Archives: Ipos

With the increasing penetration of internet connectivity across geographies of rural and urban India, the number of smartphones, social media users, and online shoppers in India is on the rise. The IT penetration in non-metro cities in India has increased due to the penetration of smartphones and government-enabled village knowledge centres, leading to increased awareness which in turn is driving demand for ICT products. The non-metro cities and other rural geographies are becoming centers of consumption for ICT products like personal computers, smartphones, internet devices, and networking devices, and hence, there is a requirement for ICT distributors and resellers having a pan-India presence. The ICT sector significantly contributes to the country’s GDP. Due to such emerging demand, India’s ICT industry size is expected to reach Rs. 1,087 billion (approximately USD 136 billion) by 2025, growing at a CAGR of 10%. Various key factors for the growth of PC and components business include the booming gaming industry in India, increasing data volumes, efficient supply chain solutions, and the central government’s PLI schemes. Due to such factors, the demand for international hardware and software products is likely to rise. Therefore, Rashi Peripherals Ltd. emerges as one of the partners to bridge the gap for such emerging demand in India, given its diverse marquee suppliers and long-grown customer base. Hence, we expect the company to benefit from such a demand scenario in the long term. On the financial performance front, the company’s Revenue/EBITDA grew at a CAGR of 26.3%/10.1% during the FY2021-23 period. The company’s net profit dropped to Rs. 1,233 million in FY23 from Rs. 1,364 million in FY21. On the upper price band, the issue is valued at a P/E of 10.5x based on FY2023 earnings which we feel is fairly valued compared to its peers. Given a highly competitive environment and thin margins of the business, we recommend investors to  “Subscribe” to the issue for listing gains.

With small finance banks and payments bank increasing their reach and expanding into rural areas and increasing financial awareness, faster growth in rural areas can be expected in future due to the huge untapped potential. Given the stronghold and experience of these entities in dealing with customers across these regions, the share of SFBs will go up against the public and private sector banks. The sector’s loan portfolio is expected to see a strong growth of around 22-24% CAGR during FY2023-25 period as most of the SFBs have completed the transition phase and are likely to benefit from the operating leverage. Capital SFB already had its presence across the retail liability and asset side on account of operating as a local area bank before converting to a small finance bank. As a result, its retail franchise and reach has already been established across current and savings deposits as well as retail term deposits, thereby placing it in a good stead against other small finance banks. In comparison to other SFBs which are primarily focused on MFI lending and find it more difficult to penetrate into other products, Capital SFB has products, systems and processes in place to scale up operations across different products and geographies. Furthermore, Capital SFB has a CASA ratio which is similar to some of the leading private sector banks like HDFC Bank, Axis Bank, and ICICI Bank. Moreover, the lender’s gross NPA of 2.73% and net NPA of 1.36% as on September 30, 2023 acts as a testament to its streamlined underwriting processes, credit assessment, efficient collections, and risk management. It is important to note that the lender’s PPOP has grown from Rs. 714.86 million in FY21 to Rs. 1,487.04 million in FY23 and stood at Rs. 753.84 million as of six months ended September 30, 2023. As the lender will utilize net proceeds of the fresh equity issue to augment its Tier-I capital base, its capital adequacy will enhance and lead to a stable leverage position. At the current P/BV multiple of 2.3x based on book value as on September 2023, we believe the company is reasonably valued and advise investors to “Subscribe” to the issue from a medium to long-term perspective.

Apeejay Surrendra Park Hotels stands at the intersection of a resurgent hospitality industry and a post-pandemic economic rebound. The resurgence is evident in the remarkable performance of the hotel sector over the past year which reflects buoyant market sentiment and optimism toward the sector’s recovery. The timing of Park Hotels’ IPO strategically positions the company to capitalize on this positive momentum. The company has built a strong brand presence and credibility within the hospitality industry which is likely to ensure that its valuations are respected over time. With a diversified pan-India portfolio, the company effectively spreads its risk across various geographic regions and market segments, enabling it to capture opportunities in a granular fashion. Moreover, the company’s historically high occupancy rates bode well for improving net margins, thereby contributing to its financial stability and growth trajectory. A closer examination of the financials reveals significant milestones achieved by the company in recent years. The company has demonstrated robust revenue growth, with sales nearly tripling over the past three years. This turnaround is notable, considering the company’s transition from losses to profitability, reflected in the sharp uptick in net profit in FY23. While the return on equity turned positive in FY23, the return on assets remains relatively modest, owing to the capital-intensive nature of the hotel industry. The valuation, although reasonable compared to peers, reflects market optimism in the relatively high P/E ratio, which stands at 56.4 times based on FY23 EPS Looking ahead, ASPH’s strategic initiatives, including debt reduction and its unique blend of hotel and F&B services, position it favourably for sustainable growth and market leadership. Based on the above-mentioned positives, we give the issue a “SUBSCRIBE” rating.

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.