Reblog: Godrej Agrovet IPO review


Godrej Agrovet Ltd. (GAL) is a well diversified, research and development focused agri-business company with operations across five business verticals i.e. animal feed, crop protection, oil palm, dairy, and poultry and processed foods. GAL is the leading compound animal feed company in India, on the basis of installed capacity for the financial year 2016. In Bangladesh, its joint venture, ACI Godrej was the fourth largest feed producer, in terms of sales volume, during the financial year 2016. It is also the largest crude palm oil producer in India, in terms of market share, as of March 31, 2017.

In animal feed business, GAL’s portfolio of products comprises cattle feed, poultry feed (broiler and layer), aqua feed (fish and shrimp) and specialty feed. Animal feed products are manufactured at 35 facilities, of which 10 facilities are owned and seven are operated by it, located near major consumption centers across India, with an aggregate production capacity of 2.36 million MT per annum, as of June 30, 2017. Company’s pan-India distribution network for animal feed products includes approximately 4,000 distributors, as of June 30, 2017.

In crop protection business, GAL manufactures a wide range of products that cater to the entire crop lifecycle including plant growth regulators, organic manures, generic agrochemicals and specialized herbicides. In October 2015 it acquired a majority equity interest in Astec LifeSciences (ALS) and currently own 56.82% of the outstanding equity shares. ALS manufactures agrochemical active ingredients (technical), bulk and formulations as well as intermediate products and sells its products in India as well as exports them to approximately 24 countries, including the United States and countries across Europe, West Asia, South East Asia and Latin America. ALS also undertakes contract development and manufacturing services for other agrochemical companies. ALS sells all its products to institutional customers, while GAL sells its products primarily to retail consumers. The distribution network of Company’s crop protection business in India includes approximately 6,000 distributors, as of June 30, 2017.

In oil palm business, GAL produces a range of products including crude palm oil, crude palm kernel oil and palm kernel cake. The company purchases fresh fruit bunches (“FFBs”) from palm oil farmers and work closely with them by providing planting material, agricultural inputs and technical guidance. It has entered into memoranda of understanding with nine state governments, which provides the company with access to approximately 61,700 hectares under oil palm plantation, which is equivalent to approximately one-fifth of India’s area suitable for oil palm cultivation, as of March 31, 2017. This public-private partnership model, which, has been promoted by the Government of India, allows GAL to maintain an asset-light business model. The company works closely with farmers in it’s designated area to plant oil palm on their farmland and provide technical guidance and assistance. The company has set up five palm oil mills in India with an aggregate FFB processing capacity of 125 MT per hour and a palm kernel processing capacity of seven MT per hour, as of June 30, 2017. GAL is recognized as the ‘Highest Crude Palm Oil Producer in the Country’.

In dairy business, which it operates through Subsidiary, Creamline Dairy, it sells a majority of milk and milk-based products under the ‘Jersey’ brand across the states of Telangana, Andhra Pradesh, Tamil Nadu, Karnataka and Maharashtra. As of June 30, 2017, it owned and operated nine milk processing units. For dairy business, supply chain network includes procurement from six states through a network of 120 chilling centers, as of June 30, 2017. As on the same date, it’s dairy distribution network included approximately 4,000 milk distributors, approximately 3,000 milk product distributors and 50 retail parlours, as well as direct sales to institutional customers.

GAL also manufactures and market processed poultry and vegetarian products through its brands ‘Real Good Chicken’ and ‘Yummiez’. To grow its poultry and processed foods business, company has entered into a joint venture with Tyson India Holding Limited, a subsidiary of Tyson Foods Inc., U.S.A. This helps GAL with the technical and operational expertise to compete successfully in India. The company has set up two processing plants with integrated breeding and hatchery operations and has a diverse customer base comprising of retail customers as well as institutional clients such as quick service restaurants, fine dining restaurants, food service companies and hotels.

To part finance its repayment/pre-payment of working capital facilities, repayment of commercial paper and general corpus fund needs, GAL is coming out with a maiden IPO for fresh equity issue worth Rs. 300 crore and offer for sale of Rs. 300 crore by Godrej Industries and 12300000 equity shares under OFS by V-Science Investment Pte. Issue is being made via book building route with a price band of Rs. 450 to Rs. 460 for a share having face value of Rs. 10 each. Company has reserved shares worth Rs. 20 crore for eligible employees. Issue opens for subscription on 04.10.17 and will close on 06.10.17. Total issue size is Rs. 1157 crore including pre-IPO placements. Minimum application is to be made for 32 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. BRLMs to this offer are Kotak Mahindra Capital Co. Ltd., Axis Capital Ltd. and Credit Suisse Securities (India) Pvt. Ltd. Kavry Computershare Pvt. Ltd. is the registrar to the issue. Having issued initial equity at par in 1991-92, company raised further equity in the price range of Rs. 82 to Rs. 2164.41 per share. It has also issued bonus shares in the ratio of 3 for 1 in March 1994, 6 for 1 in March 2015 and 1 for 1 in March 2017. In September 2017 it issued 192901 shares at a price of Rs. 440 per share under pre-IPO placement, thus the fresh issue size stands reduced to Rs. 291.51 crore (approx 6337390 shares) that includes reserve quota for employees. Post issue, GAL’s current paid up equity capital of Rs. 185.32 crore will stand enhanced to around Rs. 191.66 crore.

On performance front, GAL has (on a consolidated basis) posted turnover/net profits of Rs.3117.42 cr. / Rs. 156.56 cr. (FY14), Rs. 3325.50 cr. / Rs. 210.13 cr. (FY15), Rs. 3817.67 cr. / Rs. 261.09 cr. (FY16) and Rs. 4983.45 cr. / Rs. 274.39 cr. (FY17). For Q1 of the current fiscal, it has reported net profit of Rs. 74.29 crore on a turnover of Rs. 1369.42 cr. It has posted an average EPS of Rs. 10.02 and average RoNW of 23.86% for last three fiscals on a paid up equity capital of Rs.185.13 cr. Issue is priced at a P/BV of 7.88. If we annualize latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 30. It has no listed peers to compare with. Issue is priced justifiably considering the diverse activities.

On BRLM’s front, three merchant bankers associated with this issue have handled 42 public issues in past three fiscal years out of which 11 issues closed below the issue price on listing date.

Conclusion: After long, a well diversified company from the house of Godrej is coming with a maiden offer. Company is playing major role in all its verticals and is poised for better prospects. Investment may be considered for short to long term.

The original review is authored by Dilip Davda, appears on Chittorgarh.com and is available here.


Reblog: Prataap Snacks IPO review


Prataap Snacks Ltd. (PSL) an Indore based company is one of the top six Indian snack food companies in terms of revenues in 2016, and among the fastest growing companies in the Indian organized snack market between 2010 and 2016. Based on the FS Report, the snacks market in India is estimated at approximately Rs. 55000 crore out of which organized snack market is estimated at Rs. 22000 crore and grew at a CAGR of 14% between 2012 and 2016. With increasing competition and cost pressure, there has been a gradual shift from an unorganized to organized sector across the various product segments. PSL is present in three major savory snack food categories in India and all its products are sold under the “Yellow Diamond” brand. As of July 31, 2017, PSL had 40 flavors of Chips and extruded snacks and 23 varieties of Namkeen in the market. It is set to launch special snacks for health-conscious consumers and also sweet bites in the near future.

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Reblog: SBI Life Insurance IPO review


SBI Life Insurance Co. Ltd. (SBI Life) is a life insurance arm of SBI group that is coming out with a public offer after 23 years gap. The last issue was in 1994 for SBI.

SBI Life India’s largest private life insurer, in terms of New Business Premium generated in each fiscal year, since Fiscal 2010. It has also increased its market share of New Business Premium generated among private life insurers in India, from 15.87% in Fiscal 2015 to 20.04% in Fiscal 2017. Between Fiscal 2015 and Fiscal 2017, SBI Life’s New Business Premium generated increased at a CAGR of 35.45%, which is the highest among the top five private life insurers (in terms of total premium in Fiscal 2017) in India.

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Reblog: ICICI Lombard IPO review


 

 

 

ICICI Lombard General Insurance Co. Ltd. (ILGI) is a general insurance arm of ICICI Bank group. The Bank is in the process of unlocking value of its arms via public issues and listings. Last year the group came with first life insurance sector arm ICICI Prudential Life Insurance IPO that after initial hiccups surged and continues to do well. Now it is coming out with a maiden offer for its general insurance arm which is ranking first among private sector general insurance companies with better product mix and having better business on all fronts.

ILGI is the largest private-sector non-life insurer in India based on gross direct premium income in fiscal 2017, a position it has maintained since fiscal 2004 after being one of the first few private-sector companies to commence operations in the sector in fiscal 2002. The company offers its customers a comprehensive and well-diversified range of products, including motor, health, crop/weather, fire, personal accident, marine, engineering and liability insurance, through multiple distribution channels. It was founded as a joint venture between ICICI Bank Limited, India’s largest private -sector bank in terms of consolidated total assets with and Fairfax Financial Holdings Limited, a Canadian based holding company which, through its subsidiaries, is engaged in property and casualty insurance and reinsurance and investment management.

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Reblog: Cochin Shipyard IPO Review


Cochin Shipyard Ltd. (CSL) is a PSU enjoying “Miniratna” status and the largest public sector shipyard in India in terms of dock capacity, as of March 31, 2015, according to the CRISIL Report. CSL caters to clients engaged in the defense sector in India and clients engaged in the commercial sector worldwide. In addition to shipbuilding and ship repair, it also offers marine engineering training. As of May 31, 2017, the company has two docks – dock number one, primarily used for ship repair (“Ship Repair Dock”) and dock number two, primarily used for shipbuilding (“Shipbuilding Dock”). CSL’s Ship Repair Dock is one of the largest in India and enables it to accommodate vessels with a maximum capacity of 125,000 DWT and Shipbuilding Dock can accommodate vessels with a maximum capacity of 110,000 DWT.

Now CSL is in the process of constructing a new dock, a ‘stepped’ dry dock (“Dry Dock”). This stepped dock will enable longer vessels to fill the length of the dock and wider, shorter vessels and rigs to be built or repaired at the wider part. It is also in the process of setting up an International Ship Repair Facility (“ISRF”), which includes setting up a shiplift and transfer system. In the last two decades, company has built and delivered vessels across broad classifications including bulk carriers, tankers, Platform Supply Vessels (“PSVs”), Anchor Handling Tug Supply vessels (“AHTSs”), launch barges, tugs, passenger vessels and Fast Patrol Vessels (“FPVs”). The company is currently building India’s first Indigenous Aircraft Carrier (“IAC”) for the Indian Navy. It has also grown ship repair operations and is the only commercial shipyard to have undertaken repair work of Indian Navy’s aircraft carriers, the INS Viraat and INS Vikramaditya.

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Reblog: HUDCO IPO review


Housing & Urban Development Corp Ltd, popularly known as “HUDCO” that recently celebrated its 47th anniversary on 25th April 2017 and enjoying “Mini Ratna” status among PSUs is breaking the ice after a gap of 5 years (since April 2012) with a maiden IPO from a PSU. This wholly owned GoI Company is engaged in urban and rural housing as well as infrastructure project financing and has a track record of profit generation and dividend distribution since inception. It enjoys AAA rating for its debt plans from rating agencies like CARE, ICRA and IND Ra to have low cost debts.. Its housing finance loan is classified as social housing, residential real estate and retail finance (branded as Hudco Niwas). Under social housing Hudco is financing economically weaker sections/ lower income groups of the society.

For urban infrastructure finance, Hudco distributes loans relating to water supply, roads and transport (including railways and ports), power, SEZs, gas pipelines, oil terminals, telecom network, market complex, shopping centres, hotels, office buildings, sewerage, drainage, solid waste management etc.

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Reblog: Avenue Supermarts DMart IPO review


Issue Summary

Avenue Supermarts Ltd (ASL) is an emerging national supermarket chain (D mart) , with a focus on value-retailing. According to Technopak, in Fiscal 2016 ASL was one of the largest and the most profitable F&G retailer in India. It offers a wide range of products with a focus on the Foods, Non-Foods (FMCG) and General Merchandise & Apparel product categories. ASL opened its first store in Mumbai, Maharashtra in 2002. As of January 31, 2017, it had 118 stores with Retail Business Area of 3.59 million sq.ft, located across 45 cities in Maharashtra (59), Gujarat (27), Telangana (13), Karnataka (7), Andhra Pradesh (4), Madhya Pradesh (3), Chhattisgarh (1), NCR (1), Daman (1) and Rajasthan (2). At the end of the nine months period ended December 31, 2016 and Fiscals 2016, 2015 and 2014, the company had 117, 110, 89 and 75 stores with Retail Business Area of 3.57 million sq. ft., 3.33 million sq. ft., 2.66 million sq. ft. and 2.14 million sq. ft., respectively.

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Reblog: Music Broadcast (Radio City) IPO review


Issue Summary

Music Broadcast Ltd (MBL) is operating radio stations under the branch “Radio City” and has grown its presence from 4 cities in 2001 to 37 cities as on 15th February 2017. These radio stations include the eight “Radio Mantra Stations” transferred from SPML pursuant to the Scheme of Arrangement and nine out of eleven New Radio City Stations. The company expects the remaining two New Radio City Stations to be operationalised by March/ April 2017. MBL is present in 12 out of the top 15 cities in India by population having a reach to over 49.60 million listeners in 23 cities. All its Phase II Radio City Stations which were under Phase II Policy have been migrated to the Phase III Policy. These include Radio City stations which are present at Bengaluru, Lucknow, Mumbai, New Delhi, Chennai, Pune, Hyderabad, Ahmedabad, Surat, Nagpur, Jaipur, Vadodara, Coimbatore, Vizag, Ahmednagar, Sholapur, Sangli, Nanded, Jalgaon and Akola and the Radio Mantra Stations which have been transferred to it pursuant to the Scheme of Arrangement which are located at Agra, Bareilly, Gorakhpur, Varanasi, Jalandhar, Ranchi, Hissar, and Karnal. Under the Phase III Policy, new cities were opened up for auction, pursuant to which MBL acquired 11 additional radio stations i.e. the New Radio City Stations. The New Radio City Stations which have been operationalised are located at Kanpur, Ajmer, Kota, Udaipur, Patiala, Jamshedpur, Nasik, Kolhapur and Madurai. The remaining two New Radio City Stations namely Bikaner and Patna are expected to be operationalised by March/ April 2017. Under the Phase III Policy the license period for radio stations has been increased to 15 years and radio stations are now permitted to carry news bulletins of AIR and also network their radio stations in all cities.

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Reblog: BSE Ltd IPO review


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Issue Summary

After demonetization, the market went for tail spin with standstill activities in the primary market. However, the long waited IPO of BSE is taking a lead to break the ice for CY 2017 as well as final quarter of FY16-17 as the first main board IPO.

BSE LTD (erstwhile known as The Bombay Stock Exchange) is the premier and the oldest stock exchange of Asia (established on 9th July 1875) and has become the most trustworthy brand as far as stock market is concerned and has become the synonyms with its Sensex and Dalal Street.

Today BSE is the world’s largest exchange by number of listed companies (5,329), India’s largest and world’s 10th largest exchange by way of market capitalization, with US$ 1.7 trillion in total market capitalization of all listed companies and the world’s fastest stock exchange. It has now also become the first stock exchange to go public in India and has thus become the first mover. BSE has diversified products for trading is also providing IT services and solutions, listing business, marketing business, data business etc.

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Reblog: IPO Analysis – PNB Housing Finance


PNB Housing Finance is entering the primary market on Tuesday 25th October 2016, to raise Rs. 3,000 crore, via a fresh issue of equity shares of Rs. 10 each, in the price band of Rs. 750 to Rs. 775 per share. Based on the price discovered, company will issue 3.9 to 4.0 crore equity shares at the upper and lower end of the price band respectively. Representing 23.37% of the post issue paid-up share capital at the upper end, issue closes on Thursday 27th October.

51% subsidiary of Punjab National Bank, PNB Housing Finance is India’s 5th largest home loan provider (after HDFC, LIC Housing, Dewan and Indiabulls Housing) with loan book of Rs. 30,900 crore (30-6-16), 70% of which is housing loans, having average ticket size of Rs. 32 lakh. Average ticket size for non-housing loans, which constitute 30% of the loan book, is Rs 57 lakh. With operations mostly in the urban areas of North, South and West India, its loan book has posted CAGR of 62% between March 2012 to June 2016.

While FY16 revenue grew 52% YoY to Rs. 2,700 crore, Net interest income (NII) jumped 63% YoY to Rs. 840 crore, leading to net profit of Rs. 328 crore and EPS of Rs. 27.58, on equity of Rs. 126.92 crore. Net interest margin (NIM) of 2.98% was clocked in FY16, up from FY15’s 2.94%, while Return on average assets (RoA) stood at 1.35%, up from FY15’s 1.27%.

The stupendous financial performance continued into FY17, with revenue of Rs. 863 crore, NII of Rs. 255 crore and net profit of Rs. 96 crore for the June quarter. Q1FY17 EPS stood at Rs. 7.57. Despite the phenomenal growth, asset quality is has remained intact, infact better than industry average. Gross NPAs, as of 30-6-16, of Rs. 84 crore, represents 0.27% of gross assets.

As of 30-6-16, company had networth of Rs. 2,240 crore, translating to BVPS of Rs. 177. It has only 2 shareholders – parent Punjab National Bank (51%) and Carlyle Group (49%), the latter pursuant to its acquisition of Destimoney Enterprises in Feb 2015. Fresh issue proceeds of Rs. 3,000 crore will augment company’s capital base. Current capital adequacy ratio (CAR) stands at 13.04% vis-à-vis regulatory requirement of 12%.

Given the room which fresh capital will provide the company for further leverage, capital being lifeline for any finance business, FY17 expected EPS is estimated at about Rs. 35 per share. At Rs. 775, company’s market cap will be Rs. 12,837 crore, upon listing, based on expanded equity of Rs. 165.63 crore. Estimated BVPS, as of 31-3-17, is Rs. 340, which translates into PBV multiple of 2.3x, while the PE multiple works out to 22x, based on current year estimates.

Below is a comparison with other listed housing finance companies, both bigger and smaller than the company:

Company Name

(Rs. Crore)

Loan Assets

Revenue

PAT

Gross NPA %

Current Market Cap

Mcap % to loan assets

PE

PBV

As of 30-6-16

QoQ Growth

FY16

YoY growth

FY16

YoY growth

Margin

30-6-16

FY17E

FY17E

LIC Housing

1,27,437

1.8%

12,396

16.2%

1,661

19.8%

13.4%

0.59%

31,087

24%

16.9x

2.8x

Dewan

72,012

3.6%

7,312

22.2%

729

17.4%

10.0%

0.98%

10,455

15%

11.6x

1.7x

Indiabulls Housing

71,026

3.4%

8,290

28.2%

2,345

23.4%

28.3%

0.84%

37,121

52%

12.5x

2.7x

PNB Housing

30,901

13.7%

2,700

51.6%

328

68.9%

12.1%

0.27%

12,837*

42%*

22.1x*

2.3x*

Gruh Finance

11,543

3.9%

1,275

20.3%

244

19.5%

19.1%

0.56%

12,409

108%

44.3x

11.1x

Can Fin

11,183

5.1%

1,084

32.6%

157

82.1%

14.5%

0.24%

4,861

43%

22.1x

4.3x

* at upper end of price band of Rs. 775 per share

The growth rates which PNB Housing has posting is the highest in the industry (only Can Fin reported higher PAT growth in FY16, but its revenue and loan book growth was much lower). Moreover, PNB Housing’s NPAs have also been under check – 2nd best in the peer set. While net margins and RoE can improve further, based on valuation parameters of PBV multiple (2.3x) and market cap as a % to loan assets (42%), the pricing of the issue appears in-line. Growth visibility in the stock remains very high, given the fresh capital coming into the business, which provides added comfort.

Housing finance industry has been on a growth trajectory, with further headroom for growth. Company’s industry-leading growth coupled with sound fundamental position make it an attractive investment opportunity, albeit softening due to higher base.

Positive sector outlook coupled with stunning growth rates make the issue a subscribe.

Disclosure: No Interest.

The original article is authored by Geetanjali Kedia and is available here.