Reblog: Future Supply Chain IPO review


Future Supply Chain Solutions Ltd. (FSC) is one of India’s largest organized third-party logistics service operators. It offers automated and IT-enabled warehousing, distribution and other logistics solutions to a wide range of customers. Company’s service offerings, warehousing infrastructure, pan-India distribution network, “hub-and-spoke” transportation model and automated technology systems support its competitive market position. FSC’s customers operate in various sectors across India, including retail, fashion and apparel, automotive and engineering, food and beverage, fast moving consumer goods (“FMCG”), e-commerce, healthcare, electronics and technology, home and furniture and ATMs. According to management, its business model enables it to act as a service provider that can comprehensively cover customers’ supply chain needs. It currently operates with 14 hubs, 106 branches and dedicated containerized fleet of 526 vehicles. Its Mihan-Nagpur distribution center is the most modern and highly automated one.

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Reblog: Shalby Ltd IPO review


Shalby Ltd. (Shalby) is one of the leading multi-specialty chains of hospitals in India. Its hospitals are tertiary care hospitals, few of which also offer quaternary healthcare services to patients in various areas of specialization such as orthopedics, complex joint replacements, cardiology, neurology, oncology, and renal transplantations. As on the date of RHP, Shalby provided inpatient and outpatient healthcare services through 11 operational hospitals with an aggregate bed capacity of 2,012 beds. As on June 30, 2017, it had nine operational hospitals with an aggregate operational bed count of 841 beds. Shalby that has earned name and fame for joint replacement had a 15% market share of all joint replacement surgeries conducted by private corporate hospitals in India in 2016. As on the same date, it also provided outpatient services through 47 Outpatient Clinics and has ten shared surgery centres within third party hospitals, which are called “Shalby Arthroplasty Centre of Excellence” (“SACE”), where Shalby offers orthopedic healthcare services including surgeries. Since March 2007, it has conducted an aggregate of 92100 surgeries, and provided healthcare services to an aggregate of 1025533 patients, consisting 133652 inpatients and 891881 outpatients. Indian healthcare industry that was around Rs. 9.2 trillion in 2016 is expected to grow at a CAGR of around 15-16% to reach Rs.17.2 trillion by 2020.

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Reblog: HDFC Standard Life IPO Review


IPO Snapshot:

HDFC Standard Life Insurance is entering the primary market on Tuesday 7thNovember 2017, with an offer for sale (OFS) of up to 29.98 crore equity shares of Rs. 10 each, by both the promoters HDFC (64% of OFS) and Standard Life (36% of OFS), in the price band of Rs. 275 to Rs. 290 per share. Representing 14.92% of the post issue paid-up capital, OFS will raise Rs. 8,695 crore at the upper price band and will close on Thursday 9th November. Listing is likely on 17th November.

Company Overview:

HDFC Standard Life, HDFC’s 61.21% subsidiary, with 34.75% owned by foreign partner Standard Life, is India’s 3rd largest private sector life insurer, after ICICI Pru and SBI Life, based on market share of 16.5% among private insurers, on FY17 total premium.

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Reblog: Khadim India IPO review


IPO Snapshot:

Khadim India is entering the primary market on Thursday 2nd November 2017 to raise Rs. 50 crore via fresh issue of equity shares and an offer for sale (OFS) of up to 66 lakh equity shares of Rs. 10 each by promoters (11% of OFS) and Fairwinds PE (89% of OFS), both in the price band of Rs.745 to Rs. 750 per share. Representing 40.32% of the post issue paid-up share capital at the upper end, total issue size is Rs. 543 crore. The issue will close on Monday 6th November and listing is expected on 14thNovember.

Company Overview:

Khadim India is India’s second largest footwear retailer, and the largest in East India, with 853 Khadim’s branded retail outlets (80% of which are franchised out) and 377 distributors, as of 30-6-17, with retail accounting for 73% of Rs. 621 crore FY17 topline and distributors accounting for 22%. The company has a dual strategy to grow both retail outlets and deepen distribution pipeline. The company offers a bouquet of 9 brands across different footwear categories, besides parent brand Khadim. Positioned as a value retailer focusing on mass and mass premium category, 55% of its stores are located in tier 3 cities.

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Reblog: New India Assurance IPO Review


IPO Snapshot:

The New India Assurance Company is entering the primary market on Wednesday 1st November 2017 with an IPO of up to 12 crore equity shares of Rs. 5 each, comprising fresh issue of upto 2.40 crore equity shares and an offer for sale (OFS) of 9.60 crore equity shares by promoter Indian Government, both in the price band of Rs.770 to Rs. 800 per share, with Rs. 30 per share discount for retail investors. Representing 14.56% of the post issue paid-up share capital, issue will raise Rs. 9,474 crore, at the upper end, of which, Rs. 1,895 crore will flow into the company via fresh issue and balance Rs. 7,579 crore will meet FY18 divestment target of Rs. 72,500 crore. Issue will close on Friday 3rd November and listing is expected on 13thNovember.

Company Overview:

New India Assurance, 99.99% subsidiary of Government of India, is the country’s largest general insurance company, with 15% market share (down from FY16’s 15.7%) in gross direct premium, enjoying leadership in all segments, such as motor, health, fire, marine, except crop. In FY17, motor, health, fire, marine, crop segments accounted for 39%, 26%, 15%, 3% and 5% of company’s gross written premium, respectively, which is more-or-less in line with the industry structure, except for crop insurance where all private sector insurers have been more aggressive. Company has a robust pan India multi-channel distribution network, comprising 2,452 offices, 68,389 agents, 16 corporate agents, 25 bancassurance partners (including Bank of India and Canara Bank), with individual agents, direct sales and brokers accounting for 42%, 31% and 26% of business respectively.

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Reblog: Mahindra Logistics IPO review


Mahindra Logistics Ltd. (MLL) – a Mahindra group company is one of India’s largest 3PL solutions providers in the Indian logistics industry which was estimated at Rs. 6.40 trillion in fiscal 2017 according to CRISIL report. MLL’s competitive advantage is its “asset-light” business model pursuant to which assets necessary for operations such as vehicles and warehouses are owned or provided by a large network of business partners. Technology enabled, “asset-light” business model allows for scalability of services as well as the flexibility to develop and offer customized logistics solutions across a diverse set of industries. The company operates in two distinct business segments, supply chain management (“SCM”) and corporate people transport solutions (“PTS”).

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Reblog: Reliance Nippon Life IPO review


Reliance Nippon Life Asset Management Ltd. (RNL) (erstwhile known as Reliance Capital Asset Management Ltd.) is one of the largest asset management companies in India, managing total AUM of Rs. 3,625.50 billion as of June 30, 2017. RNL is involved in managing (i) mutual funds (including ETFs); (ii) managed accounts, including portfolio management services, alternative investment funds (“AIFs”) and pension funds; and (iii) offshore funds and advisory mandates. It is ranked the third largest asset management company, in terms of mutual fund quarterly average AUM (“QAAUM”) with a market share of 11.4%, as of June 30, 2017, according to ICRA. RNL started mutual fund operations in 1995 as the asset manager for Reliance Mutual Fund, managed QAAUM of Rs. 2,229.64 billion and 7.01 million investor folios, as of June 30, 2017. It managed 55 open-ended mutual fund schemes including 16 ETFs and 174 closed-ended schemes for Reliance Mutual Fund as of June 30, 2017. RNL has a pan-India network of 171 branches and approximately 58,000 distributors including banks, financial institutions, national distributors and independent financial advisors (“IFAs”), as of June 30, 2017.

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Reblog: IPO Review – Indian Energy Exchange Ltd.


Indian Energy Exchange Ltd. (IEX) is the largest exchange for the trading of a range of electricity products in India, in terms of traded contract volumes in the financial year 2017 according to the Central Electricity Regulatory Commission (the “CERC”). Electricity products traded over its electronic trading platform comprise (i) electricity contracts in blocks of 15 minutes in the day-ahead-market (the “DAM”), (ii) electricity contracts for fixed terms in the future, such as intra-day contracts, day ahead contingency contracts and contracts up to 11 days ahead, known as the term-ahead-market (the “TAM”) and (iii) renewable energy certificates (“RECs”). IEX has commenced the trading of energy saving certificates (“ESCerts”) on Exchange on September 26, 2017. It is one of two exchanges in India that offer an electronic platform for the trading of electricity products and have a substantial majority market share among the power exchanges in India. The DAM constitutes the substantial majority of the energy contracts that are traded on IEX. In the financial years 2016 and 2017, it commanded a 99.6% and 99.4% market share, respectively, of electricity contracts in the DAM, in terms of volume, according to the CERC. According to the CERC, in the financial years 2016 and 2017, 93.7% and 94.8% of the traded contract volumes of electricity contracts in the DAM, TAM and RECs combined, were conducted over it.

The Indian power market, in terms of electricity generated, consisted of 89.7% of long-term and medium terms electricity contracts (contracts for periods of one year or over) and 10.3% of short-term electricity market (contracts for periods of under one year) for the financial year 2017, according to the CERC. The short-term electricity market includes contracts through licensed traders, direct bilateral contracts, deviation settlement mechanism (“DSM”) and contracts traded over power exchanges. The share of electricity contracts traded over power exchanges has grown from 23.8% to 34.5% of the short-term market between the financial year 2013 and the financial year 2017, according to the CERC. Further, according to CRIS, the short-term electricity market in India is expected to grow to 21.1% of electricity generated in India by the financial year 2022, of which 43.0% is expected to be traded over power exchanges.

Trading in the DAM and TAM product categories through IEX provides participants with a means to meet their power requirements and manage, among other things, availability and price of electricity. It primarily brings together sellers of power, such as independent power producers, captive power plants, distribution companies and Government owned power generation companies, and buyers of power, such as distribution companies and industrial, commercial and institutional power consumers, and provides them with a transparent, neutral and automated platform for trading of electricity. Trading on IEX is done by its members on their own behalf and on behalf of their clients, who are together known as participants on Exchange. Trades with respect to electricity contracts traded in the DAM and TAM are physically settled, meaning that settlement is made through the physical delivery of electricity itself. IEX does not own or trade electricity products for on its own account.

As of August 31, 2017, IEX had over 5,900 participants registered on its Exchange of which over 3,200 participants were active. Over 4,300 registered participants were eligible to trade electricity contracts and over 4,000 registered participants were eligible to trade RECs, as of August 31, 2017. Its participants registered to trade electricity contracts are located across 29 states and five union territories in India and include 50 distribution companies, over 400 electricity generators, and over 3,900 open access consumers. As on the same date, IEX included over 1,000 renewable energy generators and over 2,900 industry and corporate customers. In the financial year 2017, participants traded and cleared 4.62 million RECs on Exchange. Only 3.6% of power generation capacity is traded on this exchange against 30 to 70% trades on global power exchanges.

For providing exit route and listing gains, IEX is coming out with a maiden IPO by way of offer for sale of 6065009 equity shares of Rs. 10 each via book building route with a price band of Rs. 1645-1650 to mobilize Rs. 997.69 to Rs. 1000.73 crore (based on lower and upper price bands). The issue opens for subscription on 09.10.17 and will close on 11.10.17.Minimum application is to be made for 9 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. BRLMs to this offer are Axis Capital Ltd., Kotak Mahindra Capital Co. Ltd., and IIFL Holdings Ltd. Karvy Computershare Pvt. Ltd. is the registrar to the issue. Issue constitutes 20% of the post issue paid-up capital of the company. This being a secondary offer, the company’s paid-up capital remains same at Rs. 30.33 crore post IPO. Its entire equity is issued at par so far. The average cost of selling shareholders ranges from Rs. 10 to Rs. 709.23.

On the performance front, IEX has posted total revenue/net profits of Rs. 173.99 cr. / Rs. 91.95 cr. (FY14), Rs. 176.38 cr. / Rs. 90.02 cr. (FY15), Rs. 200.14 cr. / Rs. 100.34 cr. (FY16) and Rs. 237.42 cr. / Rs. 113.57 cr. (FY17). For Q1 of the current fiscal, it has reported a net profit of Rs. 30.63 cr. on total revenue of Rs. 61.66 cr. It has posted an average EPS of Rs.34.84 and average RoNW of 39.25 for last three fiscals. The issue is priced at a P/BV of 16 plus. If we annualize latest earnings and attribute it on post issue equity then asking price is at a P/E of 40 plus. It has no listed peers to compare with. Though pricing of the IPO raises concern, its track record and bright prospects leave some room for new investors. IEX’s revenue posted CAGR of 14.5% for last five fiscals. It’s PAT margins are near 49% for all these years.

On BRLM’s front, three merchant bankers associated with the offer have handled 44 public issues in the past three years out of which 12 issues closed below the issue price as on listing date.

Conclusion: Higher spending for power infra augurs well for this company. IEX will enjoy the first mover advantage and generate more fancy post listings. Investors may consider an investment for short to long term. (Subscribe).

The original review appeared on Chittorgarh.com and is penned by Dilip Davda. It is available here.


Reblog: Mas Financial IPO review


Mas Financial Services Ltd. (MFSL) is a Gujarat-headquartered NBFC with more than two decades of business operations and as of June 30, 2017, it operated across six States and the NCT of Delhi. Its business and financing products are primarily focused on middle and low income customer segments, and include five principal categories: (i) micro-enterprise loans; (ii) SME loans; (iii) two-wheeler loans; (iv) Commercial Vehicle loans (which include new and used commercial vehicle loans, used car loans and tractor loans); and (v) housing loans. MFSL’s shareholders include development finance institutions including FMO and DEG and private equity investors including Sarva Capital.

As of March 31, 2017 and June 30, 2017, company’s AUM was Rs. 3332.57 cr. and Rs. 3451.74 cr. respectively. Company’s AUM increased at a CAGR of 33.37% from Rs. 1053.19 cr. as of March 31, 2013 to Rs. 3332.57 cr. as of March 31, 2017. As of June 30, 2017 it had more than 500,000 active loan accounts, across more than 3165 Customer Locations in six States and the NCT of Delhi, served through our 121 branches. As of 30.06.17 it has assigned 34.1% AIMs to banks/FIs. Company’s average cost of borrowing is 9.05% and is having NIM of around 7%. Company is pursuing and maintaining stable growth and quality of portfolio by expanding product offerings to anchor its belief that growth with quality will enhance the stakeholder’s value. Company meets its funding requirements from banks like HDFC Bank, Axis Bank, Union Bank, SIDBI, Union Bank, Central Bank of India etc.

To part finance augmenting its capital base to meet future capital requirements, MFSL is coming out with a maiden IPO of Rs. 460.04 crore via book building route with a price band of Rs.456 – Rs. 459. The issue consists of fresh equity issue (approx 5076252 shares) worth Rs. 233 crore and offer for sale for Rs. 227.04 crore (approx 4946405 shares). The issue opens on 06.10.17 and will close on 10.10.17. Minimum application is to be made for 32 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. The issue is solely lead managed by Motilal Oswal Investment Advisors Ltd. and Link Intime India Pvt. Ltd. is the registrar to the issue. It has reserved xx shares for eligible employees and is offering a discount of Rs.45 per share. Having raised initial equity at par from incorporation till March 2008, it raised further equity in the price range of Rs. 124.93 to Rs. 1200 per share between July 2012 and September 2017. It has also issued bonus shares in the ratio of 1 for 2 in December 2006, 1 for 2 in August 2007, 1 for 19 in December 2011, 3 for 5 in January 2014, 3 for 2 in November 2016. DEG held 4,998 CCDs that have been converted to 2,470,175 Equity Shares in the Board meeting held on September 21, 2017. FMO held 21,735,545 Series A CCPS that have been converted into 1,739,865 Equity Shares and Sarva Capital held 21,735,545 Series B CCPS that have been converted into 1,280,723 Equity Shares and 400 Series C CCPS held by nine shareholders has been converted into 87,716 Equity Shares, all in the Board meeting held on September 12, 2017. Post issue, its current paid up equity capital of Rs. 49.57 crore will stand enhanced to Rs. 54.67 crore. The average cost of acquisition of equity shares by promoters ranges from Rs. 1.06 to Rs. 2.38.

On the performance front, MFSL has (on a consolidated basis) posted revenue/net profits of Rs. 184.92 cr. / Rs. 33.09 cr. (FY14),Rs. 238.20 cr. / Rs. 40.80 cr. (FY15), Rs. 304.20 cr. / Rs. 51.45 cr. (FY16) and Rs. 364.70 cr. / Rs. 69.33 cr. (FY17). For Q1 of current fiscal, it has reported a net profit of Rs. 23.70 cr. on revenue of Rs.104.33 cr. For last five years, it has posted CAGR of 26.3% and 25.9% in revenues and net profits respectively. For last three fiscals, it has posted an average EPS of Rs. 13.13 and average RoNW of 23.75% on paid-up equity capital of Rs. 42.96 cr. (as on 31.03.17). Non-annualized EPS and RoNW are Rs. 4.75 and 6.03% on an equity base of Rs. Rs. 43.99 cr. (as on 30.06.17). The company has converted its entire preference share into equity share as on 12.09.2017 and as on 21.09.17 it’s paid-up equity capital stood at Rs. 49.57 crores. The issue is priced at a P/BV of 7.43. If we annualize latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of 26 plus. Thus, the issue appears fully priced.

On BRLM’s front, merchant banker associated with this offer has handled 10 public issues in the past three years out of which 3 issues closed below the issue price on the listing date.

Conclusion: Moderate investment may be considered for long-term in this fully priced issue.

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


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.