Archives: Ipos

India’s digitization efforts have evolved the digital and financial services landscape at a rapid pace. Several existing players are working on delivering these digital services across India. The business of digital service providers can be classified into three broad categories. Department of Administrative Reforms & Public Grievances (DARPG) formulated the National e-Governance Service Delivery Assessment (NeSDA) in 2019 to boost governance endeavors and drive digital government excellence. With the increase in digital adaptation, the demand for various other services has also increased. The increasing digitalization is boosting the market for insurance services, online ticketing, assisted e-commerce, bill payments, tele-medicine, tele-agriculture, digital learning, etc. in urban, semi-urban, and rural areas. With huge touch points of the business correspondent companies, they can provide these services to even the remotest areas. Additionally, even retail/wholesale stores can distribute and/or sell their products through these companies’ touch points. It will pave the way for additional income for business correspondent companies. We believe BLSe’s top and bottom lines are attributed to its recent acquisitions, and the trends will continue with more acquisitions planned. BLS E-Services witnessed the highest revenue growth of 50.8%, with the highest EBITDA and PAT margins at an average of 33.8% and 18.2% respectively in H1FY24. Turning to valuations, the PE ratio stands at 33.1x based on the annualized FY24E EPS which appears reasonable compared to peers in the industry. Based on the positives discussed, we give the issue a “SUBSCRIBE” rating.

Nova AgriTech is strategically positioned to capitalize on the substantial growth potential within the Indian agricultural sector, projected to grow at a CAGR of 5.1% over the next five years. The government’s focus on enhancing farm productivity, coupled with initiatives like Minimum Support Price (MSP) and natural farming, creates a conducive environment for sustained growth. The company’s expansion plans, funded by IPO proceeds, align with the industry’s upward trajectory, emphasizing the potential for future success. In addition to the favorable market conditions, Nova AgriTech boasts two key qualitative advantages. Its well-established distribution network across cities and a robust farmer outreach program ensure a high degree of acceptance for its products. Furthermore, the company’s commitment to environmentally friendly solutions, supported by a well-equipped R&D facility and experienced employees, positions Nova AgriTech as a one-stop solution provider. Financially, Nova AgriTech has demonstrated robust and steady revenue growth over the last three years. Notably, the net profit margins have experienced a significant and commendable expansion during this period. With an impressive ROE of 32.1%, ROA at 11.3%, and PAT margins of 9.7%, the company exhibits attractive financial metrics in a highly competitive segment. The comfortable asset turnover ratio and efficient asset utilization indicate the potential for sustained profitability. Turning to valuations, the PE ratio stands at 12.3x based on the annualized diluted H1FY24 EPS which appears relatively low compared to peers in the industry. The valuation outlook hinges on Nova AgriTech’s ability to maintain its current sales growth rate, preserve net margins, and gradually improve them. Based on the positives discussed, we give the issue a “SUBSCRIBE” rating.

From being the world’s fifth largest economy as of FY23 and having a gross domestic product of USD 3.75 trillion, India is poised to grow at a stable rate of 6% and achieve the third largest economy status in the future. The ongoing structural reforms by the Government of India such as infrastructure development, disinvestment, higher FDI limits, and projects like national infrastructure policy and national logistics policy are about to yield fruitful results in various domains in the coming period. An interesting trend has been observed in global economics that when an economy exceeds the USD 2,000 per capita mark, the country’s economy is poised to grow at a faster pace than before. Also, such an event has shown a positive impact on the consumer electronics market in the past. With India reaching the inflection point of USD 2,000 per capita income in CY2020, it aims to reach the USD 10,000 per capita mark by CY2047, thereby growing at the rate of 7% yearly and achieving a USD 20 trillion economy status. As of today, such impact on the growth of consumer electronics market post the USD 2,000 per capita achievement mark is seen in the increasing government schemes for consumer electronic industries.  On the industry front, the Indian consumer durables ODM market is estimated to be Rs. 300 billion in FY23 out of which Room Air Conditioning manufacturing has a 19% share which is approximately Rs. 57 billion. Nowadays, split air conditioning systems have gained popularity compared to window ACs, with split ACs forming 87% of the market share. Also, the penetration rate of room air conditioners in India is lower at 8% compared to 42% globally. Therefore, we believe that sectoral tailwinds such as increasing global temperatures, higher consumer purchasing power and spending, favorable government policies, increased urbanization, and increased domestic consumption of RACs would benefit the company in the long term. Additionally, long-standing relationships with marquee customers, diverse product portfolio, backward integrated manufacturing facilities and strong management experience in the field of component and RAC manufacturing positions the company favorably for the future. On the financial performance front, the company’s Revenue/EBITDA/PAT grew at a CAGR of 44.6%/56.2%/102.5% during the FY2021-23 period. On the upper price band, the issue is valued at a P/E of 49.6x based on FY2023 earnings which we feel is fairly valued and is lower than its comparable peers. We, therefore, recommend a “Subscribe” rating to the issue from a medium to long-term perspective.

Medi Assist interacts with many participants in the health insurance ecosystem and generates revenues predominantly from health and other general insurance companies. Over the years, the company leveraged the domain expertise of the Indian health insurance ecosystem to establish trust and strengthen longstanding relationships with these insurance companies. Insurance companies benefit from a diverse range of services and the ability to manage many products and services. The company has developed a longstanding client base of insurance companies where their clients trust and rely on its services, technology infrastructure and expertise built over several years of experience for day-to-day aspects of their businesses. The average relationship term with the four PSU insurance companies was 20 years, and with 23 non-PSU sector insurance companies, it was nine years as of September 30, 2023. The company share of retail and group benefits administration premiums under management from non-PSU insurance companies has increased from 14.65% in FY21 to 21.3% in FY23 and 24.3% during the six months ended September 30, 2023

The CNC Machine Production, Domestic Consumption Market, Import, and Export market in India is poised for substantial expansion between FY2023 and FY2027 at a noteworthy CAGR of 13.7%, 11%, 7.6% and 14.2% respectively. This growth is underpinned by heightened demand from crucial sectors such as automobiles, consumer durables, and aerospace. The industry is progressively shifting towards advanced CNC machines, propelled by the escalating intricacy of tasks. While the 2-3 Axis CNC machines dominate India’s CNC consumption due to their cost-effectiveness, the exigency for precision manufacturing in automotive, defense, and aerospace is projected to drive demand for more sophisticated technologies. Qualitatively, Jyoti CNC Automation Ltd boasts market leadership in India and a substantial global presence in CNC machine manufacturing. Deep-rooted customer relationships, vertical integration for end-to-end operations, and a proven track record in executing large-scale projects add to its strengths. Subsequently, examining the financials of Jyoti CNC Automation Ltd reveals robust revenue growth in the last three years and a recent turnaround in net profits after two years of losses. Due to prior losses, the ROE and ROA are pertinent only for the latest year. The company’s net profit margin remains tepid at 1.58%, while ROE stands robust at 41.5%. In the case of Jyoti CNC Automation Ltd’s business model, the focal points are the client base and the margins generated from clients. Jyoti plans to utilize the IPO proceeds to substantially reduce its long-term debt by approximately 50%, instigating a significant improvement in the balance sheet leverage. While the pricing may appear ambitious, potential investors might view Jyoti CNC Automation Ltd as a strategic investment aligned with the burgeoning defense sector in India. The company’s high growth trajectory positions it as a proxy play on the escalating demand for defense orders, akin to the outperformance witnessed in other defense stocks. The steep P/E ratio of 324x based on the latest year diluted EPS of Rs. 1.02 warrants scrutiny, especially when juxtaposed with the peer group’s P/E ratio. The market’s optimism appears contingent on the company’s anticipated profitability surge in the ensuing years. We, therefore, give the issue an “AVOID” rating.

The company has been engaged in the contract-based manufacturing of pharmaceutical formulations since 2005, which has led to well-established relations with customers and suppliers. The company manufactures formulations for both domestic and foreign pharmaceutical companies, including several reputed entities such as Cipla, Glenmark Pharma, Indoco Remedies, J. B. Chemicals, Ajanta Pharma, Mankind Pharma, etc. Further, Innova Captab’s strong brand recognition, long-term relationships, and ongoing active engagements with distributors have helped the company to expand its product offerings and geographic reach. The company also has a record of sustained consolidated revenue from operations, growing at a CAGR of 50.2% during FY21-23. The company’s focus on branded generic products for the domestic and international markets, strong brand presence, consistent financial performance, and R&D focus to build an increasingly complex product portfolio and customer stickiness have helped it to grow its business successfully. As we advance, the improvement in operational performance is expected to be driven by the ramping-up of operations in recently acquired Sharon Bio-Medicine Ltd. along with timely execution and commercialization of the Jammu project. The issue is valued at a P/E of 31.6x on the upper price band based on FY23 earnings, which is fairly valued. We, therefore, recommend an SUBSCRIBE rating for the issue.

Among the addressable markets for the company, there is a high variation in the expected CAGR between gas, nuclear, and coal turbines with the highest CAGR expected for components of nuclear turbines (+8% CAGR by 2027) followed by gas turbines (+1% CAGR by 2027). The market for aerospace and defense components is the largest at Rs. 99,000 crores in 2022 and is also expected to have the highest CAGR of +9% by 2027. The overall addressable market across energy turbine, aerospace, and defense components for the company is expected to grow at +7% CAGR from Rs. 1,28,000 crores in 2022 to Rs. 1,81,000 crores in 2027. Additionally, there is an addressable market for oilfield drilling components which is expected to grow at +4% CAGR by 2027. The energy turbine, aerospace & defense industries have a significant entry barrier due to a lengthy qualification process for the components driven by the criticality of their usage. Some of these components are life-critical and mission-critical and hence, have zero parts per million defect requirements. Superior manufacturing demands a unique blend of expertise, innovation, quality, and advanced safety controls in the industry which cannot be obtained by only installing CNC machines. Azad Engineering Ltd. increased its revenue from Rs. 124 crores in FY20 to Rs. 262 crores in FY23 (CAGR of 28.4% between FY20-23), with an EBITDA margin of 31.4% in FY23. The company is one of the fastest growing manufacturers (in terms of revenue growth for the period between FY20-23) with one of the highest EBITDA margins among key players for machined components for the key industries serviced by the company. As a strategic and growth partner to customers across highly regulated industries, the company enjoys long-term relationships along with high customer stickiness and a high percentage of repeat business. This allows them to have long-term contracts, a stable customer base, and strong visibility on long-term revenue. The company is one of the fastest-growing manufacturers (in terms of revenue growth for the period between FY20-23) with one of the highest EBITDA margins among key players for machined components for the key industries serviced by the company. With Azad Engineering being in the niche industry and promising growth seen in the industry, we give a “Subscribe” rating to the issue. On the upper price band, the issue is valued at a P/E of 48.3x based on FY24 annualized earnings which we feel is fairly valued in comparison to its peers.

Happy Forgings Ltd. is an engineering-led manufacturer of complex and safety-critical, heavy forged, and high-precision machined components in India. While catering to the global OEMs engaged in the manufacturing of commercial vehicles in the automotive sector and manufacturer of farm equipment and industrial equipment in the non-automotive sector, the company is a leading player in the domestic crankshaft manufacturing industry. Keeping its focus on producing market accretive value-added products and possessing the second-largest production capacity for CVs and high-horsepower industrial crankshafts in India, the company has transitioned from being a forging-led business to a machined component manufacturer. This transition is reflected in the growth of the company over the years and the share the machining component business in the total revenue of the company. The machining component business comprised 70-80% of the total revenue of the company during the fiscal years 2021-2023 which also demonstrates its increased focus on machined products over the years. The company derives 75-80% of its revenue from its top 10 customers. This number is expected to fall to 50% which reflects that the company is building a newer client base and reducing its dependency on the old client base. With the global forging and machining market estimated to grow at a CAGR of 5.2% by 2029  and the Indian crankshaft market for automotive, farm tractors and industrial engines estimated to grow at a CAGR of 8.3%  by value between fiscal 2024 and 2029, the company emerges as the one-stop solution to cater to such market demand in the automotive and non-automotive segments. On the financial performance front, the company’s Revenue/EBITDA/PAT grew at a CAGR of 43%/46.6%/55.4% during the FY2021-23 period. On the upper price band, the issue is valued at a P/E of 36.4x based on FY2023 earnings which we feel is fairly valued. We, therefore, recommend a “Subscribe” rating for the issue.

The company has more than 15 years of experience in the jewellery industry. They design and manufacture a wide range of antique bridal gold jewellery, consisting of Jadau, Meena, and Kundan, and sell them in wholesale and retail markets. They also process and supply Antique Bridal Gold Jewellery on a work basis to national retailers. Their wholesale customer base includes reputed national, regional, and local family jewellers spread across 20 states and 72 cities within India. RBZ also operates its retail showroom under the “Harit Zaveri” brand and is an established player in Ahmedabad. They also export their jewellery to the Middle East region. They manufacture operations from a well-equipped, modern facility in Ahmedabad, Gujarat, with advanced casting, laser, and 3-D printing technologies. The company also has a track record of sustained consolidated revenue from operations, growing at a CAGR of 64.0% during FY21-23 period. Overall, the company’s diverse jewellery collections comprising different manufacturing techniques and varieties, a strong brand presence in the Indian jewellery industry, and a wide reach and presence across India have helped it to grow its business successfully. The issue is valued at a P/E of 13.4x on the upper price band based on FY23 earnings, which is fairly valued. We, therefore, recommend an “SUBSCRIBE” rating for the issue.

The men’s apparel market in India is projected to be Rs. 2.2 lakh crores in FY23 and has grown at a CAGR of 9.6% from FY15-20. It is anticipated to post strong growth rate of 18% CAGR to reach Rs. 4.3 lakh crores by FY27 which sets the stage for a dynamic landscape within which Credo Brands Marketing emerges as a noteworthy player, showcasing a distinctive blend of strengths. The company’s qualitative advantages include a strong brand equity spanning a diverse product range, safeguarding against business model risks. Operating on a scalable and asset-light model, MUFTI demonstrates flexibility for expansion with minimal capital investments. The brand’s unwavering presence as a trendsetter in men’s fashion and strong in-house design competencies establish formidable entry barriers. Financially, MUFTI has reported an impressive CAGR of around 42% between FY21 and 23, with net profits doubling over the previous year and showing multifold increase compared to FY21. While the boost in profitability is positive, projecting the June quarter profit figures for FY24 indicates a significant potential shortfall compared to earlier performance. Anticipating a seasonal upswing in the upcoming quarters due to the winter sale of items like jackets and sweaters, it is premature to make definitive remarks about the overall financial performance for FY24. However, the surge in FY23 has translated into marked improvement in net profit margins (15.5% in FY23) and ROE (30% in FY23). The company operates in a segment where the margins are stable, and that is evident in the robust growth in the ROE and net margins in the last two years, underlining the strength of its brand and effective product positioning. Turning to valuation, the IPO offers a competitive P/E ratio of 23.2x times based on FY23 EPS, reflecting reasonable pricing, especially considering the impressive earnings growth rate and an industry average P/E of 95.2x. We, therefore, recommend investors to “SUBSCRIBE” for listing gains to the issue.