scorecardresearchEverything you need to know about Prudent Corporate Advisory Services’ IPO

Everything you need to know about Prudent Corporate Advisory Services’ IPO

Updated: 13 May 2022, 07:38 AM IST
TL;DR.

The company has set a price band of 595-630 per share for IPO. The issue is entirely an offer for sale (OFS) by existing investors of the company.

The company has set a price band of  <span class='webrupee'>₹</span>595-630 per share for IPO. The issue is entirely an offer for sale (OFS) by existing investors of the company.

The company has set a price band of 595-630 per share for IPO. The issue is entirely an offer for sale (OFS) by existing investors of the company.

Prudent Corporate Advisory Services’ 538- crore initial public offering (IPO) opened on May 10 and will conclude on May 12. The company has set a price band of 595-630 per share for IPO. The issue is entirely an offer for sale (OFS) by existing investors of the company.

The retail wealth management firm raised a little over 159 crore from anchor investors ahead of the initial share sale.

About the Firm: Prudent Corporate Advisory Services is one of the leading independent retail wealth management services groups (excluding banks) in India and is among the top mutual fund distributors in terms of average assets under management and commission received. The company offers a technology-enabled, comprehensive investment and financial services platform with end-to-end solutions critical for financial products distribution and presence across online and offline channels. Prudent Corporate offers mutual fund products, insurance products, stockbroking services, fixed income products, gold accumulation plans and so on.

OFS: The IPO is an offer for sale of up to 82,81,340 equity shares by Wagner Ltd and up to 2,68,000 equity shares by Shirish Patel. The company will not receive any proceeds from the offer and all proceeds will go to the selling shareholders.

Shareholding: Currently, Wagner owns 39.91 percent of the firm's stake while Shirish Patel, who is a Whole-time Director and CEO of the company, has a 3.15 percent stake in the firm.

Reservation: Half of the issue size has been reserved for qualified institutional buyers (QIBs), 35 percent for retail investors and the remaining 15 percent for non-institutional investors.

Bid: Investors who wish to subscribe to Prudent IPO can bid in a lot of 23 equity shares and multiples thereafter. At the upper price band, it will cost investors 14,490 to get a single lot.

Book Managers: Equirus Capital, ICICI Securities and Axis Capital are the book running lead managers to the offer while Link Intime India is the registrar of the issue.

Peers: Post listing, Prudent Corporate Advisory will join listed peers like IIFL Wealth Management, ICICI Securities, HDFC AMC, Nippon Life Indian Asset management, and UTI Asset Management.

Anchor Investors: Ahead of the IPO, Prudent Corporate Advisory Services on Monday raised over 159 crore from 24 anchor investors for 25.30 lakh equity shares at 630 each. The anchor investors included Societe Generale, Kuber India Fund, DSP Mutual Fund (MF), HDFC MF, Axis MF, L&T MF, UTI MF, Canara Robeco MF, Motilal Oswal MF, Aditya Birla Sun Life MF, Kotak MF and HSBC MF.

Brokerage views:

Hem Securities: Subscribe for long-term

The brokerage has a 'Subscribe for long-term' rating for the issue. As per Hem, the firm being operative in an underpenetrated Indian asset management industry, which has grown at a CAGR of more than 20 percent, has a pan-India diversified distribution network with the ability to expand into underpenetrated B-30 markets. The company has demonstrated a consistent track record of profitable growth due to a highly scalable, asset-light and cash generative business model, it said

Angel One: Neutral

Prudent Advisory has grown its AUM at a CAGR of 32.8 percent between March 2018 and December 2021. Moreover, the company has grown its revenues and profits at a CAGR of 13.6 percent and 46.8 percent between FY19 and FY21 despite the adverse impact of Covid-19, noted the brokerage.

“At the higher end of the price band Prudent will be trading at P/E multiple of 34.0x its annualized EPS for 9MFY2022 as compared to Anand Rathi which is trading at 20.5xFY2022 earnings. We believe that prudent has a very strong retail-focused business model which provides them with a distinct competitive advantage and will be difficult to replicate. However, valuations are on the higher side as compared to peers which will limit gains in the near term and hence we have a NEUTRAL recommendation on the IPO.”

Anand Rathi: Subscribe for long term

“At the upper end of the IPO price band, Prudent Corporate Advisory Services Ltd. is offered at P/E of 33.9x its FY22 annualised earnings, with a market capitalization of 26,086 million. The company has a scalable and asset-light model in a high growth underpenetrated Indian asset management industry with a diversified distribution network. The company reported a return on net worth (RoNW) of 28.73 percent in FY21. However, the IPO is richly priced and the company will have to continue growing its business at a high growth rate, in order to justify the valuations – hence we give the IPO a “Subscribe (Long Term)” rating.”

Choice Broking: Subscribe with Caution

According to Choice Broking, since 85 percent of the business comes from MF distribution, “the business is highly cyclical to equity market behavior.” The competitive intensity in financial product distribution has become more intense with the entry of fintech players. “The company might face challenges in maintaining its margins at ~25 percent going forward. The demanding valuation at 2,608 crore is expensive, leaving no margin of safety for investors,” it said. Considering these parameters, it assigned a ‘subscribe with caution’ rating to the issue.

 

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First Published: 13 May 2022, 07:38 AM IST