Quess Corp IPO Review

Bengaluru-based Quess Corp is all set to hit the primary market on Wednesday to raise Rs 400 crore in order to fund its businesses as well as pay off its debts.

The Thomas Cook-owned company, which operates in integrated business services segment, has fixed price band of Rs 310-317 per equity share for its Initial Public Offer (IPO). The post issue market cap of the company is likely to be Rs 3,993 crore.

Incorporated in the year 2007, Quess Corp Limited (earlier IKYA Human Capital Solutions Limited) is the largest IT staff augmentation provider and third largest general staffing company in India based on number of employees. Company offers various services including staffing, recruitment, skill development and management.

The company has PAN India presence with 47 offices across 26 cities along with overseas offices in North America, the Middle East and South East Asia. Currently more than 120000 employees are employed with company including 3400 core employees and over 117000 associated with the clients. At the closing of the financial year 2016, company has roped in over 1300 client’s including some of the world’s largest, reputable organizations, including 20 companies ranked in the 2015 Fortune Global 500 list.

  • Issue Date : Jun 29, 2016 – Jul 1, 2016
  • Issue Type:100% Book Building
  • Issue Price Band:310–Rs.317 per share
  • Face Value Per Share: Rs.10
  • Minimum Bid Lot:45 Equity Shares and in multiples of 45 equity shares thereafter
  • Minimum Order Value:13,950 to Rs.14,265
  • Issue Size:400 crore at lower price band
  • Proposed Listing: NSE/BSE
  • Lead Managers:Axis Capital Limited, YES Securities (India) Limited, IIFL Holdings Limited and ICICI Securities Limited
  • Registrar:Link Intime India Private Limited

Promoters

The promoters of the company are:

1. Ajit Isaac
2. Thomas Cook (India) Ltd

The issue has reserved quota of 75% for QIB’s 15% for HNIs and 10% for retail segment.

It is integrated business services provider of It serves across 4 segments namely,

1. Global Technology Solutions,
2. People & Services,
3. Integrated Facility Management
4. Industrial Asset Management.

Quess-Corp-IPO-Overview

Objects of the issue

  1. Repayment of debt availed by the Company ( 50 Cr.),
  2. Funding capital expenditure requirements of the Company and their Subsidiary, MFX US ( 71.7 Cr.),
  3. Funding incremental working capital requirement (159.9 Cr.)
  4. Acquisitions and other strategic initiatives ( 80 Cr.) and
  5. General corporate purposes (38.4 Cr.)

Financial Performance

  • Company has reported Revenues from Sales figures at Rs.3,435 crore for the year ended 31st March, 2016. For the past 5 years, company has provided growth at CAGR of 40%.
  • Company has maintained the EBIDTA margin of around 5% from the last 5 years.
  • Company is running on PAT of around 2% from the last 5 years. PAT in FY 2011 was just 1% which is now increased to 2.50% in FY 2016.
  • Return on Net Worth (RoNW) provided by company is 25.62% for the previous year ended 31st March, 2016.
  • Earnings Per Share (EPS) of the company for last year was Rs.7.82 per share and Net Asset value is Rs.30.52 per share.

In Fiscal 2016 company’s top 10 clients contributed 30.40% of its total revenue while largest client, Samsung India Electronics Private Limited, contributed 7.40% of its total revenues in such period.

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Book Running Lead Manager to the offer are Axis Capital Ltd, ICICI Securities Ltd, IIFL Holdings Ltd and Yes Bank Ltd. Link Intime India Pvt Ltd is the registrar to the issue. Most of its equity issue is made at par except in December 2010 it issued some shares at a price of Rs. 56.68. It also issued bonus shares in the ratio of 3 for 1 in January 2016. Post IPO its current paid up equity capital of Rs. 113.33 crore will stand enhanced to Rs. 125.95 crore.

On Book Running Lead Manager front, four Book Running Lead Manager’s associated with this IPO handled 23 IPOs in past three years, of which 9 IPOs closed below the issue price on listing date.

Positive

Company’s client age has been very loyal. For example, 23 out of 25 top clients of the company have been company’s customer for more than 15 years.

Quess Corp Ltd. is the amongst the industry leaders and has been on the top spot in IT staff augmentation provider in India based on the number of employees.

Quess topline and bottom-line has grown at CAGR of 52.4% and 80.7% respectively between FY12-16.

Negative

The staffing services market is highly fragmented and competitive. Price competition in the staffing industry is intense, particularly for qualified industrial personnel.

The staffing services sector is subject to complex laws and regulations. Any future changes in laws or government regulations could have a material adverse effect on its business and financial condition.

It generates thin margin of over 2%

One of Company’s director have been named respondents in a criminal proceeding.

Company had posted a positive cash flow statement in the previous year but cash flow from operating activities is negative primarily due to increase in working capital requirement fuelled by revenue growth of the Company which translates into longer dues of debtors.

Continued negative cash flows will have an adverse impact on the company’s business and its growth plans in the near term.

It’s acquisition of Brainhunter Systems Ltd. May be challenged under Indian Law.

Conclusion:

Current Market Premium is Rs.190/- to Rs.195/-

Quess is available at a multiple of 45.2x based on FY16 earnings, which is at discount to its peer Teamlease (57.5x).

This being a niche player with many firsts to its credit and having bright prospects ahead may be considered for medium to long term investment as it also enjoys first mover tag for the segment.

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 prior to making any actual investment decisions, based on information published here.

 

IT Dept To Block PAN, LPG Subsidy Of Tax Defaulters

In order to cripple and check the activities of wilful tax defaulters, the Income Tax department has decided to “block” Permanent Account Number (PAN) of such entities, get their LPG subsidy cancelled and take measures to ensure that they are not sanctioned loans.

A number of such measures have been mooted by the tax department, to be undertaken this financial year, in order to curb the menace of large-scale tax avoidance and evasion.

As per a strategy paper prepared by the department, also accessed by PTI, the taxman will block PAN in such a way “that these defaulters are not sanctioned any loans or overdraft facility by public sector banks, as the same is bound to become non-performing assets”.

Further, it said, “Ministry of Finance can be suggested to withdrawn facility like LPG subsidy which is directly credited in to the bank accounts of the said defaulters.” This step, the strategy paper said, will act to “disincentive” the defaulters.

income tax
The taxman also proposes that the identities of such blocked PANs be circulated to the Registrar of Properties “with a request for not allowing any registration of immovable properties where such PANs are involved.” Such defaulters’ information has also been recommended to be circulated across tax offices so that their activities loans or government subsidy can be plugged country-wide.

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The department has also decided to subscribe to the Credit Information Bureau Limited (CIBIL) data, on a possible payment basis, to check out the financial activities of defaulters and undertake action against them for recovery and freezing of assets.

CIBIL is an agency to collect and maintain records of an entities’ payments pertaining to loans and credit cards.

The department, beginning last year, has also started to ‘name and shame’ large tax defaulters (over Rs 20 crore default) by publishing their names and other credentials in leading national dailies and on its official web portal.

The IT department, beginning this financial year, has also decided to publicly name all category of taxpayers who have a default of Rs one crore and above.

“Tax default is a major menace that the department is grappling with.These new measures are aimed to curb these instances in the right earnest,” a senior IT official said.

Mahanagar Gas IPO review

Incorporated in May 1995, Mahanagar Gas Limited (MGL) is an equal stake joint venture between Indian gas transmission player GAIL and British Gas (BG Group) plc. Both parties hold 45% stake each while the government of Maharashtra holds 10% ownership. Since BG Group has been taken over by Royal Dutch Shell, the latter now has the ultimate ownership of the stake BGAPH (BG Asia-Pacific Holdings Pte. Limited) owns in Mahanagar Gas.

MGL is presently the sole authorized distributor of compressed natural gas (CNG) and piped natural gas (PNG) in Mumbai, its adjoining areas and the Raigad district in Maharashtra. Mahanagar Gas’ monopoly in the distribution business is valid until 2020 for Mumbai, until 2030 for the Adjoining Areas and until 2040 for the Raigad district. Furthermore, this exclusivity is extendable in blocks of 10 years as per the government regulations.

Issue Detail :

Issue Open: Jun 21, 2016 – Jun 23, 2016
Issue Type: Book Built Issue IPO
Issue Size: Rs.939 crores on lower price band
Face Value: Rs 10 Per Equity Share

Minimum Investment: Rs.14735/- on higher price band
Issue Price: Rs. 380 – Rs. 421 Per Equity Share
Market Lot: 35 Shares
Minimum Order Quantity: 35 Shares
Listing At: BSE/NSE

Lead Mangers: Kotak Mahindra capital and Citi group group global markets

Promoters :

GAIL (India) Limited; and

BG Asia Pacific Holdings Pte. Limited

Objects of the Issue:

To achieve the benefits of listing the Equity Shares on the Stock Exchanges.

MAHANAGAR GAS LTD.

Company Financials:

The company posted profit of Rs.225.5 crores for the year ended Mar-11 and profit of Rs. 301 crores for the year ended Mar-2015.

The company generated revenue of Rs. 1073.56 crores for the year ended Mar-11 and Rs.2135.63 crores for the year ended Mar-15.

For last three fiscals it has been posted an average EPS of Rs. 34.05 (basic) and Rs. 30.89 (diluted). Thus the asking price is at a P/E of 12.3 on the equity as on 31.03.16 and if we consider current equity with FY 16 earnings, then the asking price is at a P/E of 13.4 plus which is justified compared to composite industry P/E of 30 plus. Peers have the lowest P/E of 17 and the highest P/E of 44 as stated in RHP.

Both the promoters i.e. GAIL and BG Asia are selling equal quantity of 12347250 shares to dilute around 25% of the post issue paid up equity capital. With this IPO the company is trying to mobilize Rs. 938.39 cr. / 1,039.64 cr. based on the lower and upper price band. BRLM to the offer are Citigroup Global Markets India Pvt Ltd and Kotak Mahindra Capital Company Ltd. Link Intime India Pvt Ltd is the registrar to the issue. Post allotment, shares will be listed on BSE and NSE.

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Positive

The Company is in virtual monopolistic business with steady growth and bright prospects ahead.

Good profits of over 14% in FY15

Strong financial performance with consistent growth and profitability

Well positioned in Mumbai metro.

Cost effective availability of domestic natural Gas.

Promoters with strong national and multinational experience.

Infrastructure exclusively and established infrastructure network.

Negative

The majority of its total revenue is attributable to its CNG business. Any  decrease in volume of CNG sold by them may have an adverse effect on its buisness,financial condition and cash flows.

If alternative fuels become more cost effective, or a fuel of choice to its customers, its business result of operations and cash flows and could be adversely affected.

Any increase in the cost price of natural gas or any reduction in the allocation amount of natural gas may have an adverse effect on its business, result of operation and cash flows.

The price of domestic natural Gas and RLNG (Regasified Liquefied Natural Gas ) We purchase is denominated in U.S Dollars,while the selling price is in Indian Rupees.

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Conclusion:

Mahanagar Gas commands 30% premium in grey market ( i.e. Rs.129/- )

Grey market operators are offering investors up to Rs 550 per share of Mahangar Gas, compared to its price band of Rs 380 to Rs 421.

It offers IPO at a justified pricing and thus is worth considering for medium to long term rewards.

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 prior to making any actual investment decisions, based on information published here.

 

Invest in your Child’s Dreams: Best Investments for your Child’s Education

College tuition and associated education costs rise 10-15% annually. If you have young children, the price you’ll pay for their education could be significantly higher than today’s prices. Currently, a Domestic 2 Year Full-Time MBA costs roughly ₹12-16 lacs, In 5 years, the cost is likely to touch ₹20-25 lacs.

The percentage of people getting a post graduate degree is merely 12% versus graduate degree of 72%, which is much lower for individuals who grew up in a low income household than individuals who grew up in non-low income household. These means only a lucky child can get an opportunity of getting higher education.

Due to increased Inflation, Competition & Lifestyle Inflation affecting the cost of children’s education there is a rise in demand for both the parents to work and earn such living. All the families are under increasing strain and disadvantaged families are strained to limits as they have fewer resources to invest in early development. The without resources like “parent coaching” in the busy life attract private coaching costs nearly ₹70,000-₹1, 00,000 p.a in addition to the academic costs.

Despite this cost escalation, you’ll want your children to have the option to go to the college of their choice. So how do you save enough money for college and still achieve your other goals?

LONG TERM AVERAGING OF EQUITY SIP’S IS RAPIDLY BUILDING WEALTH

Be an Early Bird

Starting savings early will not only be able to amass a larger sum, but the money will also gain from the power of compounding. E.g., Suresh Gupta, A Delhi based finance professional having a child aged 8 months started investing in an SIP of ₹ 9,000 for duration plan of 18 years in an equity fund that gives 15 per cent return for getting a target corpus of ₹1 cr. For such individuals like Suresh, Equity based Mutual Funds are more preferred than opting for balanced MF’s. If you have a higher risk appetite than your equity investment can be as high as 75% and rest in Fixed Deposits, PPF, Tax Free Bonds etc.

Play it safe in the Short Term:

If you have a short time horizon(<5years) you will have to opt for safer investments which means being risk averse. These investments include recurring deposits, debt investments, PPF etc. Though these investments offer guarantee returns with safety of capital but also provide less returns. E.g., Vimal Singh, A Mumbai based Salaried person having a child aged 15 years have to invest more than ₹50,000 in SIP for the period of 2-3 years to fulfill his child aspiration of studying for a MBA Course costing ₹20-25 lacs. A mid-incomed person cannot afford to put ₹50,000/month aside & ignore his household costs. Hence, the child has to either quit studying for post-graduation or has to take assistance from bank in the form of an educational loan.

Exploring investment Options for your child :

Exploring investment Options for your child

More than 4 lakh Pune flat buyers are victims of the builders

Investing in future child education is also gaining popularity these days. The plan can be established with one of the parents as the beneficiary and then transferred to the child after birth. These leads to more saving and longer time duration to appreciate. A couple married for 6 years before their first child is born has 33% longer time for their investments to appreciate. Otherwise, the parents can invest in Equity Mutual Funds which have delivered averaged annualized returns of 16.5% as compared to investing in traditional life insurance policies which offer low yields of 5-6%. 

Reviewing your performance of the funds in the portfolio is as important as Investing. An underperformance of fund can be rebalanced by replacing with a performing fund.

Example of Different Types Of Investments:

The investment of ₹2000/month for a period of 18 years in an traditional policy can grow till ₹7lacs with return of 5 to 6%, in a recurring deposit till ₹11 lacs with return of 9%, in a balanced fund till ₹15 lacs with return of 12% and in an Equity Fund at ₹22 lacs with return of 15%

Keeping in mind that financial plans are made to achieve such crucial goals in life. Hence the earlier you invest in your child education and the more systemized your financial plan is, the lesser financial burden you/child face in the long term.

“A child educated only at school is an uneducated child” – George Santayana