HPL Electric & Power Ltd IPO Review and Grey market premium

HPL Electric manufactures various electric equipment’s, including, metering solutions, switch gears, lighting equipment and wires & cables. It currently sells its products under the brand ‘HPL’.

It has pan-India network of over 2,400 authorized dealers or distributors and 15,000 retailers, as on March 2016. Its carrying and forwarding agents supply products from warehouses located in 21 states and union territories in India.

Further, it has over 90 branch offices and representative offices across India, which carry out marketing activities. It currently owns and operates seven manufacturing facilities located across the states of Haryana and Himachal Pradesh. HPL supplies products to power utilities, which primarily includes electricity boards & power distribution companies, and also to retail and industrial customers.

Issue Details

Issue Open: Sep 22, 2016 – Sep 26, 2016
Issue Type: Book Built Issue IPO
Issue Size: [.] Equity Shares of Rs 10 aggregating up to Rs 36.10 Cr
Face Value: Rs 10 Per Equity Share
Issue Price: Rs. 175 – Rs. 202 Per Equity Share
Market Lot: 70 Shares
Minimum Order Quantity: 70 Shares
Listing At: BSE, NSE
Min. Investment : Rs.12250/- om lower price band
Lead Managers :
ICICI Securities Limited
IDFC Securities Limited
SBI Capital Markets Limited

Objects of the Issue

Repayment of debt (Rs 130 crore) and funding working capital requirements (Rs 180 crore).

Debt on Books

As on June 2016, the aggregate amount of secured loans outstanding was Rs 593.26 crore, comprising term loans of Rs 141.79 crore and secured working capital loans of Rs 451.47 crore. Additionally, it had availed of non-fund based working capital facilities aggregating to Rs 391.55 crore, on a standalone basis.

Company Promoters

1. Lalit Seth
2. Havell’s Pvt Ltd

Name of share holder

Worst Retirement Mistakes and Remedies to improve them

Competition

The market for electric equipment is expected to grow at CAGR of 8-12 percent between 2016 and 2020, with the LED market expected to grow significantly, at a CAGR of 62 percent during the corresponding period. The large scale promotion of energy efficiency by the Government has resulted in greater acceptance of LED lamps that use up to 70 percent lesser energy than conventional luminaires, which is expected to drive the market for LEDs to reach Rs 31,010 crore by 2020.

Total Market sharePositive

Pan India sales and distribution network

Experienced management team and skilled workforce

Established brand in the electric equipment industry

Large product portfolio

Established relationship with institutional customers and strong pre-qualification credentials.

Sales Data

Sales data

Negative

Foreign currency fluctuation risks, particularly in relation to import of raw materials.

Dependent on third party suppliers for continued supply of raw materials, the availability and cost of which may adversely affect the business, financial condition, results of operations and prospects.

There are two legal disputes pending adjudication,seeking to obtain an injuction against the issue,including a trademark litigation filed against comapany and company promoters.In the event such dispute are not decided in company favor,company ability to proceed with issue may be impaired and company reputation may be adversely affected.

Subject to stringent labour laws or other industry standards and any strike, work stoppage or increased wage demand by employees or any other kind of disputes with employees,could adversely affect on business, financial condition, results of operations and cash flows.

Increases in interest rates may materially impact on results of operations.

Performance :

For last four fiscals, HPL’s consolidated turnover/net profits were Rs. Rs. 915.73 cr. / Rs. 31.42 cr. (FY13), Rs.1016.04 cr. / Rs. 28.37 cr. (FY14), Rs. 1051.85 cr. Rs. 34.62 cr. (FY15) and Rs. 1121.25 cr. / Rs. 36.62 cr. (FY16). In FY14, it suffered a setback in bottom lines.

Conclusion

For fiscal 2016, fiscal 2015 and fiscal 2014, the percentage of revenue from exports over the total revenue was 1.35%, 2.88% and 2.90% respectively. If we attribute latest earnings on the fully diluted equity post IPO then the asking price (at the higher price band) is at a P/E of 35 plus and at a P/BV of 2.63 (based on NAV of Rs. 76.52 as at 31.03.16) that makes it a pricy bet.

Grey Market premium

On 21.09.2016 at 10.30 am, Kostak rs. 350/400, No trades in Grey market.

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

ICICI Pru Life Insurance IPO Review

ICICI Prudential Life Insurance Co. Ltd. (IPLICL) is the largest private sector life insurer in India by total premium in fiscal 2016 and assets under management at March 31, 2016. It is a joint venture between ICICI Bank Limited, India’s largest private sector bank in terms of total assets with an asset base of 7.2 trillion at March 31, 2016, and Prudential Corporation Holdings Limited, a part of the Prudential Group, an international financial services group with GBP 509 billion of assets under management at December 31, 2015. ICICI Prudential Life Insurance Co. Ltd. Is one of the first private sector life insurance companies in India and commenced operations in fiscal 2001. It offers a range of life insurance, health insurance and pension products and services. Every fiscal year since fiscal 2002,It has consistently generated the most new business premiums on a retail weighted received premium basis among all private sector life insurers in India.

The Indian life insurance sector was the 10th largest life insurance market in the world and the 5th largest in Asia in terms of total premiums in 2016, according to Swiss Re, sigma No 3/2016. The Indian economy is one of the fastest growing large economies in the world, with a GDP growth rate of 7.3% (in real terms) in fiscal 2016 and a household savings rate of 19.1% of GDP in fiscal 2015, according to CRISIL Research, Life insurance industry report, July 2016 . ICICI Prudential Life Insurance Co. Ltd.  expect these macroeconomic factors, coupled with India’s large and young population, rapid urbanisation and rising affluence to propel the growth of the Indian life insurance sector.

Comparison of Life Insurance penetration

Comparison of Life Insurance penetrationIn fiscal 2016, its market share, on a retail weighted received premium basis, among all insurance companies in India (public and private sector) was 11.3%, as compared with a market share of 9.7% for our nearest private sector competitor. Among the 23 private sector life insurance companies in India, IPLICL had a market share, on a retail weighted received premium basis, of 21.9% in fiscal 2016

Issue Particulars

Issue opens on 19 Sept 2016

Issue closes on 21 Sept.2016

Issue Size: 181,341,058 Equity Shares of Rs 10 aggregating up to Rs 6,056.79 Cr
Offer for Sale of 181,341,058 Equity Shares of Rs 10 aggregating up to Rs [.] Cr

Face Value: Rs 10 Per Equity Share

Issue size : Rs. 6000/- Cr.

Price Band Rs. 300-334

Market Lot : 44 shares

Proposed listing on :  BSE,NSE

Lead Managers : BoA Merrill Lynch,Deutsche Equities India Private Limited,Edelweiss Capital Limited,HSBC Securities & Capital Markets Pvt Ltd,ICICI Securities Limited,IIFL Holdings Limited,JM Financial Consultants Private Limited,SBI Capital Markets Limited,UBS Securities India Private Limited.

Market premium Updates ( Grey Market )

On 20th Sept 2016, at 03.00 pm,  MP is Rs. 14-15 sellers, kostak Rs. 600/650.

On 19th Sept 2016, at 12.00 noon MP is Rs. 23-24, kostak Rs. 1100.

On  16th Sept  at  02.00 pm : MP is  Rs. 21-22 .Kostak is of  Rs.900/950.
On 15.09.2016 at  02.00 pm : MP is  Rs. 21-22 .Kostak is of  Rs. 900
On 14.09.2016 at  11.00 am : MP is  Rs. 17-18 .Kostak is of  Rs. 850.
On 13.09.2016 at  11.00 am : MP is  Rs. 21.50-23 .Kostak is of  Rs. 950.
On 12-09-2016 at 05.00 pm MP Rs. 18-19  ,Kostak rates Rs.600-650
On 12-09-2016 at 12.00 noon MP Rs. 17-18  ,Kostak rates Rs.750
On 10-09-2016 at 08.00 pm MP Rs. 15  ,Kostak rates Rs. 900
On 10-09-2016 at 03.00 pm MP Rs. 18  ,Kostak rates Rs. 925
On 09-09-2016 at 05.00 pm MP Rs. 22-23 ,Kostak rates Rs. 950
On 09-09-2016 at 11.00 am MP Rs. 21-22 ,Kostak rates Rs. 900
On 08-09-2016 at 11.00 am MP Rs. 27-28 ,Kostak rates Rs. 1200
On 07-09-2016 at 11.00 am MP Rs. 36-37 ,Kostak rates Rs. 1350 ( Strong buying seen), & at some centres, trades were at Rs. 28-29 and kostak Rs. 1200-1300
On 06-09-2016 at 11.00 am MP Rs. 35 and Kostak rates Rs. 1350-1400 ( Strong buying seen)

 

ICICI Pru life Comparison with others

ICICI PRU LIFE COMPARISON 1ICICI Pru Life Comparison 2In the 2015-16 fiscal, ICICI Pru Life total premium stood at Rs 19,164 crore. Its persistency ratio was 82.4 percent, the highest in the sector, while AUM was at Rs 1.09 trillion (Rs 1.09 lakh crore). The total expenses of the entity are one of the lowest at 14.6 percent.

L&T Technology Services IPO Review

ICICI Bank has diluted around 6 per cent before IPO and through IPO now it is diluting another 12.63 per cent stake. Post IPO ICICI Bank will hold around 55 per cent, Prudential group 26 per cent and the rest will be public holding. As it needs to dilute another 6 per cent in next three years, the existing stakeholders have planned to have ICICI Bank holding around 54 per cent and Prudential group at 20%, thus the next dilution will be by way of offerings from Prudential group.

Claim settlement ratio

Claim settlement ratioPositive Factors

A.Consistent leadership across cycles;
B. Ability to deliver superior customer value;
C. Diversified multi-channel distribution network for our products and services;
D. Leveraging technology;
E. Robust and sustainable business model.
F. Strong and established brand of our shareholders, “ICICI Bank” and “Prudential”; and
G. Experienced senior management team.

Negative

Its Company and its Directors and its Subsidiary, one of its Promoter and certain Group Companies are involved in certain legal and other proceedings.

Changes in market interest rates could have a material adverse effect on its business and profitability.

Higher expenses than expected could have a material adverse effect on its business, financial condition and results of operations.

It could be subject to claims by the customers and/or regulators for alleged mis -selling.

There are operational risks associated with the insurance industry which, when realised, may have a material adverse effect on its business, financial condition, results of operations and prospects.

Any termination of, or any adverse change to, its ability to attract or retain distributors, both institutional and retail,and key sales employees, could have a material adverse effect on its business, financial condition, results of operations and prospects.

Regulatory and statutory actions against IPLICL or its distributors could cause us reputational harm and have a material adverse effect on its business, financial condition, results of operations and prospects.

Shifts in demographic trends and consumer attitudes towards life insurance could have a material and adverse effect on its business, financial condition, results of operations and prospects.

Catastrophic events, including natural disasters, could materially increase its liabilities for claims by policyholders and have a material adverse effect on its business, financial condition and results of operations.

A WAY OF SUCCESS FULL FINANCIAL PLANNING

Differences between its actual benefits and claim payments and those assumptions and estimates used in the pricing of, and setting reserves for, our products could have a material adverse effect on its business, financial condition, results of operations and prospects.

The actuarial valuations of liabilities for our policies with outstanding liabilities are not required to be audited and if such valuation is incorrect, it could have an adverse effect on its financial condition.

Its rely on third -party contractors and service providers for a number of services, but ICICI PRU cannot guarantee that such contractors and service providers will comply with relevant regulatory requirements or their contractual obligations.

Insurance business is vulnerable to misconduct and fraudulent activities and such activities could have a material adverse effect on its business, financial condition, results of operations and reputation.

Any increase in or realisation of its contingent liabilities could have a material adverse effect on its business, financial condition, results of operations and prospects

The majority of our corporate bonds portfolio has a domestic credit rating of not lower than “AA”.

Investment portfolio is subject to liquidity risk,market risk,interest rate which could decrease its value.

Some of Group Companies have incurred losses in the past, based on their audited financial statements available. One of its Promoters may also have unsecured loans.

The insurance sector is subject to seasonal fluctuations in operating results and cash flows.

Adverse changes in the reinsurance markets could have a material adverse effect on its business, financial condition, results of operations and prospects, and ICICI PRU are exposed to the risk that our reinsurers may not perform their obligations.

Foreign investors are subject to foreign investment restrictions under Indian laws that may limit our ability to attract foreign investors, which may have a material adverse impact on the market price of the Equity Shares.

Market risk arises from unanticipated financial loss due to adverse fluctuations in key variables, including interest rates, foreign exchange rates and equity market prices

Employees

At March 31, 2016, we had 10,673 employees. Agents are not an employees.

On performance front, for last three fiscals it has posted an average EPS of Rs. 11.40 (on consolidated basis). First quarter of current fiscal is showing dismal performance, but insurance industry normally generates maximum business in the second half of the year. Hence the attribution on the basis of first quarter will be misguiding.

Valuation: The IPO values the company at Rs 47,880 crore, at the upper end of the price band. This implies a price to embedded value (EV) -an industry term which represents the present value of future profits from assets after adjusting for risks -multiple of 3.4 times the FY16 EV of Rs 13,939 crore. The valuation is 47% higher than the last stake sale of 6% to Premji Invest and Temasek in November 2015. However, compared to the multiple commanded by the share swap agreement between HDFC Life and Max life (4.2 times FY16 EV), the pricing appears attractive.

Recommendation

Current market premium is Rs. 22/- ( From Rs. 35/- )

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

 

L&T Technology Services IPO Review

L&T Technology Services is a fully owned subsidiary of engineering major Larsen & Toubro (L&T) and offers engineering research and development services.

Established in 2012, L&T Technology Services provides its services to clients in manufacturing, technology and process engineering industries. Most of these clients are based in North America and Europe. L&T Technology Services generated around 80.2% of its revenues in FY2016 from customers in these two regions.

L&T Technology primarily operates in five industry verticals – Transportation (29.9% of revenues in FY2016), Industrial products (25.2%), Telecom and Hi-tech (19.8%), Process industry (18.7%) and Medical devices (6.3%).

According to the red herring prospectus (RHP), L&T Tech employed a total of 9,419 employees as of 30 June 2016, including more than 2,000 employees outside India. The company operates through 12 global delivery centres in India and overseas, 26 sales offices in India, North America, Europe, the Middle East and Asia and 31 labs in India.

Company Promoters:

The Promoter of our Company is L&T

Issue Detail

Issue Open: Sep 12, 2016 – Sep 15, 2016
Issue Type: Book Built Issue IPO
Issue Size: Offer for Sale of 10,400,000 Equity Shares of Rs 2 aggregating up to Rs [.] Cr
Face Value: Rs 2 Per Equity Share
Issue Price: Rs. 850 – Rs. 860 Per Equity Share
Market Lot: 16 Shares
Minimum Order Quantity: 16 Shares
Listing At: BSE, NSE

The IPO will be managed by Kotak Mahindra Bank, Bank of America Merrill Lynch, JM Financial, and SBI Capital Markets. Karvy Computershare will be the registrar of the public offer.

L and T Infotech subsribe or Avoid

Tentative timetable:

The Anchor Investor Offer shall be one Working Day prior to the Bid/Offer Opening Date

Finalization  of Allotment  On :  20 September , 2016

Unblocking of funds from ASBA : On  21 September , 2016

Credit of  Shares to demat accounts  On  : 22 September, 2016

Commencement of trading  On   23 September , 2016 (Friday)

Objects of the Issue:

1. To achieve the benefits of listing the Equity Shares on the Stock Exchanges and
2. To carry out the sale of up to 10,400,000 Equity Shares by the Selling Shareholder.

List of Anchor Investors who have invested in LTT

1 Sundaram Mutual Fund   2,90,576   9.31%
2 Copthall Mauritius Investment Limited   2,44,176   7.83%
3 Canara Robeco Mutual Fund    2,21,008    7.08%
4 Dsp Blackrock Focus 25 Fund   2,21,008    7.08%
5. HDFC Trustee Company Limited    2,21,008    7.08%
6 ICICI Prudential Life Insurance Company Limited    2,17,808    6.98%
7 Fil Investments (Mauritius) Ltd    2,09,296    6.71%
8 Blackrock India Equities (Mauritius) Limited     2,09,296    6.71%
9 Parvest Equity World Emerging     2,09,296     6.71%
10 National Pension Service Managed By Oaktree Capital Management L.P        1,90,604     6.11%
11 Morgan Stanley Mauritius Company Limited     1,60,000    5.13%
12 Jp Morgan Funds     1,51,152    4.84%
13 Tata Mutual Fund    1,45,344     4.66%
14 Integrated Core Strategies Asia Pte Ltd    83,248     2.67%
15 Indus India Fund (Mauritius) Limited      83,200     2.67%
16.Oaktree Emerging Markets Mauritius Holdings Limited    72,998    2.34%
17 Vanguard Emerging Markets Select Stock Fund     73,646     2.36%
18 Macquarie Emerging Markets Asian Trading Pte Ltd.     58,192     1.87%
19 Jp Morgan India Smaller Companies Fund     58,144    1.86%

About this fast growing sector

LTT is an acknowledged leader in engineering design services, design-led manufacturing, networks and operations, data transformation, and analytics. It collaborates with the clients to help them achieve more and together shape a better future. It can be called  Designing Tomorrow.

This  industry focus includes aerospace, defense, rail transportation, off-highway & industrial, power generation, mining, oil & gas, communications, utilities, geospatial, semiconductor and medical technology. It aligns closely with the business needs, goals, culture, and core values of our clients. This reflects in the deep, long-standing relationships & have developed and sustained with some of the leading names in these industries.

ER&D Services market  is of $1007 Billion globally in 2015and estimated ER&D outsourcing opportunity for ER&D service provider companies like LTT is $365Billion and hence offers tremendous growth opportunity for this company. LTT is  recognised by Zinnov in leadership zone in 8 industry verticals.Majority of its work is executed by employees based out  of its delivery centers in India  giving it a competitive advantage of lower costs compared to its US and European competitors.

Positive

Leading global pure-play ER&D services company;

Well-diversified player with multi-vertical industry expertise and long-standing customer relationships;

Focused on driving innovation through in-house R&D, IP and strategic alliances;
Strong L&T parentage and long history of engineering expertise; and
Qualified and experienced personnel in an entrepreneurial culture.

Negative

There are outstanding criminal proceedings pending against the company, its promoters and one of its directors.

Its revenues are highly dependent on customers primarily located in North America and Europe as well as on customers concentrated in certain segments, notably industrial products, transportation, telecom and hi-tech, process industry and medical devices. “An economic slowdown or factors affecting these geographies or segments could materially adversely affect our business, financial condition and results of operations.

It has an exposure to foreign exchange rate risk in respect of revenues or expenses entered into in a currency, primarily denominated in USD, and Euro. Any significant appreciation of the rupee against foreign currencies is likely to have an impact on its business.

A reduction of its R and D budgets of its existing and prospective customers could affect its pricing and volume of work.

Any inability to manage company growth could disrupt is business and reduce its profitability.

L and T infotech IPO which was part of L and T group which came for IPO few months back is currently trading at 10% Discount on Issue price.Hence, investors should re-think about this group IPO before subscription.

L and T Tech Comparison with peers

L and T comparioson with peers

Valuation

On performance front, the company has posted turnover/net profit of Rs.2643.89 cr. / Rs. 310.90 cr. (FY15), Rs. 3142.72 cr. / Rs. 416.65 cr. (FY16). For first three months of current fiscal, it has earned net profit of Rs. 123.68 cr. on a turnover of Rs. 833.39 cr. If we attribute these earnings on the post IPO capital, then asking price is at a P/E of 35. Against industry composite of 25 plus.

Despite healthy balance-sheet and improving margins, one can give this IPO a miss, given the poor show of L&T Infotech IPO as well as unattractive pricing in the current issue, coupled with negative sentiments now prevailing for IT stocks, leaving little-to-no room for appreciation.

Recommendation

Current market premium is Rs. 20/- ( From Rs. 95/- )

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

EMI VS SIP ( Be controlled or take control )

Now a days loans are available for almost everything from education to travel & car to home, every one of us gets number of loan enquiry calls from various banks or finance companies. Those who consider loan as first option should just to determine the total EMI calculation & those who get in to these  details, analysis it, certainly then reconsider their decision of loan  or to minimize loan amount.

EMI VS SIP ( BE CONTROLLED OR TAKE CONTROL )

Nobody can deny the importance of loan for very expensive purpose like home, but with little advance planning we can minimize requirement of loan if not eliminate it 100% & should  avoid for education, consumption loan or car loan. Why?.  So first let’s understand EMI concept.

Arithmetic of EMI

Equated Monthly installment is a common way of loan repayment which includes principal & interest. Let us understand it with example. Suppose a person takes a loan of Rs:-30,00,000/- for the tenure of 20 year’s & 30 years at 9.4% its EMI calculation will be

EMI BREAK UP

Loan Amount 30,00,000 30,00,000
Interest rate 9.4% 9.4%
Period 20 years 30 years
EMI Rs:-27,768 25,007/-
Gross Amount Rs.66,64,397/- Rs.90,02,533/-
Gross Interest payment 36,64,397/- 60,02,533/-

Amount of repayment varies with the loan tenure & in initial stage of loan, repayment interest component constitute larger part of EMI & small portion of principal repayment, which  gradually gets reverse. As loan repayment proceeds interest component of the EMI comes down & principle amount becomes major.

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

Above table help to understand that more than 55 % (For 20 yrs Tenure ) And 67% ( For 30 yrs Tenure ) of the principle amount we make a payment of interest. For further detail analysis borrower should ask for the loan amortization of payment schedule contains month wise interest & principle amount  in tabular form till completion  loan tenure. However it is possible for the fixed interest rate borrower & not for the flexible interest rate as their interest rates is bound to vari  which is determine by the market. In such circumstances how loan can be the first choice for any person.

Instead of it why don’t we consider the other option? Why don’t we incorporate some planning in our life for any major purchase to fulfill our dreams through our own money/ investment?

IS IT REALLY POSSIBLE? The answer is “YES” & I have done it for my several clients. Its way is through SIP. Let me explain  “HOW?”

Capital market returns are always remains at higher side than any other form of investment. But without proper knowledge it is not a right option to invest in it & instead better to opt the route of mutual fund. There are two ways in investing in the mutual funds  one is investing a lump sum amount at one stroke & another way a regular monthly installment called Systematic Investment Plan i.e. SIP. It is a regular investment of specific amount in a mutual fund scheme.

Arithmetic of SIP.

Suppose a person starts his sip with as small amount as Rs:-30000/- for a period of 20 years, with minimum expected rate of return i.e. 12% he will end up with good chunk of money such as

PROJECTED SIP RETURNS

Monthly SIP Amount Rs:- 30000/-
Period 20 years
Expected rate of return 12 %
Actual investment Rs:- 72,00,000/-
Gross amount at the end of the tenure Rs:- 2,99,74,438/- ( Rs.3 crore )
Appreciated Amount Rs:-2,27,74,438/-  ( Rs.2.3 crore )

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

Above table makes it clear why I am saying so, Just we need to change our perception. Even a person is required or prefers to take a loan for any reason such as  low interest rate scenario or investment is not ready for the withdrawal due to market condition but he can use that investment on maturity or fair amount of investment appreciation for loan repayment & reduce the tenure of his loan without increasing his EMI. Such lump sum amount deducted from the principal amount ultimately results into reduction of interest. Especially this option is more suitable & profitable for borrower opted for flexible interest rate when interest rate goes up  & collapse the monthly budget.

Beauty of the SIP is that it can be started with even small mount such as Rs:-500/- which may be increase or decrease at any point of time. Even it can be stopped  just by sending a written request to your AMC on completion of minimum mandatory period of sip i.e. 6 months .