IPO Snapshot:
CreditAccess Grameen Limited is entering the primary market on Wednesday, August 8, 2018, to raise upto Rs. 630 crore via fresh issue of equity shares of Rs. 10 each and an offer for sale (OFS) of upto 1.19 crore equity shares by promoter, both in the price band of Rs. 418 to Rs. 422 per share. Representing 18.70% of the post issue paid-up share capital, total issue size is Rs. 1,131 crore at the upper end of the price band, of which 44% is the OFS portion. The issue closes on Friday, August 10, 2018 and listing is likely on 23rd August.
Company Overview:
CreditAccess Grameen is India’s 3rd largest micro finance institution (MFI) providing unsecured loans to women with annual household income upto Rs.1.6 lakh (urban area) and Rs. 1 lakh (rural area), of average ticket size of Rs. 20,000. With asset under management (AUM) of Rs. 4,975 crore (31-3-18) and a deep rural focus (81% customers in rural), 86% of loans provided is for income generating activities, 10% for home improvement and balance for emergency and family welfare. Despite widespread network of 516 branches across 132 districts in 9 Indian States and Union territory, company’s AUM is concentrated in Karnataka (58% of total) and Maharashtra (27%). While other MFIs have converted to banks (Bandhan, Equitas, Ujjivan, Bharat Financial on the verge of merger with Indusind), CreditAccess does not plan to tap the banking route and is comfortable being a standalone MFI.
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Verdict: A ‘no-brainer’ Buy
IPO Snapshot:
HDFC Asset Management Company (AMC) Limited is entering the primary market on Wednesday 25th July 2018, with an offer for sale (OFS) of up to 2.55 crore equity shares of Rs.5 each, by both the promoters, HDFC (34% of OFS) and UK’s Standard Life (66% of OFS), in the price band of Rs. 1,095 to Rs. 1,100 per share. Representing 12.01% of the post issue paid-up share capital, total issue size is Rs. 2,800 crore at the upper end of the price band. The issue closes on Friday 27th July and listing is likely on 6th August, which will be the 5th listing from HDFC stable.
Company Overview:
HDFC AMC, 56.97% subsidiary of HDFC Ltd, with foreign JV partner UK’s Standard Life owning 37.98% stake, is India’s second largest AMC (behind ICICI Prudential) with asset under management (AUMs) of Rs.2.91 lakh crore (31-3-18) and 13.7% market share. Company is the largest AMC with equity oriented funds (at 51.3% of AUM vis-à-vis industry average of 43.2%), which also helps it become the most profitable AMC in India, having earned net profit of Rs. 722 crore in FY18 or 18.1% market share of the industry PAT, due to higher fees earned in equity as against debt product. Thus, with only 13.7% market share in total AUM, 16.8% market share in actively managed equity-oriented AUM help the company garner 18.1% market share in net profits of the industry, comprising of 42 players. Besides high profitability, company also enjoys benefit of retailisation of portfolio, with 62% AUM coming from retail investors, unlike industry average of ~50%, again highest market share in retail AUM of 15.7%. Systematic investment plan (SIP) products, with average ticket size of Rs. 3,800, also provide high revenue visibility, as 77% of company’s SIPs are signed up for 5 years.
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Verdict: The Cool and Nice Stock
IPO Snapshot:
TCNS Clothing Co. Limited is entering the primary market on Wednesday 18th July 2018, with an offer for sale (OFS) of up to 1.57 crore equity shares of Rs.2 each by PE investor, promoters, current MD and former employees, all in the price band of Rs. 714 to Rs. 716 per share. Representing 25.63% of the post issue paid-up share capital, total issue size is Rs. 1,125 crore at the upper end of the price band. Issue closes on Friday 20th July and listing is likely on 30th July.
Company Overview:
TCNS Clothing Co. is a New Delhi head quartered branded apparel maker for ethnic women wear, operating 3 brands – W, Aurelia and Wishful, with sales mix of 57:33:8. Its 465 exclusive branded outlets (281 for W, 183 for Aurelia, 1 for Wishful) accounted for approximately 50% of FY18 topline of Rs. 838 crore. Further, products are sold through 1,469 large format stores, 1,522 multi-brand outlets and online/ e-commerce websites, which account for 28%, 11% and 10% of the topline respectively. While design operations are in-house, manufacturing is completely outsourced. The brand outlets, all on long term leases, are either company operated or franchised out. Company plans to open 75-80 new stores each year, to strengthen its brands.
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Aurangabad-based Varroc Engineering plans to launch its IPO next week and has priced the offer in the range of INR965 – 967 per share. The IPO will involve sale of 20,221,730 shares through an Offer For Sale (OFS), amounting to INR1,955.4 crore at the upper end of the price end. Investors can place orders for minimum 15 shares and in multiples thereafter. All these shares of the auto component manufacturer will be sold by existing shareholders. While the positive response to recent IPOs of RITES Limited and Fine Organic Industries indicates the positive sentiment, it is better to check the fundamentals before committing your money and Varroc Engineering IPO review is a step in this direction.
All OFS
As mentioned above, all the shares sold in the IPO will be offered by existing shareholders and thus, the company will not get anything from IPO proceeds. Among the selling shareholders are Omega TC Holdings Pte Ltd, Tata Capital Financial Services Limited and promoter Tarang Jain.
Omega TC Holdings made an investment in the company in March 2014 which has resulted in its stake going up to 12.55%. The Singapore-based private equity firm plans to sell its entire shareholding of 16,917,130 shares. Similarly, Tata Capital Financial Services plans to sell its 1.15% equity stake or 1,552,040 shares. Tarang Jain, who currently owns 46.35% equity stake in the company, plans to offload 1,752,560 shares which will lead to his stake dropping to just above 45%.
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Rites Limited (Rites) (erstwhile known as Rail India Technical & Economic Services Ltd.) is a wholly owned Government Company, a Miniratna (Category – I) Schedule ‘A’ Public Sector Enterprise and a leading player in the transport consultancy and engineering sector in India and the only company having diversified services and geographical reach in this field under one roof. It has an experience spanning 43 years and undertaken projects in over 55 countries including Asia, Africa, Latin America, South America and Middle East regions. Rites is the only export arm of Indian Railways for providing rolling stock overseas (other than Thailand, Malaysia and Indonesia). The company is a multidisciplinary engineering and consultancy organization providing a diversified and comprehensive array of services from concept to commissioning in all facets of transport infrastructure and related technologies.
Rites was incorporated by the Ministry of Railways, Government of India (“MoR”) and have the benefit of being associated with the Indian Railways, which is the fourth longest rail network in the world. It has developed expertise in (1) Design, engineering and consultancy services in transport infrastructure sector with focus on railways, urban transport, roads and highways, ports, inland waterways, airports and ropeways; (2) Leasing, export, maintenance and rehabilitation of locomotives and rolling stock, (3) Undertaking turnkey projects on engineering, procurement and construction basis for railway line, track doubling, 3rd line, railway electrification, up gradation works for railway transport systems and workshops, railway stations, and construction of institutional/ residential/ commercial buildings, both with or without equity participation; and (4) Wagon manufacturing, renewable energy generation and power procurement for Indian Railways through our collaborations by way of joint venture arrangements, subsidiaries or consortium arrangements.
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Fine Organic Industries Ltd. (FOIL) is the largest manufacturer of oleochemical-based additives in India and a strong player globally in this industry. It produces a wide range of specialty plant derived oleochemical-based additives used in food, plastic, cosmetics, paint, ink, coatings and other specialty application in various industries. As at March 31, 2018, FIL had a range of 387 different products sold under the ‘Fine Organics’ brand. It is the first company to introduce slip additives in India and is the largest producer of slip additives in the world. As on 31.03.18 it has 631 direct customers (i.e., end-users of products) and 127 distributors from 69 countries. Its customer list comprises of multinational, regional and local players manufacturing consumer products and petrochemical companies and polymer producers globally. FOIL’s plastics additives and specialty additives are also used in the packaging of foods and other fast moving consumer goods.
The company manufactures additives from base oleochemicals is a highly specialised and fully atomized process. Hence, many of these additives are specialty products, and this industry enjoys premium margins with only a few players dominating the industry globally. The company has three production facilities in Maharashtra -one in Ambernath, one in Badlapur and one in Dombivli. As at March 31, 2017, these three facilities have a combined installed capacity of approximately 64,300 tonnes per annum. FOIL is in the process of setting up an additional production facility in Ambernath with a planned installed capacity of 32,000 tonnes per annum and expects it to commence operations in the fourth quarter of Fiscal 2019. In addition, it is planning to set up a new production facility in Leipzig, Germany with a planned initial installed capacity of 10,000 tonnes per annum and expects to commence operations in the third quarter of Fiscal 2020. This facility will be owned and operated by a joint venture company with 50% equity interest by FOIL.
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After a lull in the month of April 2018, long wait for main board IPO for financial year 18-19 is over with a non-banking finance company breaking the ice with its float of around Rs. 1850 crore. Details of the first main board IPO of this fiscal is given hereunder:
Indostar Capital Finance Ltd. (ICFL) is a leading non-banking finance company (“NBFC”) registered with the Reserve Bank of India as a systemically important non-deposit taking company. It is a professionally managed and institutionally owned organization which is primarily engaged in providing bespoke Indian Rupee denominated structured term financing solutions to corporate and loans to small and medium enterprise (“SME”) borrowers in India. ICFL recently expanded its portfolio to offer vehicle finance and housing finance products. Although, the company operated in a challenging credit environment in the initial years of our business operations business has experienced growth since the commencement of operations in 2011. Between fiscal 2013 and 2017, its total credit exposure, total revenue and net profits grew at a CAGR of 30.0%, 31.4% and 23.7% respectively. Its corporate lending business which was at 99.8% in FY 2015 declined to 76.8% for the period ended 31.12.17 and for the said periods, its SME lending business grew from 0.2% to 22.7%. Vehicle financing operations started from November 2017 and housing finance operations started from March 2018.
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Lemon Tree Hotels Ltd. (LTHL) is India’s largest hotel chain in the mid-priced hotel sector, and the third largest overall, on the basis of controlling interest in owned and leased rooms, as of June 30, 2017, according to the Horwath Report. It is the ninth largest hotel chain in India in terms of owned, leased and managed rooms, as of June 30, 2017, according to the Horwath Report. LTHL operates in the mid-priced hotel sector, consisting of the upper-midscale, midscale and economy hotel segments. Company seeks to cater to Indian middle class guests and deliver differentiated yet superior service offerings, with a value-for-money proposition. The company opened our first hotel with 49 rooms in May 2004 and as on 31.01.2018 it had 4,697 rooms in 45 hotels (including managed hotels) across 28 cities in India. On the said date it has 662992 members in loyalty programme as “Lemon Tree Smiles” and the number is continuously rising.
LTHL aims to be India’s largest and most preferred chain of hotels and resorts in each of the upper-midscale, midscale and economy hotel segments. Due to the dynamic and evolving nature of Indian guests’ expectations and based on its market research, company has created three brands in order to address these three hotel segments: (1) ‘‘Lemon Tree Premier’ which is targeted primarily at the upper-midscale hotel segment catering to business and leisure guests who seek to use hotels at strategic locations and are willing to pay for premium service and hotel properties; (2) “Lemon Tree Hotels” which is targeted primarily at the midscale hotel segment catering to business and leisure guests and offers a comfortable, cost-effective and convenient experience; and (3) “Red Fox by Lemon Tree Hotels” which is targeted primarily at the economy hotel segment.
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Verdict: I C it as an expensive Security
IPO Snapshot:
ICICI Securities is entering the primary market on Thursday 22nd March 2018, with an offer for sale (OFS) of up to 7.82 crore equity shares of Rs. 5 each by promoter ICICI Bank, in the price band of Rs. 519 to Rs. 520 per share. Representing 23.98% of the post issue paid-up share capital, ICICI Bank will rake in Rs. 4,017 crore at the upper end of the price band, which will help it partly off-set higher loss provisions. Issue is closing on Monday 26th March and listing is likely on 5th April.
Company Overview:
ICICI Securities, a wholly owned capital market arm of ICICI Bank, offers broking (through ICICIdirect.com), investment banking, portfolio management services (PMS) and financial products distribution (mutual fund and insurance) to retail and institutional customers, through its marketing network of 200 own branches, 2,600+ branches of ICICI Bank, 4,600+ sub-brokers and independent financial associates. The technology, whether broking or mutual fund distribution is a ‘me-too’ or easily replicable, and most other full-fledged broking firms like Motilal Oswal or a discount broker such as Zerodha or many fin-tech start-ups in mutual fund distribution have similar offerings. Hence, its technological capabilities are not out-of-the-world and are simply keeping up with the changing times. Approximately 60% of income is generated through broking, 10% from investment banking, 15% from mutual fund distribution and balance through distribution fee of insurance and other products.
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Verdict: Healthy LT prospects, but not for ST
IPO Snapshot:
Mishra Dhatu Nigam is entering the primary market on Wednesday 21st March 2018 with an offer for sale of up to 4.87 crore equity shares of Rs. 10 each, by the Govt. of India, in the price band of Rs. 87 to Rs. 90 per share, with Rs. 3 per share retail discount. Representing 26% of the post issue paid-up share capital, total issue size is Rs. 433 crore at the upper end of the price band. The issue is closing on Friday 23rd March and listing is likely on 4th April.
Company Overview:
Mishra Dhatu Nigam (Midhani), a wholly owned subsidiary of the Govt. of India, is India’s leading manufacturer of special steels and super alloys and the country’s sole manufacturer of titanium alloys, used in three critical sectors such as defence, space and nuclear energy, as well as in non-strategic sectors such as railways, oil and gas among others. Company has a manufacturing facility at Hyderabad and is undertaking greenfield expansion at two locations (i) Rohtak: operations to commence in FY19, to cater to needs of bullet proof jacket for the army and (ii) Nellore: plant will be operational in two phases – first part to commence in FY19-end, while second phase is under JV with NALCO will come on stream by FY21/22.
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