Archives: Ipos

The Indian wires and cables industry is poised to benefit from the strong growth trajectory in the residential projects post the central government’s aim of building 20 million affordable houses in urban areas across the country by 2022, under the ambitious Pradhan Mantri Awas Yojana (PMAY) scheme of the Union Ministry of Housing and Urban Affairs. On the upper price band, the issue is valued at a P/E of 22x based on FY2023 earnings which prices in most of the positives of the company. Moreover, it is important to note that Plaza Wires Ltd. operates in an industry which has high raw material volatility (which is in an uptrend over the years). Additionally, the business operates in a highly competitive industry with multiple big players which can challenge the pricing power of the company. Thus, considering the above factors, we recommend an “Avoid” rating for the issue.

The global Facility Management (FM) market is witnessing a significant transformation driven by technology innovation, new business models, emerging value propositions, competitive disruption, and new service offerings as value propositions shift to service outcomes, user experience, and business productivity. Outsourcing is evolving rapidly worldwide; in the past decade, the main objective of outsourcing was cost optimisation, but today, organisations want to outsource FM services to free up internal resources to deliver strategic value. The IFM market in India has been growing steadily over the last decade and is set to witness significant growth momentum over the next five years. The total IFM market in India in the Financial Year ended March 31, 2023, is valued at Rs. 100,386.7 crores and around 39.3% of this is outsourced to third-party companies. Between FY18 and FY23, the outsourced Indian IFM market grew at a CAGR of 9.5%. The demand for IFM services has increased as people’s preferences for a safe, clean, and secure environment have grown. Over the years, Updater has become a pan-India player, with a widespread network consisting of 4,331 locations (excluding staffing locations) managed from 129 points of presence with 116 offices in India and 13 overseas offices as of June 30, 2023. The company’s widespread network enables it to service many customers and render customised services across India, where they are required to provide services per the customer’s specific needs through a combination of workforce, materials, supervision, technology and economic models. Their contracts with most of its customers are for at least one year, which subsequently gets renewed on an ongoing basis. As a result, their business is on an annuity-based model where a customer, once secured, generates revenue over a long period. If we attribute FY23 earnings to the post-IPO fully diluted paid-up equity capital of the company, the asking price is at a P/E of 44.8x, and we believe it to be priced aggressively. We, therefore, recommend an “Avoid” rating for the issue. However, we would reassess the company on improvement in financial metrics over a sustained period.

India is positioned to be one of the fastest growing major economies and is expected to log an annual average economic growth of 6.6% between Fiscal 2024 and Fiscal 2026. A stronger domestic demand is expected to drive India’s growth premium over peers in the medium term. The investment prospects in India are bright, given the government’s capital expenditure push, the rapid progress of the Production linked Incentive (“PLI”) scheme, healthier corporate balance sheets, and a well-capitalized banking sector with low non-performing assets. India is poised to become a USD 5 trillion economy and ports would play a significant role in the growth story. Straddling the Bay of Bengal, the Indian Ocean, and the Arabian Sea with a coastline of approximately 7,517 km, the Indian economy occupies a commercially enviable location on the global map. Ports in India handle 90% by volume and 70% by value of India’s external trade. The maritime route is used to import crude petroleum, iron ore, coal, and other critical goods. The company is involved in the business of developing and managing ports, and provides maritime-related services including cargo handling storage solutions, logistics services, and other value-added services to its customers. Being in a capital-intensive business requiring huge capital as well as years of experience, JSW Infrastructure Ltd. looks well-positioned to maintain its dominant position in the ports industry in India in terms of cargo handling capacity and cargo volumes handled. The company also enjoys a strong parentage of JSW Group which has presence in various sectors in India and offers customer stickiness in the long term. The company also has plans to undertake various greenfield and brownfield expansions in the coming years which would prove beneficial for the business performance going forward. The company has a track record of sustained Revenue/EBITDA/PAT performance which grew at a CAGR of 41.2%/42.1%/62.3% during FY2021-23 period. On the upper price band, the issue is valued at a P/E of 29.7x based on FY2023 earnings which we feel is fairly valued. We, therefore, recommend a “Subscribe” rating for the issue.

The total jewellery market in Andhra Pradesh and Telangana is expected to grow at a CAGR of ~18% during FY2023-27 period to reach Rs. 96,500 crores by FY27. MVGJL has positioned itself well to capture a good chunk of this growth by catering to all economic segments and micro markets in Andhra Pradesh and Telangana through branded showrooms with a strong focus on the rural market and a dedicated urban focus. The company has displayed steady growth in revenue and even more robust profit growth which is up more than three-fold in two years. MVGJL boasts of a 23% return on its equity in FY23 which is attractive compared to its peers. They plan to open eight new stores to target more Tier 2 and Tier 3 markets which augurs well as rural markets contributed 50-52% of the total jewellery market in FY23. The nature of the business is such that a lot of costs are front-ended but once they are mitigated, profits can grow rapidly in coming years. The company has also maintained an asset turnover ratio of 1.8x and above which is a good sign for a constantly expanding business. We believe that the company looks poised to capture a further share of the unorganized jewellery market, especially in the rural areas. Based on the prospects of the sector, the company’s product catalogue, its stronghold in the southern markets and a good track record, the pricing looks attractive vis-à-vis its peers as it values MVGJL at 11.7x of its FY23 earnings. We, therefore, recommend a SUBSCRIBE rating to the issue.

The Indian apparel market is expected to grow at a CAGR of 21% between FY22 and FY27 on the back of factors like higher brand consciousness, increasing digitization, greater purchasing power and increasing urbanization. The growth of both branded apparel share and organized apparel retail share in the apparel category is expected to outpace the overall category growth. The COVID-19 pandemic gave an impetus to the growth of e-commerce which is expected to become a significant growth driver for the organized market. Sai Silks (Kalamandir) Limited, being a leading brand in South India, has shown strong topline growth in the last two years, displaying the true potential of ethnic wear retailing in India. The company intends to continue its cluster-based expansion model and increase its presence across southern India in order to ensure better operational control over its stores. The company’s focus on creating a differentiated shopping experience for various needs and segments of customers through its different format stores as well as the dedicated online portal has been a key factor in increasing the average business per customer and word-of-mouth references. In the retail business where margins are often in single digits and under pressure, SSKL has displayed excellent growth in profit and EBITDA margins. The company also has a high return on equity of around 28% which is likely to sustain the stock at high valuations. For a capital-intensive business, SSKL has also maintained an impressive asset turnover ratio of 1.1x which will give much-needed confidence to the company as it embarks on a massive expansion. On the upper price band, the issue is valued at a P/E of 27x based on FY2023 earnings which is lower compared to its peers and is reasonable for the retail business where the valuation matrix should only get better from hereon. We, therefore, recommend a SUBSCRIBE rating for the issue.

The demographic shift has positively impacted the demand for residential real estate, and urbanisation has further contributed to the need for housing in urban areas. The government’s policy support, supportive intervention, and increased household income have improved affordability in the last two and a half decades. The rise in household income with almost steady ticket price levels has increased the affordability of housing units. While many locations in the NCR region can be identified as affordable housing destinations, the Gurugram-Sohna region collectively accounted for a large share of the affordable units supplied in NCR (98% for 2022 and 84% for the first quarter of 2023). Post-COVID-19, the demand for individual floors (builder floors) has increased and is likely to witness considerable demand and absorption in coming years. Signature Global is expected to benefit from these industry tailwinds as it has an established distribution network targeting affordable and mid-segment customers. The company has a dedicated in-house direct sales team responsible for sourcing leads. The company has a track record in execution and continued construction that has been instrumental in its consistent sales and performance despite challenging market conditions due to the COVID-19 pandemic. They have generated positive operating cash flows despite incurring significant business development expenses for growth and without significantly increasing the leverage. Though the company has a good market share in its focused regions, its continued losses in the last three financial years make us cautious about the IPO. We, therefore, recommend an “Avoid” rating for the issue. 

Yatra Online offers a comprehensive range of travel and travel-related products and services catering to the needs of passengers travelling domestically, as well as travelling to and from international destinations. The company provide customers with various tools and information that they need to research, plan, book and purchase travel products and services in India as well as outside India. With these services, the company has built and maintains strong relationships across a portfolio of suppliers for airlines, hotels and holiday packages. Further, the Indian travel industry is expected to grow at a 9-11% CAGR during FY23-28 period to reach Rs 4,540 billion in FY28, driven by the development of tourism infrastructure, rising income levels translating into higher discretionary spending on travel and tourism, and an increase in the frequency of travel for business and leisure purposes. Being one of the key players, Yatra Online is well-positioned to capture a significant share of growth in the tourism industry in India, owing to its longstanding relationship with both B2B and B2C customers. This enables the company to target India’s most frequent and high-spending travellers and educated urban consumers. With the growth in the tourism industry, we expect the online travel market share (OTA) to increase faster than captive players, improving the company’s profitability. With the company posting profits in FY23 and strong revenue growth in the past, we remain positive on the company from a medium to long-term perspective. We, therefore, recommend an SUBSCRIBE rating for the issue.

India’s fintech ecosystem has approximately 2,100 start-ups spread across a wide range of segments such as payments, lending, wealthtech, insurtech, and neo-banking. India’s fintech market revenue is estimated to reach approximately Rs. 8,341 billion in 2027 from Rs. 3,123 billion in 2022 as a result of supportive government policies, rising investments, and a fintech adoption rate of approximately 87%, the highest compared to other countries. The high initial costs incurred towards spend management solution setup are also major hindrances towards market growth, giving opportunities for SaaS offerings. India’s outsourced spend management software and services market is estimated to grow from Rs. 35 billion in 2022 to Rs. 72 billion by 2027 on the back of greater awareness and higher acceptance within MSMEs coupled with the expansion of the industrial economy and increased availability of customized spend management solutions. Zaggle has created a market niche in India by offering a combined solution for spend management (through payment instruments) and employee management (through SaaS). This diversification acts as a barrier to new entrants as the combined exposure adds complexity not only in processes and offerings but also in terms of guidelines adherence and internal operations. The company demonstrated growth at a CAGR of approximately 51.9% during the three years between FY2021 and FY2023, driven by increased usage of digital modes of payment during this period in India. If we attribute FY23 earnings to the post-IPO fully diluted paid-up equity capital of the company, the asking price is at a P/E of 66.7 and we believe it to be priced aggressively. We, therefore, recommend an “Avoid” rating for the issue. However, we would reassess the company on improvement in financial metrics over a sustained period. 

The Indian travel and tourism industry is slated to grow at a healthy pace over the next few years, driven by the benefits of rapid urbanization, expansion of the office market, increasing domestic travel, and initiatives from the government. Additionally, the industry is in the supply growth stabilization phase, which is likely to benefit companies like Samhi Hotels through its inherently large scale of keys and ability to expand its inventory compared to other small players in the market. While the industry tailwinds paint a rosy picture for the business, the company-specific characteristics such as loss-making status and negative net worth for the past three fiscals – FY21, FY22, and FY23 paint an overall bleak picture for the business compared to improvement in metrics of its listed peers like Chalet Hotels and Indian Hotels over the fiscals. Moreover, with an asset-heavy model, the company has increased net borrowings to Rs. 26,144.10 million in FY23 from Rs. 22,540.95 million in FY21. We, therefore, recommend an “Avoid” rating for the issue.