margin
Six months. Completed September 30, 2021	$405,312	1.5%
FY March 31, 2021	$5,363,055	20.4%
FY March 31, 2020	$309,763	1.2%
Operating cash flow
Period	Operating cash flow
Six months. Completed September 30, 2021	$2,039,965
FY March 31, 2021	$3,623,642
FY March 31, 2020	$2,486,792
(Glossary of terms)

(Source)

As of September 30, 2021, Primech had $4.3 million in cash and $23.0 million in total liabilities.

Free cash flow during the twelve months ended September 30, 2021 was negative ($709,538).

Primech Holdings Ltd IPO Details

Primech intends to raise an undisclosed amount in gross proceeds from an IPO of its common stock.

No existing shareholders have expressed interest in purchasing shares at the IPO price.

Management says it will use the net proceeds from the IPO as follows:

to grow our business by expanding our range of services and expanding our operations locally and regionally.

to establish our team of software developers, programmers and engineers to build our own IoT system, software and robots. Specifically, we are currently in the planning stage to build a team with members of academia that we will collaborate with to start the development of an integrated IoT platform and software automation system. labor for our installation services. The system will integrate commercial off-the-shelf IoT devices such as cameras and sensors to be deployed in a facility and/or on robots, which will evaluate and respond to various events to perform data-driven functions or actions for help our installation services with lower cost and more efficiency. We also intend to develop our proprietary robots based on the Robot Operating System, an open source robotics platform, which will provide the flexibility to customize our robots to meet unique applications for installation services such as cleaning and disinfection services.

for marketing and promotional activities.

for minority investments in one or more companies in the electric vehicle conversion and charging sector and for the upgrading and integration of our electric vehicle charging function with our fleet of driving machines and self-cleaning. As of the date of this prospectus, we are negotiating to acquire a minority interest in a potential target that we believe will achieve our objectives described above. However, as we have not entered into any agreement with this entity, we may invest in other potential alternative targets. We do not intend to acquire a controlling interest in any target company.

for working capital and other general corporate purposes.

(Source)

The presentation by management of the company’s roadshow is not available.

Regarding ongoing legal proceedings, the company is the subject of various claims, including a fatal construction accident by a subcontractor hired by a subcontractor. Management believes that any claim would not have a material adverse effect on its financial condition or business.

The sole listed bookrunner of the IPO is Tiger Brokers.

Primech IPO Commentary

PMEC is seeking capital in the US public market to fund its expansion into robotics and electric vehicle charging services.

The company’s finances have generated growing revenue, varying gross profit and gross margin, uneven operating profit, and growing operating cash flow.

Free cash flow for the twelve months ended September 30, 2021 was negative ($709,538).

Sales and marketing expenses as a percentage of total revenue increased slightly as revenue increased; its sales and marketing effectiveness multiple rose sharply to 16x in the last reporting period.

The company currently plans to pay no dividends on its shares and anticipates that it will use future earnings to reinvest in its growth initiatives.

The market opportunity for the provision of cleaning services is expected to grow at a moderate growth rate through 2030, based on a global growth estimate.

Tiger Brokers is the sole underwriter and there is no data on the company’s participation in the IPO over the past 12 month period.

The main risk to the company’s prospects is the expansion of the company into other activities, which could fail.

Many Asian companies seek to diversify their revenue streams and end up operating independent businesses, producing below-average results due to a lack of specialization.

When we know more about management’s IPO, I will give a final opinion.

Expected IPO pricing date: to be announced.