Tag: IPO

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Editorial

Antony Waste Handling IPO: All You Need to Know

Antony Waste Handling Cell Limited has decided to take the public route and it will hit the market on 21st December 2020. Probably, this should be the last Initial Public Offer (IPO) of 2020. Let’s dig deeper and understand what it is all about.

About the Company

Antony Waste Handling Cell Limited was incorporated in 2001. They are one of the top five companies in the Indian municipal solid waste management industry. Jose Jacob Kallarakal, one of the founders, is the current Chairman and Managing Director of the company. They offer a range of services like solid waste collection, transportation, landfill construction, processing and disposal services nationwide. Currently, Antony Waste Handling Cell has 23 ongoing projects and 1,089 vehicles.

These are 17 MSW C&T (Municipal Solid Waste Collection & Transportation), 2 MSW processing and 4 mechanized sweeping projects. MSW C&T projects include walking door-to-door and collecting waste from households, commercial establishments and other community bins. MSW processing projects include sorting and segregation waste which is collected through MSW C&T. The segregated waste is further processed by composting, shredding, recycling and turned into refuse-derived fuel.

Antony Waste serves some of India’s biggest municipal corporations like Municipal Corporation of Delhi, Kalyan-Dombivali Municipal Corporation and Jaypee International Sports. Many of their projects are running already at Navi Mumbai Municipal Corporation (NMMC), Thane Municipal Corporation (TMC), Greater Noida Industrial Development Authority (GNIDA) and more.

About the IPO

IPO DateDec 21, 2020 – Dec 23, 2020
Issue TypeBook Built Issue IPO
Face ValueRs 5 per equity share
IPO PriceRs 313 to Rs 315 per equity share
Market Lot 47 Shares
Offer for Sale Up to Rs 215 crore
Fresh IssueUp to Rs 85 crore
Issue SizeUp to Rs 300 crore
Listing AtNSE, BSE

For the second time, Antony Waste Handling Cell will be hitting the market this year. Earlier in March, they came up with a Rs 206 crore issue in the price band of Rs 295-300. But, due to shutdown and dramatic fall in the market due to Covid-19, they failed to generate enough bids. 

This time, the company has come out with a larger issue size and a higher price band. The size of the issue is now Rs 300 crore and the new price band is Rs 313-Rs 315 per share. The issue will open on 21st December and close on 23rd December. The minimum and maximum lot of this IPO is of 47 shares and 611 shares respectively. That means an investor who is looking to invest in this IPO has to at least pay Rs 14,805. The maximum a single investor can invest is Rs 1,92,465, but this is likely not going to happen as the IPO will be oversubscribed. 

This IPO consists of two parts: a fresh issue and an offer for sale (OFS). Tonbridge (Mauritius), Leeds (Mauritius), Cambridge (Mauritius), and Guildford (Mauritius) are selling some of their equity shares. The company has already raised Rs 89.99 crore at a price band of Rs 315 ahead of its IPO. Massachusetts Institute of Technology was the top anchor investor winning 44% of the total anchor allotments. 

Antony Waste Handling Cell has three reasons behind taking going public. Firstly, some parts of the proceeds will be used to finance its waste-to-energy project at Pimpri Chinchwad in Maharashtra. This will be done by investing money in its subsidiaries AG Enviro and ALESPL. The second objective is to infuse debt in AG Enviro to reduce consolidated borrowings of the company. Lastly, some of the proceeds will be used to meet general corporate purposes.

Financial Overview of the Company

30 September 202031 March 202031 March 201931 March 2018
Total Assets707.56672.10512.63428.07
Total Income215.10464.61298.51290.77
Profit after Tax29.0562.0734.6839.88
Values in Rs crores

The company had an amazing FY20 as their profits rose by a massive 79% year-on-year (YoY) to Rs 62 crore. Their top-line (revenue) also showed a jump of 58% from Rs 298 crore to Rs 464 crore. Even after the lockdown due to coronavirus, Antony Waste has accumulated almost Rs 30 crore of profits in the first half of this financial year. With this trend, we can see them surpassing last year’s profits number as well. Thus, the company has done fairly well to manage its bottom line.

The biggest strength is their desire to use the latest technology tools, vehicles, and equipment. They hold a diversified project portfolio, thus, not depending only on one type of projects. A nation-wide reach also helps them to spread their wings and operate in several states. Their consistent track record of MSW projects execution has earned them a leader tag in the MSW management industry. Another big advantage? They don’t have any listed competitors. Thus, investors might look at this IPO as another opportunity to gain.

Risk Factors

  • As you can already interpret from the company’s client list, they are very much dependent on the Municipal Corporations for projects. A major chunk of the revenue is generated from them. These municipalities are themselves dependent on budgets which are allocated by the state or central governments. Any reduction in this budget can massively impact Antony Waste’s business.
  • Even if the projects are rolled out by these municipal corporations, there is no guarantee that Antony Waste will get them. If any other waste handling company satisfies the prequalification requirements of the tender, the project will be handed to that company.
  • Antony Waste Handling Cell requires a high amount of working capital. If they fail to generate money quickly from their projects, their business will be impacted heavily. Over the past three years, their trade receivables have increased consistently. In FY18, they had a trade receivable of Rs 88 crore. This stood at Rs 113 crore in FY20. This is not a good sign for any company which has huge working capital requirements. (Trade receivable is the amount owed to Antony Waste by its customers).

Conclusion

As we mentioned before, Antony Waste Handling Cell Limited is the only entity belonging from MSW industry which will be listed. Thus, investors will be keenly looking at the performance of this IPO. We cannot imagine our lives without the operations of these types of companies. They help us to live in a cleaner society. MSW industry is expected to grow at a CAGR of 5%. In FY18, the MSW market was estimated to worth around Rs 3,000 crore. The company believes that the market will be worth Rs 6,200 crore by the end of FY23. The company is already a market leader. They also depend on recent technologies to carry out their daily operations which aids them in cutting their costs. Can we expect the last IPO of 2020 to be another hit?

With a lot of negative global cues running around, foreign institutions might not fully subscribe to the IPO, and it may become a flop. My opinion is to again wait to see how institutions react to this IPO.

What are your thoughts on the company? Do let us know by commenting below. You can find the company’s red herring prospectus here. 

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Editorial

Burger King IPO: All you Need to Know

burger king ipo

One of the most awaited IPOs of 2020 is going to be launched in the first week of December. The quick-service restaurant, Burger King India, will launch its initial public offer on 2nd December 2020. The issue will open for subscription on 2nd December and close on 4th December. It will consist of fresh issuance of shares worth Rs 450 crore and an offer for sale worth Rs 360 crore. 

About Burger King

Burger King is India’s fastest-growing quick-service restaurant chain. Its huge network of chains includes 216 Burger King restaurants and 7 Sub-Franchised Burger King restaurants. You may have seen a Burger King outlet in your nearby mall too! Founded in 1954 in Florida, it currently holds the position of second-largest fast-food hamburger chain in the world. Burger King entered the Indian market in 2014. Currently, 99.39% of the total stake is owned by the promoters. Post issue, promoters’ holding will fall to 52.9%.

The current CEO of Burger King India, Rajeev Varman, is an experienced individual. He worked at Taco Bell for more than 5 years before joining Burger King. For the next 13 years, he worked for Burger King in the US, Canada and North-West Europe. Since 2013, he has been working for Burger King India. Working in India has been a different experience for him. This is because the menu and the product line which has to be used in India is completely different from what is used in other countries. Beef is highly used in western countries but using beef in India would not have been a wise choice, as noted by Rajeev. Thus, all the decisions have to be taken from scratch, yet Rajeev Varman has been able to deal with all the issues comprehensively.

The Indian subsidiary of US-based Burger King focusses on India-centric offerings, the growing millennial population and premium product offerings to generate demand. Also, they use online food orderings, home delivery and social media to attract more customers of younger age. According to the company, increasing nuclearisation of families, rising disposable incomes and urbanisation have led people to eat out.

31-Mar-2031-Mar-1931-Mar-18
Total Assets1,197.70920.47730.35
Total Revenue846.82644.13388.73
Profit After Tax-76.57-38.27-82.23
(Values are in Rs crores)

As we can see, the company is not able to make profits even with growing revenue numbers. In fact, losses are widening mainly due to the company’s competitive pricing model.

About the IPO

Burger King aims to raise Rs 810 crore via the issue. The company has reserved 10% and 15% portions of IPO for retail investors and non-institutional investors. Rest 75% is for qualified institutional investors. Even though the IPO issue ends on 4th December, equity shares of Burger King will debut on the markets around December 14, 2020.

The price band for the IPO has been fixed at Rs 59-60 per share. Burger King’s promoter QSR Asia Pte Ltd will be selling up to 60 million shares as a part of Offer for Sale. Proceeds from Offer for Sale go to the pockets of the promoters, as their exit. The retail investors can apply for a maximum of 3,250 equity shares, that is 13 lots. The minimum amount to be spent to by an individual would range between Rs 14,750-Rs 15,000 for a lot (Rs 59 x 250 = Rs 14,750 to Rs 60 x 250 = Rs 15,000).

The proceeds from the IPO will be used to finance the roll-out of new company-owned Burger King Restaurants. Burger King plans to expand by setting-up new restaurants in various cities across India with the focus to meet the growing demand. They aim to open at least 700 restaurants by December 31, 2025.

Other than this, the proceeds from the IPO will also be used for general corporate purposes. These general purposes include brand building, marketing efforts, strengthening of the marketing capabilities, partnerships, tie-ups, joint ventures and more. The money will also be spent on meeting long-term and short-term working requirements.

IPO DateDec 2, 2020 – Dec 4, 2020
Issue SizeAggregating up to Rs 810 crore
Issue TypeBook Built Issue IPO
Offer for SaleAggregating up to Rs 360 crore
Fresh IssueAggregating up to Rs 450 crore
Face ValueRs 10 per equity share
IPO PriceRs 59 to Rs 60 per equity share
Lot Size250 shares
Listing AtBSE, NSE

Book running lead managers for this IPO are Kotak Mahindra Capital Company, CLSA India, Edelweiss Financial Services and JM Financial.

Risk Factors for Burger King

  • Just like for any food-chain business, Burger King is susceptible to health concerns arising from food-borne illness. Negative food-related incidents could diminish the brand value of the company as well as lose the trust of the customers. A possibility of an outbreak of a food-borne illness or a health epidemic cannot be dismissed as well.
  • The development of Burger King depends on the policies of the government who can impose certain restrictions on the operations.
  • Demand for burgers will see a significant fall if the food preferences of the people changes in the coming future.
  • Any lapse in the quality control systems of the third-party delivery aggregators, suppliers or distributors can hurt their business and reputation.
  • Inflation, seasonality, global supply and demand and demand in local and international markets will increase the prices of raw materials. If this happens, Burger King will find it hard to cut costs and increase the prices of its products across the country. With this, they can even lose market share.
  • The quick-service restaurant industry in India is very competitive. Burger King competes with the likes of McDonald’s, KFC, Domino’s Pizza, Subway, Pizza Hut and more.
  • EPS stands for Earnings per Share. You can read about EPS here. NAV is computed as the closing net worth divided by the closing outstanding number of equity shares.
Name of Company Face ValueTotal Income FY19(in crores)EPSNAV
Burger King IndiaRs 10Rs 644.13-1.449.42
Jubilant FoodworksRs 10Rs 3,610.5024.2395.45
Westlife DevelopmentRs 2Rs 1,417.672.5937.47
Westlife Development holds the master franchisee for McDonald’s in western India and South India.

Conclusion

Burger King is one of the favourite fast-food chains in India. It is especially loved by the people of younger generations. Other QSRs also took the public route to generate funds so that they open more stores across the country. This approach will help Burger King to spread their wings in different states and reach out to more customers.

Indian FMCG sector has allowed many participants to shine over the years. Let’s look at Jubilant Foodworks’ share price was around Rs 110 in January 2010. Currently, it is trading at more than Rs 2,500. The younger population of India offers a huge potential to these Quick Service Restaurants(QSRs) to attract customers. Urbanization and increasing disposable income have helped people to move out of their homes and eat. This massive potential of the Indian market will only increase from here. Thus, offering a big opportunity to companies like Burger King. It depends on the company that how better they can understand the Indian market and offer products suitable to them. Burger King looks all set to grow and conquer the Indian organised fast-food industry.

The company filed its red herring prospectus with SEBI, which you can find here. 

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Editorial Editorial of the Day

Gland Pharma IPO: All you need to know

India’s biggest pharmaceutical Initial Public Offer will hit the primary market on 9th November. Hyderabad-based Gland Pharma has received the (SEBI) Securities and Exchange Board of India’s approval to launch its Rs 6,000 crore IPO. This will give birth to India’s largest IPO in the pharmaceutical sector to date. This IPO will include a fresh issue of Rs 1,250 crore. The company filed its draft red herring prospectus with SEBI in July 2020. You can find it here.

About Gland Pharma

Gland Pharma was founded in 1978 to manufacture and market Heparin injection for the domestic market. It entered the US market in 2007. In 2013, its Oncology formulations facility at Visakhapatnam received USFDA acceptance which is very crucial for pharmaceutical companies.

Gland Pharma has seven manufacturing facilities in India. Out of the seven, four facilities are for finished formulations and the rest three are Active Pharmaceutical Ingredient (API) facilities. The company is present in sterile injectables, oncology and ophthalmic segments.

It follows a business-to-business model (B2B) and is present in over 60 countries such as the US, India, Russia, etc. It has a portfolio of products across various therapeutic divisions such as anti-malaria, anti-diabetic, anti-infectives and more.

Strong fundamentals

66% of the company’s presence is in the US market and only 18% of the total revenue comes from the Indian market. The company looks fundamentally robust. The following images tell you the growth story of the company.

Source: Annual Report

Gland Pharma’s revenue from operations increased by 28.81% to Rs 2,633.24 crores in FY20. This rise was driven by 51 new product launches in the United States, Europe, Canada and Australia. Higher revenues boosted their bottom line. Their profit after tax (PAT) increased by 71.02% to Rs 772.95 crores in FY20. The company EBITDA Margin has increased from 34.9% to 40% in two years.

Company net worth has increased by more than 1.5 times in the last two years. This shows that the company is fundamentally sound and can be a great opportunity for investors. The money generated from the primary market will be used to fund capital expenditure and an increase in working capital. This is another signal that the pharma company has more plans to expand in the near future.

Source: Annual Report

About the IPO

Investors have a keen eye on this company because it is one of the first companies with a Chinese parent to go for a public listing. It is majority-owned by China’s Shanghai Fosun Pharma. In 2017, private equity firm KKR got an amazing opportunity to exit from Gland Pharma. They sold their stake to Shanghai Fosun Pharmaceutical Group for over $1.2 billion. In return, Fosun Pharma acquired around 74% of the total stake in Gland Pharma.

The factor of a Chinese parent in the Pharma company is important to discuss because of two reasons. Firstly, this IPO is talked about at a time when there is huge uncertainty in Indo-China relations. Both the neighbouring countries were involved in the military standoff at the borders which led to casualties on both sides. India followed their stance with a digital strike by banning 250 Chinese apps.

Secondly, the pharma sector has seen large investments during Covid times. The companies are supported with good valuations due to the optimistic future of the industry. We have already seen a bunch of companies launching their IPOs this year. But no pharma companies have taken this road in 2020. Gland Pharma will be the first pharma company in India to take the primary market route this year.

The Details

IPO DateNov 9, 2020 – Nov 11, 2020
Price BandRs 1,490-1,500 per share
Issue SizeAggregating up to Rs 6,479.55 crore
Issue TypeBook Built Issue IPO
Offer for SaleAggregating up to Rs 5,229.55 crore
Fresh IssueAggregating up to Rs 1,250.00 crore
Face ValueRs 1 per equity share
Market Lot10 shares
Listing AtNSE, BSE

Kotak Mahindra Capital, Citi, Nomura and Haitong Securities are the book running lead managers for the issue.

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Editorial

Equitas SFB IPO. All You Need To Know

Equitas Small Finance Bank has launched its IPO The period for subscription began on 20th October and shall end on 22nd October 2020. The scrip will be listed on 2nd November 2020. The current offer for sale is of 7.2 crore equity shares amounting to Rs 237.60 crores and a fresh issue of equity shares aggregating to Rs 237 crores. Offer for sale amount goes to the promoters, as it is their exit. Fresh equity goes into funding for the company. The company aims to raise close to Rs 517 crores through the IPO. Let’s find out more about this IPO.

About the IPO

Issue OpenOct 20, 2020
Issue CloseOct 22, 2020
IPO PriceRs 32 – Rs 33
Lot Size450 Shares
Minimum Order Quantity450 Shares or 1 lot 
Face ValueRs.10
IPO SizeRs 517.60 crore
Fresh IssueEquity Shares of Rs 10 amounting to Rs 280 crores
Listed onBoth NSE & BSE

On Day 1, the IPO was subscribed by 39%. It received bids for 4,54,01,850 shares against a total issue size of 11,58,50,001 shares according to NSE data.

On Day 2, the IPO was subscribed by 50%. Receiving bids for 5,80,78,800 shares according to NSE data. 

Overall, the IPO has been subscribed 0.67 times as of Day 2.

CategorySubscription Status
Qualified Institutional Buyers(QIB)0.05 Times
Non-Institutional Investors(NII)0.05 Times
Retail(RIIs) 1.42 Times
Employee0.97 Times
Others0.24 Times
Total0.67 Times
QIB subscription looks low

Investors who have shares of Equitas Holdings (EHL) which is the parent company of Equitas Small Finance Bank are eligible to apply under the shareholder’s category of Equitas Small Finance Bank IPO. The company has reserved 10% of the offer for Shareholders of EHL amounting close to Rs 51 crores.

About the Company

  • The Equitas Small Finance Bank is an institution founded in 2007 that provides retail baking services and other financial services. The aim of a small finance bank is financial inclusion of areas like small businesses, marginal farmers, micro-industries, and unorganized sector entities. Small Finance Banks with net worth above Rs 500 crore are supposed to mandatorily get listed on the stock exchanges within 3 years, and this is why Equitas SFB is doing its IPO.
  • Equitas SFB is the largest small finance bank in terms of outlets and the second-largest in terms of assets under management and deposits according to CRISIL.  
  • The company possesses the following strengths:
    • Largest Small Finance Bank in terms of outlets(856 banking outlets and 322 ATMs), therefore better market distribution network in terms of micro-financing services.
    • Customized Credit Assessment before giving out loans, this ensures low NPAs. The Gross NPA for the company was 2.68% of total advances or total money lent out. 
    • The bank has a well-diversified asset portfolio which includes Vehicle Finance, Agriculture Finance, Micro Finance, Housing Finance, MSE Finance, and Corporates. The Secured-Loan product segment has grown at a CAGR of 48.35% over the last two years.
    • The company is technology-driven and has invested close to ~65 Crores in Q1FY21, on technology initiatives.
    • Experienced leadership and trained employee base.
  • There are certain risk factors involved with the company such as :
    • COVID-19 pandemic. May lead to reduced collections, reduced disbursements and deposits, and increased provisioning for loans. There may be a significant increase in our NPA levels.
    • The bank is subject to stringent regulatory requirements of RBI and other regulatory authorities. Failing to comply with them might make an impact on the business. SFBs or Micro Financing is a relatively new concept in India as compared to traditional banking. The company provides small business loans, microfinance, and vehicle finance loans are under-served segments in India. The health of the business depends on the ability of first-time borrowers to pay back in time.
    • The majority of the bank’s advances are in Tamil Nadu, any adverse changes that might affect the region can give an impact on the business.
    • Subject to Interest Rate Risk. Any volatility in interest rates or inability to manage interest rate risk could highly affect the bank.
    • Equitas SFB was earlier an NBFC and used to fund itself using term loans from big banks and financial institutions. Now the company depends on deposits and refinancing to fund itself. SFBs are restricted by RBI guidelines to perform certain functions related to funding. The inability to fund itself might be a problem for the bank. 

The company’s vital financials are as follows:

30 June ’2031 March ’2031 March ’1931 March ’18
Total Assets20,892.1419,314.5515,762.6913,301.15
Total Income750.972927.802394.831772.90
Total Expenses693.302684.162184.271741.07
Profit After Tax57.67243.64210.5731.83
Amount in Rs. Crores

The concept of Micro Finance is still relatively new in India. RBI guidelines on SFB creates certain bottlenecks in their operations. However, these banks to reduce risk have created a stringent credit assessment procedure to avoid a high number of NPAs. It is advised that an investor thoroughly goes through the company’s strategy regarding funding, credit facilities, expansion of business, and other important vital ratios. Such vital information can be found in the company’s RHP or Red Herring Prospectus. You can check out the Red Herring Prospectus of the company over here.

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Editorial

Angel Broking IPO: All you need to know

What is an IPO (Initial Public Offering)?

IPO’s are at a boom right now. We covered all the details of CAMS IPO you wanted to know before it was launched a few days back. Today, we are going to talk about the Initial Public Offering (IPO) of Angel Broking.

The Angel Broking public offer is the 8th IPO in 2020, and the 7th after COVID-19 lockdown. SBI Card, Rossari Biotech, Mindspace Business Parks REIT, Happiest Minds, Route Mobile, Chemcon Speciality Chemicals and Computer Age Management Services (CAMS) are the previous seven companies to launch their IPO this year.

About the company

Angel Broking Ltd is one of India’s oldest stockbroking houses. It was incorporated in 1996. It provides broking, margin funding, advisory and financial services. The company also conducts research services and gives out investment advice.

Currently, Angel Broking is the fourth largest broker on NSE (in terms of active clients) with a market share of 6.3% as of June 2020. It has several applications like Angel Broking Mobile, Angel BEE, SpeedPro and NXT. As of June 30, 2020, Angel Broking mobile application had more than 4.3 million downloads. Also, it’s Angel BEE mobile application had nearly 1 million downloads.

The company was forced into adopting discount broking system, after the coming of new age brokers like Zerodha.

IPO Details

Angel Broking plans to raise to Rs 600 crore through the book-building issue. It will be a fresh issue of Rs 300 crore and an offer for sale of Rs 300 crore. Offer for sale means that the current promoters of the company are getting an exit. On Monday, Angel Broking raised nearly Rs 180 crore from more than 20 anchor investors. They have been allotted 58.8 lakh shares for Rs 306 each.

The quota for retail investors is fixed at 35%. QIB and NII quota are fixed at 50% and 15%. The leading book managers for this IPO are ICICI Securities Ltd, Edelweiss Financial Services Ltd and SBI Capital Markets Ltd.

One market lot consists of 49 shares. For retail investors, the minimum lot is 1 and the maximum lot is 13. That means a retail investor has to pay at least Rs 14,945 to bid for the issue. Maximum limit says that a retail investor cannot invest more than Rs 1,94,922 (13 Lots X 49 Shares X Price). The tentative date for IPO’s listing date is 5th October 2020.

IPO DateSep 22, 2020 – Sep 24, 2020
Issue TypeBook Built Issue IPO
Issue SizeUp to Rs 600 crore
Fresh IssueUp to Rs 300 crore
Offer for SaleUp to Rs 300 crore
Face ValueRs 10 per equity share
IPO PriceRs 305 to Rs 306 per equity share
Market Lot49 Shares
Min Order Quantity49 Shares
Listing AtBSE, NSE

Financial Highlights

Angel Broking’s total revenue from operations was Rs 724.62 crore in FY20. Total revenue for the month ending June or Q1FY21 was Rs 238.42 crore. During this period, Angel Broking earned 14.65% of the income from interests and 85.21% from fees and commissions. As of June 30, 2020, they have more than 21.5 lakh operational broking accounts.

Angel Broking’s Revenue and Profit After Tax is growing at a CAGR of 15% and 32% respectively. Their ROE has remained stable at 15.2 from 2019 to 2020, which is nothing extra-ordinary. The broking firm’s client base has increased from 10.6 lakh in FY18 to 21.5 lakh as on June 2020. Thus, at a CAGR of 38.61%, which even though it looks good is not as good as peers. In the first quarter of FY21, they have seen a monthly client addition of 1.15 lakh clients on an average.

2017-182018-192019-20
Revenue738.5737710.5
PAT101.176.786.6
EPS14.0410.6512.03
(Values are in crore rupees)

The Pros

  • Angel Broking is the fourth largest broking house based on active clients after Zerodha, ICICI Securities and RKSV (Upstox).
  • Robust client base through the online and digital platform. They also have a strong sub-broker network.
  • Track record of strong financial performance over the years.
  • Ability to use technology to cut down on costs which gives them a larger net profit margin.
  • Huge untapped brokerage industry. Retail trading has taken a quantum leap. Domestic broking industry’s revenue has increased by 10.5% CAGR between FY15-FY20.
  • Experienced management team leading the business.

The Cons

  • A lot of competition in the market already. Its listed peers are ICICI Securities Ltd., Geojit Financial Services Ltd., IIFL Holdings Ltd., Motilal Oswal Financial Services Ltd. and JM Financial Services Ltd. Its unlisted peers are Zerodha, RKSV Securities and 5Paisa Capital, etc. New age brokers are coming in with newer and faster tech faced products which Angel Broking may find hard to follow.
  • Their valuation is on a bit higher side. Its valuation is 26.84 times FY20 earnings.
  • Emerging low-cost brokers will pile more pressure on the company in the future to retain their clients.

Do make your own studies before investing in any company. To get a complete idea of the company, you can find the red herring prospectus submitted by Angel Broking, here.

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Editorial

CAMS IPO: All you need to know

Are you searching about an IPO on google? marketfeed covers that for you! Click here to understand what is an IPO. Here, let’s talk about the Initial Public Offering (IPO) of CAMS.

About the company

Computer Age Management Services (CAMS) is a Mutual Fund Transfer Agency which has been a part of the Indian Financial services segment for over two decades. The company was founded in 1988. NSE Investments Limited, HDFC Bank group, Warburg Pincus LLC and Acsys Investments Private Limited are the owners of Computer Age Management Services.

Today, the CAMS serves as India’s largest registrar and transfer agent of mutual funds. It acts as a technology-enabled service solutions partner (investor interface, dividend processing, brokerage computation, etc.) to Private Equity Funds, Banks, Private Life Insurance, etc. It has 278 customer service centres all over India and has three back-office delivery centres in Chennai. According to CRISIL (Indian rating agency), Based on average assets under management (AAUM), CAMS has an aggregate market share of 70%, which is huge.

IPO Details

CAMS drive a major chunk of its revenue from the mutual fund’s services business. Almost 87% of revenue is contributed by fees they take from Mutual Fund houses. Rest 13% comes from other business. These are non-Mutual-Fund business like verification and maintenance of the KYC records of investors for use by finance institutions. CAMS charges fees based on the size of Asset Under Management (AUM). Higher the AUM, higher the fees. They also follow the policy to charge higher fees on Equity Mutual funds when compared to Debt Funds.

NSE Investments Limited (NSEIL) holds 37.48% stake in CAMS. They are looking to liquidate their stake via an Offer-for-sale.

One market lot consists of 12 shares. For retail investors, the minimum lot is 1 and the maximum lot is 13. That means a retail investor cannot invest more than Rs 1,91,880 (13 Lots X 12 Shares). The tentative date for IPO’s listing date is 1st October 2020.

The highlights about the IPO is given below:

IPO DateSep 21, 2020 – Sep 23, 2020
Issue TypeBook Built Issue IPO
Issue SizeRs 2244 crore
Offer for Sale18,246,600 Equity Shares
Face ValueRs 10
IPO PriceRs 1229 – Rs 1230 per share
Market Lot12 Shares
Min Order Quantity12 Shares
Listing AtBSE
Employee DiscountRs 122

Financial Highlights

CAMS’ revenue has increased by a CAGR of 13% from 2016 to 2020. Their Profit after Tax (PAT) has increased by CAGR of 15.2% during the same period. Revenue of the company has seen consistent growth. As the Indian Mutual Funds industry expands in the future, more revenue will be generated by the company.

Over the span of 5 years, companies AUM has increased from Rs 13,50,000 crore to Rs 27,00,000 crore. Return on Equity (ROE) stood at 32.1% for last year. They are able to attain this high ROE for some time now. The average ROE from 2018 to 2020 is 31.4%.

2017-182018-192019-20
Revenue650711721
PAT160130173
EPS332635
Revenue and PAT are given in crores

The Pros

CAMS faces very limited competition in the market they operate in. None of their peers are listed. Their closest competitors are Sundaram BNP Paribas and Karvy. Hence, the company is planning to gain even bigger market share in the near future.

The company believes in client stickiness. Their top 10 clients have a healthy relationship of 19 years with the company.

The high potential of the industry and the company to grow in the future makes it a lucrative offer for the investors.

CAMS has 4 out of the top 5 mutual funds and 9 out of the top 15 mutual funds as their clients. Thus, the company has the biggest clients to serve in the mutual funds’ industry.

The Cons

As we stated earlier, around 87% of the company’s revenue comes from their core business, i.e. Mutual Funds. They use more of paper-based MF transactions to generate revenue but slowly the industry is shifting towards digitalization.

CAMS have their valuation on a bit higher side. Their price-to-book value is 34,61 times FY20 EPS.

Do make your own studies before investing in any company. You can find the red herring prospectus submitted by CAMS, here.

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Jargons

What is an IPO? A Comprehensive Guide to Initial Public Offerings

What is an IPO (Initial Public Offering)?

All companies need to raise funds to invest in new projects and grow. Firms can raise capital through equity, debt, or invest their retained earnings back into the business. An Initial Public Offering (IPO) is a way for established companies to raise equity capital. In this article, we will understand what an IPO is, how it works, and its benefits & drawbacks to a company.

What is an IPO?

An Initial Public Offering (IPO) is the process by which a privately owned company issues its shares to the public for the first time. It transforms the company from being a privately owned entity to a publicly traded one. An IPO is one of the methods through which companies can raise required capital by issuing shares.

An IPO can have two parts: a fresh issue and an offer for sale (OFS).

  • A Fresh Issue refers to when a company sells new shares to the public for the first time. These shares have never been traded publicly before.
  • Through an Offer for Sale (OFS), existing shareholders like founders, early investors, or employees of a company sell their shares to the public. These shares were previously held by insiders and are now being sold to external investors during the IPO.

Thus, an IPO is also a method for early investors and founders to exit their investments.

Why Do Companies Go Public?

Companies decide to go public for various reasons:

  • Capital Generation: One of the primary reasons for an IPO is to raise capital. Going public allows a company to access a more extensive pool of investors and generate funds for various purposes, such as expansion, research and development, debt reduction, or acquisitions.
  • Liquidity for Existing Shareholders: An IPO provides an opportunity for existing shareholders, including founders and early investors, to sell their shares and realize the value of their investments.
  • Enhanced Visibility: Being a publicly traded company increases visibility and credibility, which can attract customers, partners, and additional investment opportunities.

How Does an IPO Work?

An IPO is a complex and time-intensive process. Here’s a basic outline of how an IPO works:

1. Deciding the Mode of Raising Capital

The primary step in an IPO process is to decide how a company (say, XYZ Private Ltd) wants to raise capital. It can raise funds through equity or debt. XYZ can borrow money from banks, venture capitalists, private equity firms, and other financial institutions to meet its financial needs. However, borrowing may be unfavourable for companies at times, especially when it’s in the initial stages and needs more cash flow to service the debt.

Once the company decides to raise capital through equity, it must decide whether to raise it privately or publicly. IPO is an option for raising capital publicly.

2. Appointment of Investment Bankers

Before a company files for an IPO, it needs to prepare its financial statements, undergo audits, ensure regulatory compliance and satisfy requirements. It will appoint investment banks and underwriters that perform various functions on behalf of the company. These entities act as intermediaries between the company and its investors. They also prepare the prospectus, decide how much money to raise and when, and help the company price its issues.

What is a Prospectus?

A company going public in an IPO issues a formal document known as a prospectus to the Securities & Exchange Board of India (SEBI). This document offers detailed information about the company, including its financials, operations, risks, and the number of shares it plans to offer. This data helps potential investors make informed decisions. It also explains how the company plans to use the proceeds of the issue.

SEBI regulates the entire IPO market in India. It ensures transparency and compliance in the IPO process. There are multiple types of prospectus such as Draft Red Herring Prospectus (DHRP), shelf registration prospectus, etc.

3. Registration for IPO

The company and an investment bank prepare a registration statement and a Red Herring Prospectus (RHP). It is the most important document that a retail investor has access to. You can use the RHP to evaluate the offer. The document contains all the information about the company and its IPO, except the price or quantity of shares that will be offered.

4. Cooling-Off Period

This is the time when SEBI verifies the facts disclosed by the company. It looks for errors, omissions, and discrepancies. The company can set a date for the IPO only after SEBI approves the application.

4. Application to Stock Exchanges

The company submits an application to the stock exchange where it plans to list its shares. In India, a company can list its shares on the National Stock Exchange (NSE), Bombay Stock Exchange (BSE), or both.

5. Pricing

Two types of IPO pricing mechanisms exist – fixed price issues and book build issues. In a fixed price issue, the price at which shares will be sold and allocated is made known to the public in advance. Meanwhile, in a book-building issue, the issuer only reveals a range of prices (known as a price band). We will discuss more about both of these mechanisms.

6. Public Subscription

Once the company announces the IPO date, you can apply for it. Most brokers (like Zerodha, Groww, Fyers, etc.) offer the option to apply for IPOs from their terminals.

Additionally, you can apply for an IPO through the Application Supported by Blocked Amount (ASBA) option offered by banks. You can obtain IPO application forms from designated banks or brokers. Interested investors fill in the details in the form and submit it along with a cheque. SEBI has set five working days for the availability of IPO forms to the public. 

7. Going Through With the IPO

After finalising the IPO, stakeholders and underwriters together determine the allocation of shares to investors. Typically, investors receive the entire requested amount of shares unless the IPO becomes oversubscribed. The allotted shares are then deposited into their Demat accounts, while refunds are issued in the event of oversubscription.

Following allocation, the company’s shares start trading in the stock market. The company must prevent insiders from trading to avoid manipulating IPO stock prices.

IPO shares are distributed to bidders within 10 days of the conclusion of the bidding period. In cases of oversubscription, shares are allocated proportionally among applicants. For instance, if the oversubscription is five times the available shares, an application for 10 lakh shares will only receive an allotment of 2 lakh shares.

Benefits & Drawbacks of IPO

The benefits and drawbacks of opting for an IPO are as follows:

BenefitsDrawbacks
IPOs offer a significant influx of capital for business expansion.The IPO process involves huge expenses, including underwriting fees, legal costs, and compliance expenses.
Provide liquidity to early investors and employees, allowing them to cash out their shares.Going public means giving up some control of the company as shareholders gain voting rights.
IPOs increase a company’s visibility and credibility in the market, attracting more investors and potential partners.Public companies face rigorous reporting and compliance requirements, which can be time-consuming and expensive.

What is Oversubscription and Undersubscription?

  • Undersubscription occurs when the number of shares available for purchase exceeds the demand from investors. In this case, not all shares are allocated or sold, which means that the IPO may not achieve the intended capital-raising goal.
  • Oversubscription happens when the demand for shares surpasses the number of shares available. In such cases, shares are distributed based on predetermined criteria or proportion among applicants. Investors may receive fewer shares than they requested. Oversubscription can reflect high investor interest in the IPO and may lead to a successful capital raise for the company.

IPO Pricing Methods

There are two methods through which companies price their IPOs:

Fixed Price Issue

A Fixed Price Issue is a straightforward method for determining the initial share price in an IPO. In this approach, the company and its underwriters (entities that are responsible for assessing and assuming the risk of another party) decide a fixed price at which the IPO shares will be offered to the public. This predetermined price is typically based on various factors, including the company’s financial performance, market conditions, and valuation.

In a Fixed Price Issue, all shares are made available to the public at the same fixed price, irrespective of the level of demand from investors. This simplicity and predictability can be attractive to retail investors, as they know exactly what price they will pay for the shares in advance.

However, a drawback of this approach is that it might not effectively consider market dynamics, which could result in missed opportunities if the price is not set optimally. In cases of oversubscription, investors may receive a proportionate allotment based on their subscription amount.

Book Build Issue

A Book Build Issue offers a more flexible and demand-based approach to determining the IPO share price. Rather than fixing the price in advance, the company and its underwriters set a price range within which investors can bid for shares. This price range is known as a price band. It includes a floor (the minimum price) and a cap (the maximum price). 

Institutional and retail investors then submit their bids, specifying both the number of shares and the price they are willing to pay within the defined range. The final offer price is determined by assessing the demand generated throughout the bidding process. It’s set in a way that ensures the sale of all available shares. This approach allows for real-time adjustments to the price, considering market demand and dynamics. 

Investors who place bids at or above the final offer price usually receive the shares they requested, but those who bid below it may receive a partial allocation or none at all. Book Build Issues are generally seen as offering better price discovery because they take into account market feedback and adjust to investor sentiment and demand.

What is Lot Size in an IPO?

A “lot” refers to a specific quantity of shares that are offered for sale as a single unit in an IPO. The company going public and its underwriters determine the lot size. Investors who participate in the IPO can bid for and purchase shares in these predefined lots rather than selecting an arbitrary number of shares. The lot size may vary from one IPO to another. It ensures a fair distribution of the offering among investors.

Who are the Key Players in an IPO?

Various individuals and entities collaborate to ensure the successful execution of the IPO. The key players in an IPO are:

1. Company Management

The company’s top executives, including the CEO, CFO, and other key officers, are responsible for making strategic decisions regarding the IPO. They are actively involved in the planning, preparation, and execution of the offering.

2. Underwriters/Investment Banks

Investment banks serve as intermediaries between the company and the public markets. They help structure the IPO, conduct due diligence, market the shares to potential investors, and facilitate the pricing and distribution of the shares. They also underwrite the issue, which involves assuming the financial risk of purchasing the shares from the company and re-selling them to investors.

Investment banks help the company make strategic decisions related to the IPO, including the timing of the offering, the pricing of shares, and the overall financial strategy.

3. Legal Counsel

Legal advisors help the company navigate the complex regulatory and legal requirements associated with an IPO. They ensure compliance with securities laws and regulations, draft necessary legal documents, and provide guidance on disclosure obligations.

4. Accountants and Auditors

Accounting firms assist with financial reporting, auditing, and ensuring that the company’s financial statements comply with accounting standards. Independent auditors validate the company’s financial statements and ensure their accuracy. They offer confidence to potential investors regarding the company’s financial health.

5. Regulatory Agencies

In India, SEBI oversees the IPO process. SEBI reviews a company’s prospectus and other documents to ensure that the company discloses all necessary information accurately and meets regulatory requirements.

6. Investors

Institutional investors (e.g., mutual funds, pension funds) and retail investors participate in the IPO by purchasing shares. Their demand and interest in the offering play a significant role in determining the success of the IPO.

7. Stock Exchanges

The shares of a company are listed and traded on a stock exchange after the IPO. The exchange ensures that the company meets listing requirements and facilitates the trading process.

In conclusion, an IPO represents a significant milestone in a company’s journey, helping it raise capital, gain exposure, and become publicly traded. For investors, it offers opportunities to invest in exciting companies early in their public life. However, it’s essential to approach IPOs with careful consideration, conduct thorough research, and align your investment with your financial goals and risk tolerance!

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Jargons

What is a Qualified Institutional Placement (QIP)?

A company can raise money from three platforms: 1) Acquiring debt 2) Selling equity 3) Looking at their reserves. A qualified institutional placement (QIP) is one of the ways through which a company raise funds by selling equity.

A company sells its shares by issuing an IPO. In an IPO, retail investors, Non-institutional bidders, Qualified Institutional Bidders (QIB’s) and Anchor Investors bid to acquire shares. QIP is a tool for raising capital from the market but only available to Qualified Institutional Bidders.

Who are Qualified Institutional Bidders (QIB’s)?

QIBs are those institutional investors who are considered to have financial knowledge and capability to invest through capital markets. Mutual funds, venture capital fund, Alternative Investment Fund, Provident Funds with minimum corpus of Rs.25 crores, ULIP schemes of insurance companies and pension schemes, all are considered to be in the QIB category.

Why QIP?


Qualified institutional placements follow a relaxed set of regulations when compared to an IPO. It allows an Indian-listed company to raise capital without filing any pre-issue notice to the regulators. Another main reason why SEBI allowed QIPs was that the companies do not over-depend on the foreign capital for the funding.

As QIPs follow a lesser number of rules and regulations, companies save a lot of costs. During IPOs, a company incurs fees in several stages, for example, legal fees. QIP, as a tool, passes on through less number of checks and thus act as a cost-efficient tool to raise money.

Recently in news

Private sector banks, ICICI Bank, Axis Bank and Housing Development Finance Corp Ltd (HDFC), have raised over Rs 30,000 crore from QIPs this year(2020). The ICICI Bank launched its QIP to raise Rs 15,000 crore. They were followed by, Axis Bank stated that their QIP has helped them in raising Rs 10,000 crore. HDFC also procured Rs 14,000 crore of funds via QIP. This shows, that even amidst COVID-19, the investors are backing the banks and are willing to buy their stakes.

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Editorial Market News

Mindspace IT REIT IPO. All that you need to Know.

About Mindspace IT REIT

Mindspace Business Parks REIT has a quality office portfolio in Mumbai, Hyderabad, Pune and Chennai. The business parks in Mumbai are Mindspace Airoli East Business Park, Mindspace Airoli West Business Park, Paradigm Mindspace Malad and The Square, BKC

The total leasable area of Mindspace Business Parks is 12.1 MSF* in Mumbai, 11.6 MSF in Hyderabad, 5.0 MSF in Pune and 0.8 MSF in Chennai. With a total leasable area of 29.5 MSF, it is one of the largest Grade-A office portfolios in India. Total Market Value of our Portfolio, including the facility management division Rs. 23675 Crores

*MSF stands for ‘million square foot’

About the IPO

The Mindspace REIT filed a draft red herring prospectus on 31st December 2019 followed by an offer document on July 17, 2020. The IPO highlights are as follows:

IPO DateJul 27, 2020 – Jul 29, 2020
Issue TypeBook Built Issue REIT
Issue Sizeaggregating up to ₹4,500.00 Cr
Fresh Issueaggregating up to ₹1,000.00 Cr
Offer for Saleaggregating up to ₹3,500.00 Cr
Face ValueRs. 10
IPO Price₹274 to ₹275 per equity share
Market Lot200 Shares
Min Order Quantity200 Shares
Listing AtBSE, NSE
Market Cap (₹ Cr.)23675
Why is Mindspace REIT raising Rs.4500 Crores?

According to the company’s red herring prospectus, the company will utilise Rs. 1000 Crores of the fresh issue for the following purposes:

  • Partial or full pre-payment or scheduled repayment of certain debt facilities of the Asset SPVs availed from banks/financial institutions (including any accrued interest and any applicable penalties/ premium). Its adjusted Net Debt stands at Rs 7214.8 Crores
  • Purchase of NCRPS(Non-Convertible Redeemable Preference Shares) of MBPPL(Mindspace Business Parks Private Limited)
  • General purposes

Key Financials and its Highlights

Source:SEBI
FY18FY19FY20
Total Income15,02216,79720,262
Total Assets (Current + Non Current)84,73891,4371,12,224
Profit before tax3,5186,0737,518
EBITDA10,24912,61413,718
Net Cash USED In Investing Acitivities-4,267-5,860-13,551
Net cash generated from / (used in) financing activities-4,878-3,5614,743
Borrowings52,55556,20963,569
The Pros
  1. Dividend income REITs have to pay at least 90% of net earnings to unitholders as a dividend. Ensured Regular Flow of Income
  2. The Trust has a WALE(Weighted Average Lease Expiry) of 5.8 years, which means that at present the average time in which all leases will expire in 6 years which mean a steady cash flow for the next 6 years minimum.
  3. Diversification– REITs help investors diversify a portfolio, as they have a low correlation to equity, debt and other assets class. Moreover, Every Tentant contributes to not more than 7.7% of its Gross Contracted Rentals.
  4. Transparent-Like public listed companies, REITs must disclose financial information to investors, report on material business developments and risks on a timely basis. Since REITs distribute most of their earnings, they frequently seek funding from capital markets, which require them to make additional disclosure and justify plans for using such funds.
  5. Allowed Investment only in Commercial Real Estate As per SEBI rules.
The Cons
  1. Tax on dividend-Earnings from REITs is taxed at the marginal rate of taxation making it less attractive.
  2. Lacks Presence in Banglore Cluster, a major IT and Corporarte Hub.
  3. Limited growth-REITs exhibit limited growth, as they have to distribute 90% of income. Thus, REITs can reinvest 10% of its income indicating lower compounding effect.
  4. Investment risks-The standard risks of the real estate market such as property values, interest rates on loans, location and tax laws are applicable to REITs.
  5. High expenses-REITs charge management and transaction fees. There are instances where REITs have put a limit on redemption too.
Should one go for the IPO?

The COVID-19 pandemic practically rendered commercial real estate as a liability for most sectors. However many of Mindspace’s properties have a multi-year lease agreement already in place, Mindspace has decided to give waivers to occupants as well. This does not mean a reduction in the rental collection in the medium run. Offices will adhere to government norms like limited attendance, social distancing and fixed hours will make occupancy a viable option.

Moreover, the psychological impact of working at home was harmful to a major part of society, workspaces can be expected to resume in the long-term

Projected earnings of the company as well as analysts give a optimistic outlook towards the company.

Source: SEBI

Essentially, Investment in Mindspace REIT can be for those expecting long-term returns and a low-risk appetite with a steady income. Additionally, investment in a REIT is a safe haven since it does not correlate to other segments like Equity, Debt etc. also considering the comparatively low volatility in the real estate sector and that land is a tangible asset that seldom depreciates in value especially in Tech Hubs and Metros you can expect a good growth over a horizon of 3-8 years.

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Market News

Rossari Biotech IPO – What’s in Store?

About Rossari Biotech.

Rossari Biotech is a one of the leading speciality chemical manufacturing companies in India. They provide customized solutions to specific industrial and production requirements. The company specializes in the following:

  • Home, Personal Care and Performance Chemicals
  • Textile speciality chemicals.
  • Animal health and nutrition products

They manufacture most of their products from their manufacturing facility in Dadra and Nagar Haveli with a presence in about 17 countries. Currently, their production capacity is 100,000 MTPA(Million Tonnes Per Annum). Moreover, It has two R&D facilities one in IIT Bombay and an inhouse one in Silvassa.

About the IPO

Rossari Biotech filed a DHRP (Draft Red Herring Prospectus) for an IPO initially estimated at Rs. 700 crores in mid-December. However, the IPO was later pegged at Rs. 500 crores considering global slowdown due to coronavirus pandemic.

The subscription period set was between 13th July 2020 and 15 July 2020. By end of the subscription period, Rossari Biotech was subscribed 79 times (i.e. demand for the share was 79x in the market than the prescribed value). The issue price is set between Rs. 423-Rs. 425 with the ticker hitting the market on 23rd July. The IPO managed to issue a total of 11,682,033 shares. Additionally, The IPO managed to raise 496 Crs.

To have a look at the Rossari Biotech’s Annual Reports. Click Here.