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Prudent Corporation Advisory Services Ltd.: Subscribe

Prudent Corporation Advisory Services Ltd.: Subscribe
  • Date

    10 May 2022 - 12 May 2022

  • Price Range

    ₹595 - ₹630

  • Minimum Order Quantity

    23

  • (D) RHP

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Incorporated in 2003. Prudent Corporate Advisory Services is one of India’s leading independent and fastest growing financial services groups. The company provides retail wealth management services. The company offers Mutual Fund products, Life and General Insurance solutions, Stock Broking services, SIP with Insurance, Gold Accumulation Plan, Asset Allocation, and Trading platforms. The company also offers digital wealth management solution through platform like FundzBazar, PrudentConnect, Policyworld, Wisebasket and CreditBasket. They provide investment and financial services platforms for the distribution of financial products through online and offline channels. As of FY21, the company is amongst the top 10 mutual fund distributors in the terms of average assets under management (AAUM). As of December 31, 2021, PCAS issue wealth management services to 13,51,274 unique retail investors through 23,262 channel partners on the business-tobusiness-to-consumer (B2B2C) network, which is spread across 110 branches in 20 states of India. The company is also associated as a distributor with 42 AMCs.
Objects of the issue:
The IPO aims to utilize the net proceed for the following objectives;
  • To carry out an offer for sale by selling shareholders
  • To achieve the benefits of listing the Equity Shares on the Stock Exchanges.
Investment Rationale:

Growing independent financial products distribution platforms

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 both
online and offline channels. They grew faster among national distributors (amongst the Top-10 mutual fund distributors) in terms of commission and AAUM with a CAGR of 34.4% and 32.5% respectively for the 5 year period ending Fiscal 2021. With the increasing financialization of investments
and a greater understanding of financial investments among Indians, there is significant potential to
launch newer products and enter into newer segments. In particular, certain asset classes are underpenetrated among their customer base and they will leverage their analytics capabilities to recommend customized products for their investor base. Apart from product distribution, they also wish to
strengthen their research and advisory offerings to their partners and retail customers. On the upper
end of the price band, the issue is valued at a PE of 33.9x based on FY22 annualized earnings,
which we believe is fairly priced. Hence, we recommend a “SUBSCRIBE” rating on this issue for the
long term.

Life Insurance Corporation of India: Subscribe

Life Insurance Corporation of India: Subscribe
  • Date

    04 May 2022 - 09 May 2022

  • Price Range

    ₹902 - ₹949

  • Minimum Order Quantity

    15

  • (D) RHP

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Life Insurance Corporation of India (“LIC”) was established on September 1, 1956, under the LIC Act by the Government of India by merging and nationalizing 245 private life insurance companies in India. LIC has been providing life insurance in India for more than 65 years and was the sole provider for more than 40 years. It is the largest life insurer in India, with a 61.6% market share in terms of premiums, a 61.4% market share in terms of New Business Premium (NBP), as well as by the number of individual agents, which comprised 55% of all individual agents in India as at December 31, 2021.LIC is the largest Asset manager in India as at 31 December , 2021 with an AUM of INR 40 trillion . LIC has a broad ,diversified product portfolio covering various segments across individual products and group products.LIC is the 5th largest insurance company globally and is identified as by IRDA as Domestic Systemic Important Insurer
Objects of the issue:
The IPO aims to utilize the net proceed for the following objectives;
  • To carry out an offer for sale of 221,374,920 shares by selling shareholders.
  • To achieve the benefits of listing the Equity Shares on the Stock Exchanges.
Investment Rationale:
Largest and most trusted brand in an underpenetrated Indian Life Insurance Sector

LIC has the leading market position in the sector with the strong rebound of business traction in an underpenetrated market with improving the financialization of savings. LIC’s massive scale of operations and concomitant operating leverage, cost efficiencies, and stellar track record it has established over the decades have allowed it to emerge as a market leader and sustain its position despite the liberalization of the last 20 years. In addition, the management also has plans to improve its VNB margins in the future through a focus on the sale of Non-Participating and group products. At the upper hand of the price band, the IPO is valued at 1.1 P/EV, which is attractive as it is much lower than the listed private life insurance companies that trade at P/EV of 2.5-3.9x. Hence, we recommend a “SUBSCRIBE” rating on this issue for the long term.

Campus Activewear Ltd: Subscribe

Campus Activewear Ltd: Subscribe
  • Date

    26 Apr 2022 - 28 Apr 2022

  • Price Range

    ₹ 278 - ₹ 292

  • Minimum Order Quantity

    51

  • (D) RHP

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Campus Activewear Limited (“CAL”) was incorporated on September 24, 2008. CAL is India’s largest sports and athleisure footwear brand in terms of value and volume. CAL launched its brand ‘CAMPUS’ in 2005 and is a lifestyle-oriented sports and athleisure footwear company that offers a diverse product portfolio for the entire family, which provides multiple choices across styles, colour palettes, and price points with a focus on value for money. Their dominant position in the Indian marketplace is in a segment in which international brands primarily dominate. This is due to an extensive product portfolio with 1,433 active styles for men, 241 dynamic styles for women and 485 active styles for kids and children and five manufacturing facilities across India with an installed annual capacity for assembly of 28.80 million pairs as of December 31, 2021.
Objects of the issue:
The IPO aims to utilize the net proceed for the following objectives;
  • To carry out an offer for sale by selling shareholders.
  • To achieve the benefits of listing the Equity Shares on the Stock Exchanges.
Investment Rationale:
Difficult to replicate integrated manufacturing capabilities with a pan India distribution network
CAL enjoys a virtual monopoly in branded sports and athleisure footwear in India due to its excellent design, manufacturing, and distribution capabilities, particularly in the semi-premium price range (largest market share in India). At the time of the pandemic, because of its experienced management and extensive local procurement it was able to maintain its operations at the gross levels and enjoy the growth of its D2C market, which is now poised for significant growth because of low penetration of the product in India. On the upper end of the price band, the issue is valued at a PE of 78.2x based on FY22 annualized earnings, which we believe is fairly priced. Hence, we recommend a “SUBSCRIBE” rating on this issue for the long term.

Vedant Fashions: Avoid

Vedant Fashions: Avoid
  • Date

    04 Feb 2022 - 08 Feb 2022

  • Price Range

    ₹ 824 - ₹ 866

  • Minimum Order Quantity

    17

  • (D) RHP

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Incorporated in 2002, in West Bengal, Vedant Fashions Ltd (VFL), with its brand ‘Manyavar’ is a category leader in the branded Indian wedding and celebration wear market with a pan- India presence. The company has established a multi-channel network and introduced brands by identifying gaps in the under-served and high-growth Indian wedding and celebration wear category. VFL is the largest company in India in the men’s Indian wedding and celebration wear segment in terms of revenue, EBITDA and PAT for the FY20. VFL offers a wide spectrum of products for every celebratory occasion. VFL has their dominance in the premium and value segments of the men’s Indian wedding and celebration wear market through their brands, Twamev and Manthan, respectively, and in the women’s Indian wedding and celebration wear market through their brand, Mohey.
Objects of the issue:
The IPO aims to utilize the net proceed for the following objectives;
  • To carry out an offer for sale by selling shareholders.
  • To realize the listing benefits of equity shares on the stock exchange.
Investment Rationale:
Market leader in Indian celebration wear market, benefiting from an increase in consumer spending
Their brands comprise a diverse range of attires and accessories for various members of the wedding entourage, besides the personalization for the bride and the groom. According to CRISIL, their “Manyavar” brand is a category leader in the branded Indian wedding and celebration wear market with a pan-India presence, as of FY20. “Twamev” is their premium brand in men’s Indian wedding and celebration wear, and “Manthan” is their value brand in the same segment. VFL also caters to women’s segment with “Mohey” and they have an upcoming brand, “Mehbaz”. According to CRISIL, the Indian wedding and celebration wear market is relatively less price-sensitive as compared to casual wear. The branded market is expected to grow at 18%-20% between the FY20-25, primarily due to an increase in the availability of branded Indian wedding and celebration wear, as well as several regional brands offering merchandize of consistent quality with attractive and contemporary designs, uniform pricing and enhanced customer experiences. These are positives for VSL as it has a diverse portfolio and a solid brand image.

Adani Wilmar: Subscribe

Adani Wilmar: Subscribe
  • Date

    27 Jan 2022 - 31 Jan 2022

  • Price Range

    ₹ 218 - ₹ 230

  • Minimum Order Quantity

    65

  • (D) RHP

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Adani Wilmar Limited (AWL) is a joint venture incorporated in 1999 between the Adani Group and Wilmar Group (one of the largest agribusiness MNC based in Singapore). Company’s portfolio of products spans across 3 categories which are edible oil, packaged food and FMCG, and industry essentials. “Fortune” their flagship brand, is the largest selling edible oil brand in India with a market share of 18.3%. They also offer variety of packaged goods such as packaged wheat flour, rice, puls- es, besan, sugar etc. and industry essentials such as oleo chemicals, castor oil etc. Currently, AWL has 22 plants which are strategically located across 10 states in India, comprising 10 crushing units and 19 refineries. And they also have 5590 distributers across India catering to 1.6 Million retail out- lets.
Objects of the issue:
The IPO aims to utilize the net proceed for the following objectives;
  • Funding capital expenditure for expansion of existing manufacturing facilities and developing new manufacturing facilities
  • Repayment/prepayment of borrowings
  • Funding strategic acquisitions and investments and
  • General corporate purposes
Investment Rationale:
Diversified product portfolio and dominant market share in products which constitute large share of kitchen spends across India
AWL is one of the few FMCG food companies that focuses on offering a portfolio made up of pack- aged consumer staples to consumers which accounts for approximately 66% of consumers spend on essential kitchen commodities in India. They are number 1 in edible oils (18%), soybeans(28%), mustard(10%) (Sourece:RHP). They also have significant presence in industry essentials and are largest oleo chemical manufacturers and largest exporters of castor oils in India as of March 31, 2020.annualized earnings, which is moderately priced compared to its listed peers such as HUL, Britannia, and Dabur, trading at a much higher P/E. Therefore, we give this is- sue a “SUBSCRIBE” rating for listing gain.

CMS Info Systems Ltd: Subscribe

CMS Info Systems Ltd: Subscribe
  • Date

    21 Dec 2021 - 23 Dec 2021

  • Price Range

    ₹ 205 - ₹ 216

  • Minimum Order Quantity

    69

  • (D) RHP

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Incorporated in 2008, CMS Info Systems Ltd (CMS) is India’s largest cash management company based on number of ATM points and number of pick up points. The company’s business includes installing, maintaining and managing assets and technology solutions on end-to-end outsourced basis for banks under long term contracts. CMS operates their business under 3 verticals, namely “Cash management services” which include end to end ATM replenishment services, “Managed Services” which includes banking, automation and “Other” which are in the nature of end-to-end financial card issuance and card personalization services. CMS has served more than 141,977 business points across their ATM cash management system, retail cash management and managed services businesses. The promoter of the company (having a pre-IPO 100% holding) is Sion Investment Holding Pte Ltd, which is an affiliate of Baring Private Equity Asia.
Objects of the issue:
The IPO proceeds shall be used towards the following purposes
  • Carry out the offer for sale of up to 50.93 Mn shares
  • Achieve benefits of listing the equity shares on the stock exchange
Investment Rationale:

Leading player with a Pan-India footprint

In the “Cash Management segment”, CMS is a market leader with over 66,000 ATMs, 43,000 retail pick up points and a massive 41% market share in the ATM cash management sector, as of FY21. In their “ATM Managed services”, they have an order book of over INR 15bn in Brown Level ATM solutions. On the other hand, they are also an emerging leader in “Tech Solutions” where they have an order book of 15,000 monitoring sites which is worth over INR 3.8bn. State Bank of India has been associated with CMS since FY14, has provided recurring revenue streams and expanded to 8+ solutions. As of FY21, CMS is remote monitoring 9520 ATMs, worth INR 217crs for them. CMS targets to replicate the same playbook with other private banks and public sector banks. The company has a network of 238 branches all over India and a fleet of 3965 cash vans . As of Aug’21, of the total number of ATM points their cash management business serviced, 22.4% were metro, 15.1% were semi-metro and 62.5% were semi-urban and rural, and in terms of geographic location, 23.5% were in the North of India, 26.5% were in the South, 17.6% were in the East and 32.3% were in the West. In addition, as of Aug’21, of the total number of retail pick-up points their cash management business serviced, 33.% were metro, 16.7% were semi-metro and 50.3% were semi-urban and rural, and in terms of geographic location, 26% were in the North of India, 30.4% were in the South, 13% were in the East and 30.6% were in the West

Supriya Lifescience Ltd : Subscribe

Supriya Lifescience Ltd : Subscribe
  • Date

    16 Dec 2021 - 20 Dec 2021

  • Price Range

    ₹ 265 - ₹ 274

  • Minimum Order Quantity

    54

  • (D) RHP

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Supriya Lifescience Limited (SLL) is one of the key Indian manufacturers and suppliers of active pharmaceuticals ingredients (“APIs”), with a focus on research and development. As of October 31, 2021, they have niche product offerings of 38 APIs focused on diverse therapeutic segments such as antihistamine, analgesic, anesthetic, vitamin, anti-asthmatic and anti-allergic. From April 1, 2020 until October 31 2021, their products were exported to 86 countries to 1,296 customers including 346 distributors. Their products are registered with various international regulatory authorities such as USFDA, EDQM, NMPA (previously known as SFDA), KFDA, PMDA, TGA and Taiwan FDA. As of October 31 , 2021, they have filed 14 active DMFs with USFDA and eight active CEPs with EDQM, for their API products in therapeutic areas such as antihistamine, analgesic, anesthetic, vitamin, antiasthmatic and anti-allergic. Their business operations are supported by a modern manufacturing facility located in Parshuram Lote, Maharashtra, which is approximately 250 km from Mumbai, Maharashtra.
Objects of the issue:
The IPO proceeds shall be used towards the following purposes
  • Funding capital expenditure requirements of the company( INR 923 Mn)
  • Repayment and/ or pre-payment, in full or part, of certain borrowings availed by the company (INR 600 Mn)
  • General corporate purposes
Investment Rationale:

Significant scale with leadership position across key & niche products

The company has significant presence in the API market with niche product offerings of 38 APIs as of 31 October 2021. The company is the largest exporter of Chlorpheniramine Maleate(40-45%) and Ketamine Hydrochloride(60-65%) from India. The company is also among the largest exporter of Salbutamol Sulphate (30-40%) from India .Further , the Company also contributed to 25-30% of exports of Vitamin B2 (Riboflavin, Lactoplavin) and its salts from India in FY17 to FY21 in terms of volume. As can be seen here the Company is really good at identifying, developing and scaling up of generic molecules (off-patent) from existing therapeutic segments (Their demand is high in volume and low in competition) and thus drive relatively higher returns from investments .

Data Patterns (India) Ltd: Subscribe

Data-Patterns
  • Date

    14 Dec 2021 - 16 Dec 2021

  • Price Range

    ₹ 555 - ₹ 588

  • Minimum Order Quantity

    25

  • (D) RHP

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Incorporated in 1985, Data Patterns is a defence and aerospace electronics solutions provider catering to the indigenously developed defence products industry. The company offers products to the entire spectrum of defence and aerospace platforms – space, air, land, and sea. With net profitability growth of approximately 164% between FY20-21, they are one of the fastest growing companies in the Defence and Aerospace Electronics sector in India (F&S Report). They have design capabilities across the entire spectrum of strategic defense and aerospace electronics solutions including processors, power, radio frequencies (“RF”) and microwave, embedded software and firmware and mechanical engineering. Their core competencies include electronic hardware design and development, software design and development, firmware design and development, mechanical design and development, product prototype design and development, functional testing and validation, environment testing and verification and engineering services opportunities. Their design and development capabilities have allowed them to develop complete systems as well as sub -systems for various strategic defense and aerospace electronics solutions. These systems have found applications on various platforms and programmes such as the Tejas Light Combat Aircraft (“LCA”), the Light Utility Helicopter (“LUH”), BrahMos missile programme, precision approach radars and various communications intelligence (“COMINT”) and electronic intelligence (“ELINT”) systems.
Objects of the issue:
The IPO proceeds shall be used towards the following purposes
  • Prepayment or repayment of all, or a portion of certain outstanding borrowings availed by the company (INR 0.61bn)
  • Funding working capital requirements (INR 0.95bn)
  • Upgrading and expanding their existing facilities at Chennai (INR 0.6bn )
  • General corporate purposes (Bal INR 0.24bn).
Investment Rationale:
Indigenous integrated defence and aerospace provider benefiting from “Make in India” opportunity
The Indian defense industry is rapidly shifting towards a self-sustaining one with companies and DPSUs (Defence Public Sector Undertakings) moving towards specializing into defence primes, integrators and component suppliers. The Indian Space Industry is also following a similar trend. With DPSUs focusing on specialization and subcomponent manufacture being outsourced to the private players, there is immense scope for private players like Data Patterns to reap benefits. Data Pattern focuses on building complete systems from the building blocks and sub-systems already developed and hence provides a higher value addition. Using their experience of working with the DRDO and from development of the wind profile radar, they had successfully bid for and obtained an approximately INR380 crore contract from the MoD (Ministry of Defense) for 9 precision approach radars for the Navy and Air Force, which are currently in the delivery stage. They currently own a 5.75 acres of land in Chennai and have proposed 2.81 acres of land for expansion. Their systems and processes are subject to periodic audit by customers lading to high quality output and competitive edge

Medplus Health Services Ltd.: Subscribe

Medplus Health Services Ltd.: Subscribe
  • Date

    13 Dec 2021 - 15 Dec 2021

  • Price Range

    ₹ 780 - ₹ 796

  • Minimum Order Quantity

    18

  • (D) RHP

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Incorporated in 2006, MedPlus Health Services is India’s 2nd largest pharmacy retailer in terms of the number of stores and revenue. The company offers pharmaceutical and wellness products i.e. medicines, vitamins, medical devices, test kits, and fast-moving consumer goods like home and personal care products sanitizers, etc. It is also the 1st pharmacy retailer in India to offer an omnichannel platform wherein customers can purchase products through stores, place orders over the telephone, online orders and a “Click and Pick” facility. The company has maintained a strong focus on scaling up their store network, having grown from operating their initial 48 stores in Hyderabad at the inception of their business to operating a pharmacy retail network of over 2,000 stores distributed across Tamil Nadu, Andhra Pradesh, Telangana, Karnataka, Odisha, West Bengal

and Maharashtra, as of March 31, 2021. They have witnessed a massive growth of 17% in store expansion in FY20-21. Medplus started actively focusing on online sales in FY20 and their focus is on “speed” and “convenience” as a customer value proposition for customers who place an order online. They are now able to deliver their customers’ online purchases within 2 hours of purchase in select cities of Hyderabad, Bangalore, Kolkata, Pune and Nagpur. Almost 9% of their revenue from operations are from online platform. Company’s business operations across the entire value chain are backward integrated and are wholly-managed and operated by them. Their operations are supported by their technology-driven supply chain and distribution infrastructure, organized in a hub-and-spoke model
Objects of the issue:
The IPO proceeds shall be used towards the following purposes
  • Investment into the material subsidiary “Optival” for funding working capital requirement of up-to INR 4.67 Bn
  • General corporate purposes, balance INR 1.33 Bn
Investment Rationale:

Consistently delivering compelling customer value proposition

The MedPlus brand stands for genuine and good quality products. They are able to offer discounts up-to 20% to customers given integrated supply chain and cost efficient model. They cater to a wide range of customers, including discount seekers, customers with urgent needs and customers who value convenience. Their transparent pricing, with discounts based on average order value, allows them to address the needs of different segments appropriately. They have developed a better understanding of their customers requirements through years of operational experience (up-to15 years), active customer engagement and leveraging the real time data analytics platform. They expect that their well-established brand, quality pharmaceutical products offering, array of products, ability to achieve high fulfilment rates, offering of neighborhood convenience with large store footprint, along with competitive pricing to their customers, will continue to drive their gains in market share

Metro Brands Ltd: Subscribe

Metro Brands Ltd: Subscribe
  • Date

    10 Dec 2021 - 14 Dec 2021

  • Price Range

    ₹ 485 - ₹ 500

  • Minimum Order Quantity

    30

  • (D) RHP

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Metro Brands Ltd is one of the largest Indian footwear specialty retailers. They opened their first store under the “Metro” brand in Mumbai in 1955 and have since been retailing a wide range of branded products. As of September 30, 2021, Metro operated 598 Stores across 136 cities. They target the economy, mid and premium segments in the footwear market. The company owns the brands of Metro, Mochi, Walkway, Da Vinchi and J. Fontini, as well as certain third-party brands such as Crocs, Skechers, Clarks, Florsheim, and Fitflop which complements their inhouse brands. They also retail footcare and shoe-care products at their stores through their joint venture, M.V. Shoe Care Private Ltd making them a ‘one-stop-shop’ for all footwear and related accessories to their customers. The retail operations are carried through “company owned and company operated” (COCO) model, retailing through their own Multi Brand Outlets (MBOs) and Exclusive Brand Outlets (EBOs). They operate Metro, Mochi and Walkway branded MBOs and Crocs™ branded EBOs. They also operate as shop-in shops (“SIS”) in major departmental stores across India. Currently, they are transitioning to omni-channel model through their websites, various online marketplaces, as well as, social media platforms (online channel make up about 12% of Sales as on 31st Sept 2021).They recorded the highest “realization per unit” of INR 1381/unit compared to the
leading players in India and highest net profit margins of 8.1% as of FY21 among the key players in India.
Objects of the issue:
The IPO proceeds shall be used towards the following purposes
  • Expenditure for opening new stores of the company under the “Metro”, “Mochi”, “Walkaway” and “Crocs” brands (INR 2.25 Bn)
  • General corporate purposes (Bal INR 0.7 Bn)
Investment Rationale:

Asset light business model with efficient operations leading to sustainable profitable growth

Metro Brands is among the few footwear retailers in India that outsources all their product manufacturing, resulting in an asset light model. This is supported by extensive (about 250 vendors) long standing third party vendor relationship, wherein they manage their inventory and supply chain. The company follows a “pull model” for product availability at their stores where product placement is led by a demand driven inventory replenishment method. This ensures optimum capital utilization and minimum stale stock, there by reducing discounting of products and improvement in gross margins. When compared with the peers (like Bata India, Relaxo Footwear) Metro has witnessed highest operating margins and net margins. In FY21, Metro had a gross margin of 54.9%, EBITDA margin of 21.3% and a profit after tax of INR 647 mn. They also have been declaring and paying out dividends consistently since FY 2000. In FY21, their dividend payout was 61.6%.