People believe that shares are available at lower prices during an IPO. These can be sold at higher prices once they get listed on the bourses. This is one of the reasons why people invest in an IPO.
This reason holds true for strong companies with high growth potential. But this reason may not always be correct. This is especially true now when the markets are highly volatile. Almost every other day, the share markets are falling.
A fall of 150-200 points on the Nifty has become routine now.
Also, investors have become more cautious. Tech companies that came out with their IPOs last year, at sky-high valuations, have been taken to the cleaners.
Zomato, Paytm, and the likes...
It's important to properly analyse the financials and other aspects of the offer as well as the company making the offer.
In this article, we analyse the key points of the IPO of Prudent Corporate Advisory Services.
Here are 5 key points.
#1 Details of the IPO
Prudent Corporate Advisory is a leading company that offers financial services.
The issue of Prudent Corporate opens on 10 May 2022 and will close on 12 May 2022.
The book running lead managers for this IPO are ICICI Securities, Axis Capital, and Equirus Capital.
Following are the important details of IPO:
The offer is of 854,9,340 shares. 828,1,340 shares will be sold by Wagner Ltd. 268,000 shares will be sold by Shirish Patel. The company will raise ₹53.9 m through this issue (at the higher end of the price band).
Wagner Ltd, an investment vehicle of TA Associates, is a private equity firm that has invested in Prudent Corporate. At present, it holds around 39.9% of the stake. Shirish Patel is the CEO of Prudent Corporate. He has a stake of around 3.2%.
#2 About the company
Prudent Corporate was founded by Mr Sanjay Shah in 2000. Today this Mutual Fund Distribution (MFD) company is on the list of top 10 MFDs in terms of assets under management and commission received.
Along with mutual funds services, it provides services related to Insurance, Equities, Bonds, Portfolio Management, Alternative Investment Fund, Fixed Income Products, Properties, and Loan Products.
One of the chief reasons for the success of Prudent Corporate is its early investment in technology. The company started investing in technology in the year 2004 itself.
It did not have its own mutual fund transaction platform till 2015. Hence in 2016, it came up with Fundsbazaar. Through Fundsbazaar, an investor can transact in a mutual fund without a Demat account.
Along with technology, various other factors like a strong partner network, streamlined process, and skilled employees are responsible for the success of Prudent Corporate.
#3 Financial Snapshot
In the last two years, ever since the pandemic crash, share markets have seen a massive rally. New investors started investing big time.
This resulted in good business for all private wealth management services. Prudent Corporation was no exception to this.
A whopping growth of 22% in revenue was seen in 2020-21 compared to a 5.8% growth in 2019-20. A corresponding increase can also be seen in earnings per share (EPS).
#4 Peer Comparison
IIFL Wealth Management, ICICI Securities, CDSL, HDFC Asset Management, Nippon Life India, and UTI are the listed competitors of the company
Grey Market Premium (GMP)is the price over and above the normal price at which the shares offered in IPO are traded.
At present, the GMP of Prudent Corporate is running around ₹30-35.
Points to keep in mind before applying
The company operates in a highly regulated environment. There's already an outstanding regulatory matter against the company which investors should take note of.
The industry in which Prudent Corporate operates is not highly penetrated and there's scope to grow.
But isn't this the same story whichIPO companiesalways tell? Remember when Nippon India AMC and HDFC AMC came out with their IPOs a couple of years back?
They are under immense pressure of late. They have failed to charge higher fees from their clients. Their returns since listing are not something to write home about. Both are up a meagre 7-10% since listing.
Prudent Corporate's growth graph looks very impressive, but we'll have to wait and see if the IPO performs the same way.
With the markets being volatile, the response to this IPO cannot be predicted.
As companies line up to raise funds from the market amid high valuations, investors need to consider many factors before investing their money in an IPO.
If you areinvesting in an IPO, weigh in all the positive and negative factors affecting the company.
Take a close look at the company's financials andvaluations. It would give you a clearer picture of what's brewing.
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.
This article is syndicated from Equitymaster.com