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Prudent Corporate IPO review (May apply)

Review By Dilip Davda on May 6, 2022

•    PCASL is in the business of retail wealth management services.
•    It is operating in a highly competitive segment.
•    Based on its super earnings, the issue is fully priced.
•    This company's future prospects depend on market behaviours.
•    Risk seeker/cash surplus investors may consider a moderate investment.

ABOUT COMPANY:
Prudent Corporate Advisory Services Ltd. (PCASL) is an independent retail wealth management services group in India and is amongst the top mutual fund distributors in terms of average assets under management ("AAUM") and commission received (Source: CRISIL Report). It 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. 

PCASL 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 five-year period ending Fiscal 2021 (Source: CRISIL Report). As of December 31, 2021, it is associated as a distributor with 42 AMCs.

Incorporated in 2003, it provided wealth management services to 13,51,274 unique retail investors through 23,262 MFDs on the business-to-business-to-consumer ("B2B2C") platform and is spread across branches in 110 locations in 20 states in India, as on December 31, 2021. As of the same date, it has 1067 employees on its payroll and 13.51 lakh clients.

It is an independent platform with no single AMC contributing more than 15% of its AUM as of December 31, 2021. As of the same date, its assets under management from the mutual fund distribution business ("AUM") stood at Rs. 48411.47 cr. with 92.14% of total AUM being equity-oriented. PCASL's AUM has increased from Rs. 16667.75 cr. in March 2018 to Rs. 48411.47 cr. as of December 31, 2021, at a CAGR of 32.83% with equity-oriented AUM increasing from Rs. 13865.79 cr. to Rs. 44605.91 cr. during the same period, at a CAGR of 36.49%. Among national distributors, its market share on a commission received basis has increased from around 4% in Fiscal 2015 to around 12% in Fiscal 2021. PCASL's equity AUM of Rs. 44605.91 cr. as of December 31, 2021, represented 2.39% of the total equity AUM of the mutual fund industry.

ISSUE DETAILS/CAPITAL HISTORY:
To provide an exit to existing stakeholders and availing listing benefits, PCASL is coming out with a purely secondary issue with an Offer for Sale of 8549340 equity shares of Rs. 5 each via book building process issue. It has fixed a price band of Rs. 595.00 to Rs. 630.00 per share and plans to mobilize Rs. 538.61 cr. The issue opens for subscription on May 10, 2022, and will close on May 12, 2022. Minimum application is to be made for 23 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. The issue constitutes 20.65% of the post issue paid-up equity capital of the company. 

PCASL has reserved shares worth Rs. 6.50 cr. for its eligible employees and offering them a discount of Rs. 59 per share. From the residual portion, it has allocated 50% for QIBs, 15% for HNIs and 35% for Retail investors. 

The issue is jointly lead managed by ICICI Securities Ltd., Axis Capital Ltd. and Equirus Capital Pvt. Ltd. while Link Intime India Pvt. Ltd. is the registrar to the issue. 

Having issued initial equity at par, the company issued/converted further equity in the price range of Rs. 50 to Rs. 3018.84 between February 2009 and November 2021. It has also issued bonus shares in the ratio of 18 for 1 in March 2009 and 19 for 1 in August 2021. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. 0.01, Rs. 0.13 and Rs. 150.94 per share. 

This being a secondary issue, post-IPO PCASL's paid-up equity capital will remain the same at Rs. 20.70 cr. Based on the upper cap of the price band, the company is looking for a market cap of Rs. 2608.62 cr. 

FINANCIAL PERFORMANCE: 
On the financial performance front, for the last three fiscals, PCASL has (on a consolidated basis) posted total income/net profits of Rs. 225.06 cr. / Rs. 21.02 cr. (FY19), Rs. 236.22 cr. / Rs. 27.85 cr. (FY20) and Rs. 294.90 cr. / Rs. 45.30 cr. (FY21). For the first nine months of FY22 ended on December 31, 2021, it has earned a net profit of Rs. 57.63 cr. on a total income of Rs. 328.00 cr. Thus, it kept enjoying higher margins on its business. 

For the last three fiscals, it has posted an average EPS of Rs. 8.56 and an average RoNW of 26.83%. The issue is priced at a P/BV of xx based on its NAV of Rs. 51.95 as of December 31, 2021, as well as post-IPO NAV. 

If we annualize FY22 earnings and attribute it to the post IPO equity base, then the asking price is at a P/E of around 33.94. Thus with super earnings its IPO appears fully priced. 

DIVIDEND POLICY:
The company is a dividend-paying one and has paid a dividend of 439% (FY19), 25% (FY20 and FY21) and 60% for FY22 (for the period ended December 31, 2021). It will adopt a prudent dividend policy post listing based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per the offer documents, PCASL has shown IIFL Wealth, ICICI Securities, CDSL, CAMS, HDFC AMC, Nippon Life AMC and UTI AMC as its listed peers. They are currently trading at a P/E of 36.70, 11.95, 48.27, 40.54, 29.99, 25.73 and 23.60 (as of May 06, 2022). However, they are not truly comparable on an apple-to-apple basis.

MERCHANT BANKERS' TRACK RECORDS:
Track records of the three merchant bankers associated with this issue are as under:

ICICI Securities Ltd.: This is the 41st mandate from ICICI Sec during the last three fiscals (including the ongoing one). Out of the last 10 listings, 4 opened at discount and the rest with premiums ranging from 0.06% to 169.04% on the day of listings.

Axis Capital Ltd.: This is the 37th mandate from Axis Cap during the last three fiscals (including the ongoing one). Out of the last 10 listings, 3 opened at discount and the rest with premiums ranging from 0.12% to 169.04% on the day of listings.

Equirus Capital Pvt. Ltd.: This is the 7th mandate from Equirus Cap during the last three fiscals (including the ongoing one). Out of the last 10 listings, 4 opened at discount and the rest with premiums ranging from 0.54% to 103.11% on the day of listings.


Conclusion / Investment Strategy

PCASL is operating in a competitive field and the IPO is fully priced based on its super earnings. The sustainability of such margins in bad times raises concern as its future prospects hinge on market behaviour. Cash surplus/risk seeker investors may consider a moderate investment with a long-term perspective.

Review By Dilip Davda on May 6, 2022

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at its own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

Email: dilip_davda@rediffmail.com

Prudent Corporate Advisory Services IPO FAQs

  1. 1. Why Prudent Corporate Advisory Services IPO?

    The initial public offer (IPO) of Prudent Corporate Advisory Services Limited offers an early investment opportunity in Prudent Corporate Advisory Services Limited. A stock market investor can buy Prudent Corporate Advisory Services IPO shares by applying in IPO before Prudent Corporate Advisory Services Limited shares get listed at the stock exchanges. An investor could invest in Prudent Corporate Advisory Services IPO for short term listing gain or a long term.

  2. 3. Prudent Corporate Advisory Services IPO what should investors do?

    Prudent Corporate Advisory Services IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Prudent Corporate Advisory Services IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.

  3. 4. Is Prudent Corporate Advisory Services IPO good?

    Our recommendation for Prudent Corporate Advisory Services IPO is to subscribe for long term.

  4. 5. Is Prudent Corporate Advisory Services IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the Prudent Corporate Advisory Services IPO.

  5. 6. When will Prudent Corporate Advisory Services IPO allotment status?

    The Prudent Corporate Advisory Services IPO allotment status will be available on or around May 18, 2022. The allotted shares will be credited in demat account by May 20, 2022. Visit Prudent Corporate Advisory Services IPO allotment status to check.

  6. 7. When will Prudent Corporate Advisory Services IPO list?

    The Prudent Corporate Advisory Services IPO list date is not yet available. The Prudent Corporate Advisory Services IPO is planned to list on May 23, 2022, at BSE, NSE.

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