Security and Intelligence Services India (SIS India) IPO Review

Security and Intelligence Services India (SIS India) is a leading provider of private security and facility management services in India. Its portfolio of services includes Private Security Services and Facility Management Services. Within the Private Security Services vertical, it offers Security Services, Cash Logistics Services, Electronic Security Services and Home Alarm Monitoring and Response Services.

SIS India has entered into strategic relationships in India with several multinational companies. For cash logistics and alarm monitoring and response businesses, it has entered into joint ventures with affiliates of Prosegur Compañía de Seguridad, S.A., a global player in cash management and alarm monitoring. It has also entered into a joint venture with an affiliate of Terminix International Company, L.P., a multinational provider of termite and pest control services. In addition, it has licensed the ‘ServiceMaster Clean’ brand, and associated proprietary processes, operating materials and know-how for facility management business in India from The Service Master Company, LLC group, a commercial and residential cleaning service provider.

As of April 30, 2017, it has a widespread branch network consisting of 251 branches in 124 cities and towns in India, which covers 630 districts. It employed 148,678 personnel in India and rendered security and facility management services at 11,869 customer premises across India. In Australia, the company operates in each of the eight states and employed 5,754 personnel servicing 245 customers, as of April 30, 2017. Its widespread branch network enables it to service a large number of customer premises and render customized services across India and Australia.

SIS India IPO Dates & Price Band:

  • IPO Open: 31-July-2017
  • IPO Close: 02-August-2017
  • Face Value: Rs. 10 Per Equity Share
  • Price Band: Rs. 810 to 815 Per Share
  • Listing on: BSE & NSE
  • Retail Part: 10%
  • Total Size: 51,20,619 Equity Shares

SIS India IPO Market Lot:

  • Shares: Apply for 18 Shares (Minimum Lot Size)
  • Amount: Rs. 14670

Category-wise Break up:

Anchor – 43,04,432 Shares = 350.81Crs
QIB – 28,69,622 Shares = 233.87Crs
NII – 14,34,810 Shares = 116.94Crs
RII – 9,56,540 Shares = 77.96Crs (Lot size: 18 = 53,141 Forms)
Total Issue – 95,65,404 Equity Shares = 779.58Crs.

SIS India IPO Allotment & Listing:

28th July – Anchor List
31st July – Offer Opens
02nd Aug – Offer Closes
07th Aug – Finalisation of Basis of Allotment
08th Aug – Unblocking of ASBA
09th Aug – Credit to Demat Accounts
10th Aug – Listing on NSE & BSE

SIS India IPO Lead Managers:

  • Axis Capital Limited
  • ICICI Securities Limited
  • IDBI Capital Market Services Limited
  • IIFL Holdings Limited
  • Kotak Mahindra Capital Company Limited
  • SBI Capital Markets Limited
  • Yes Securities (India) Limited

Company Promoters:

  • Ravindra Kishore Sinha
  • Rituraj Kishore Sinha

Objects of IPO:

Repayment and pre-payment of a portion of certain outstanding indebtedness availed by the Company.
& Funding working capital requirements of the Company.

Anchor Investor :

Security and Intelligence Services (SIS) has alloted 43,04,432 shares to 18 anchor investors at Rs 815 per share aggregating to Rs.350.81 crore. The anchor investors include Abu Dhabi Investment Authority-Behave, Reliance Capital Trustee Co. Ltd A/C Reliance Tax Saver (Elss) Fund, Birla Sun Life Trustee Co. Pvt Ltd A/C Birla Sun Life Small & Midcap Fund, Amundi Funds Equity India and Canara HSBC Oriental Bank of Commerce Life Insurance Co. Ltd.

SIS

Reasons to invest in this IPO (Positive Points)

SIS is ranked as a second largest security services provider in India, and its wholly-owned Subsidiary, MSS Security Pty Limited (“MSS”) is ranked as largest security services provider in Australia.

A diverse portfolio of private security and facility management services.

Established systems and processes leading to a scalable business model ; and

Experienced management and operational team

Australian operations which now form a major chunk of SIS Revenues from security services has been growing at 7% in terms of Australian Dollar.

SIS has shown ability for inorganic growth as well and its facility management business has gained good traction after acquisition  of ‘Duster’.

Reasons not to invest in this IPO (Negative Points)

SIS Promoter and  the  Chairman and  Managing Director of our Company,  Ravindra Kishore Sinha, has been named as one of the respondents in criminal proceedings initiated by certain regulatory authorities.

Operational risks are inherent in SIS business as it includes rendering services in challenging environments. A  failure to manage such risks could have an  adverse impact on its business, results of operations and 20 financial condition.

SIS has a large workforce deployed across workplaces and customer premises, consequently, company may be exposed to service related claims and losses or employee disruptions that could have an adverse effect on its reputation, business, results of operations and financial condition.

SIS businesses are manpower intensive and its inability to attract and retain skilled manpower could have an adverse impact on its growth, business and financial condition.

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SIS are subject to several labour legislations and regulations governing welfare, benefit’s and training of its employees and SIS are also a party to several litigations initiated by its former or current employees.Any increase in wage and training costs or if any decisions in pending cases are against SIS,could adversely affect its business, financial condition and cash flows.

SIS have made certain issuances and allotments  of its equity shares which are  not in compliance with section 67(3) of the Companies Act, 1956.

SIS are subject to risks associated with operating with joint venture and other strategic partners.

SIS cash logistics business exposes to additional risks in relation to the conduct of its employees, contractual liability and inadequate insurance cover, all of which may have an adverse effect on its reputation, business, results of operations and financial condition.

SIS have availed certain unsecured loans that are recallable by the lenders,  subject to the terms and conditions of their grant, at any time.

Financials :

On performance front, the company has (on a consolidated basis) reported total revenue/net profits of Rs. 3107.68 cr. / Rs. 65.43 cr. (FY14), Rs. 3565.15 cr. / Rs. 48.48 cr. (FY15), Rs. 3850.12 cr. / Rs. 64.57 cr. (FY16) and Rs. 4577.12 cr. / Rs. 90.54 cr. (FY17). It suffered a setback in FY 15 on account higher provisioning of depreciation, finance cost and employees benefits.

Last three year’s average EPS is Rs. 11.75 and for FY17 it is Rs. 13.03. Last three fiscal’s average RoNW is 16.65%. For last five fiscals, it has reported CAGR of 14.6% in revenues, 4.5% in EBITDA margins and 25% plus for RoACE. If we attribute latest earnings on fully diluted equity post issue, then asking price is at a P/E of 65 plus that augurs well against its nearest peer Quess Corp (although it is not in all the segments like SiS) trading at a P/E of 95 plus. Issue is priced at a P/BV of 10.31.

Grey market premium

Current Grey market premium is Rs.70/- to Rs.75/-

Conclusion

High Risk investors may be considered for the short term.

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.

What are the Reasons Behind Most Women not Having a Health Insurance Cover?

It is a matter of fact that there is still large gender gap in India between the ratio of men and women who have a health insurance plan. Even at present, women are far behind from men in taking a health insurance for themselves. If we take a look at today’s Indian society, women are taking and fulfilling almost equal financial responsibilities as compared to what men do for their families. According to a survey by a popular insurance company a few years back, only 10 to 15% of employed women have a proper health insurance plan.

There are many reasons why women are not taking a health insurance plan in comparison to men. Here are the points describing all possible reasons and how they can be settled.

Lack of Consciousness

Lacking or absence of consciousness is one of the major reasons behind women not tending towards health insurance. Most of the women don’t know enough about their options to buy any financial product. In some of the households, women are the sole earners of the family. So, women must have to be aware of their health condition and should choose an appropriate health insurance which will provide them coverage over any type of diseases or illness etc. and protect their families from the financial problems that can arrive through them.

Since many past years, medical costs are growing higher every year, so one should always be prepared for those situations because an unexpected illness or accident could void all your savings. A health insurance helps you to take care of yourself in the case of any hospitalization. It can share most of your hospital expense and can save you and your loved ones who depend on you by providing proper coverage against any disorder.

Health insurance

Depending on Employer’s Provided Coverage

Women employees have to realize that there can be a need of higher sum assured than what your employer is providing to your group as sometimes it can’t be enough depending on the situation. Also, there will not be any health coverage in case of quitting your job. That is why it is strongly recommended to have your individual insurance plan as the coverage provided by your employer or the company might not be sufficient in the case of any serious ailment or any critical situation.

Depending on Husband/Father

This is widely seen that even the women are getting financially independent, but the financial leader is still the men in their family. They have to work according to their husband’s family plan to protect themselves and their family. But sometimes husband’s plan might not be sufficient always. Women must identify their personal needs before deciding to take a separate additional policy. There are numerous insurance products customized according to the needs of women. For instance- specific products may provide coverage against breast cancer, which may be most beneficial to women than a single insurance providing coverage for all ailments.

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Disinclination to Pay Premiums

As we can easily see, most of the women choose to save money through the common mechanism as they depend upon the coverage provided by the employer or husband’s family plan to take care of the medical expenses. Even, some people consider the health insurance premiums as an unnecessary expense. Moreover, some purchase health insurance plans just for tax-saving motive. But this is not good at all and can be considered as foolishness. Taking a health insurance policy is as important as paying your house rent or daily expenses. Health insurance policies are not as costly as people think and can be easily maintained without shortening your investments and savings. A person of age 25 to 30 years can easily afford an insurance plan providing coverage of Rs.5 lakhs with premiums starting in the range of Rs.4000 to 5000.

Misunderstanding the uncertainty

When women are at a young age and having a very good health condition, they don’t think about the health risks they may face in the future. They never worry about having a serious disease/disorder or might face hospitalization due to some unwanted reasons. This applies not only for women but for men also in that age group. Although, facing a hospitalization in your age or gender is also very costly. And the only solution to save your savings, as well as investments, is to take an appropriate health insurance plan for you.

Nifty 50 Journey to 10,000 level

NIFTY 50 is a broad based index consisting of 50 large and liquid companies listed on National Stock Exchange of India (NSE). NIFTY 50 is the benchmark index of India, reflecting the overall conditions of Indian equity market as well as Indian economy. Over the years, NIFTY 50 has be-come the most widely used benchmark for exchange traded products in Indian equity market.

NIFTY 50 & GDP growth rate

Growth rate of India’s GDP is fairly captured in the growth story of NIFTY 50. Over the years, India has been one of the fastest growing large economies of the world which is also reflected in the rise of NIFTY 50 Index.

Performance of NIFTY 50 and GDP Growth Rate

nifty 50 and growthNIFTY 50 values as on financial year end & on days of reaching multiples of 1000 levels and GDP growth rate for respective financial year.

Beginning FY 2003-04, Indian economy was in a boom phase driven mainly by investments until it was disrupted by the global financial crisis of 2008. Large fiscal stimulus helped spur the growth process and so India began to recover much before most economies of the world.

Recovery had been hampered by temporary shock in FY 2016-2017, while since beginning of FY 2017-18, market has picked momentum primarily on back of introduction of GST & several other reforms intro-duced by the Government of India.

The 10,000 milestone that NIFTY 50 has reached is a faithful representation of India’s growth prospects.

nifty1

Journey to 10,000 level

From its base value of 1000 in November 1995, the NIFTY 50 reached the 2000 mark in December 2004, taking 9.1 years to double. Thereafter, the journey of NIFTY 50 was swift wherein it reached the 6000 mark in only 2.9 years. It took another 6.4 years to reach the 7000 mark in May 2014 from 6000 in December 2007. The 9000 level was achieved in March 2017 which was relatively faster from 7000 level taking only 2.8 years.

The flagship index ‘NIFTY 50’ hit the 10,000 mark on July 25, 2017, taking only 4.3 months to move from 9000 to 10000.

Time takenMethodology

The NIFTY 50 Index tracks the performance of a portfolio of the 50 largest and most liquid Indian securities. The companies are filtered for liquidity on the basis of impact cost which is the cost of executing a transaction in a security in proportion to its index weight, measured by market capitalization at any point in time. NIFTY 50 methodology delivers the most replicable and reliable benchmark index for the Indian equity market.

Index is rebalanced on semi – annual basis. The cut-off dates are January 31 and July 31 of each year, i.e. for semi-annual review of indices, average data for six months ending the cut-off date is considered. Four weeks prior notice is given to market from the date of change.

NIFTY 50 Index has an inception date of November 3, 1995. The index was constructed using a unique concept of impact cost, which helps in the selection of highly liquid stocks and results in the creation of a replicable index. Initially constituents were weighted on the basis of full market capitalization and from June 26, 2009 onwards, the computation was changed to free float methodology.

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Performance

Since inception, NIFTY 50 has given annualized returns of 11.2% while having annualized volatility of 24.5%. Volatility in recent periods has reduced from over 24% since inception to close to 8-11% in more recent times (6 month to 1 year period). The return to risk ratio of NIFTY 50 has also improved substantially over the years from 0.46 since inception to 1.98 in the last 6 month period.

NIFTY 50 as on July 24, 2017 was trading at P/E of 25.45x and P/B of 3.55x which are lower than the previous highs of 28.5x on Feb 11, 2000 and 6.6x on Jan 08, 2008 respectively.

NIFTY 50 Performance – Price Return Index (Nov’95 to Jul’17)

performance

Nifty 50 Performance – Return and Risk

risk vs return

Calendar Year Performance

In terms of calendar year returns, since 1996, NIFTY 50 has given more than 50% return in 4 calendar years and more than 30% return in 7 calendar years. NIFTY 50 has fallen by over 20% only in 2 calendar years, giving positive returns in 15 out of 23 years.

Calender Year wise performance of NIFTY 50

calender wise

At the time of inception, NIFTY 50 represented 13 sectors while there are 12 sectors as of June 30, 2017. Over the years weight allocation in these sectors has undergone a significant change. IT sector was not represented at the time of inception, but now represents around 11.6% of weight in the index as on June 30, 2017.

Sector weights for 1995 is as on date of inception (Nov 03, 1995) and for 2017 & 2005 as on June end.

sectorwise

From 1995 to 2017, weights of financial services sector has increased from 19.7% to 35% and for metals and consumer goods have declined from 11.6% to 4% and 18.8% to 11.2% respectively. Other sectors like chemicals & textiles which represented 5.4% and 5.5% respectively at the time of inception, no longer form part of NIFTY 50.

 

Japanese investors Nomura India Fund owned $13 billion of Indian stocks and bonds

“India is the only country among major emerging markets that satisfies all the conditions — a sizable economy, high growth rate and yield, and political stability,” said Go Ikeda, a senior fund manager at Mitsubishi UFJ Kokusai Asset Management Co.

“Investors are looking at where the growth will be in the medium to long term, without having to worry about short-term swings in the market.”Kazuto Wada, an executive director at Nomura, Japan’s largest brokerage.

Indian economy that’s growing at 7 percent annually with reforms showing tangible progress.

India’s economy is expanding at about seven times the pace of Japan’s, buoyed by a burgeoning middle class and more one than million young people joining the labor force every month. Indian shares have hit multiple records this year amid optimism about Prime Minister Narendra Modi’s policies.

Sumitomo Mitsui Asset Management Co.’s Indian bond fund, co-managed with Kotak Mahindra Asset Management, took in a net 24 billion yen ($214 million) from December through June, lifting total assets to about 87 billion yen as of July 10.

Japanese investment trusts’ holdings of Indian securities more than doubled to 898 billion yen in June from a year earlier, data from Investment Trusts Association, Japan show.

The rupee has gained 5.8 percent versus the dollar in the past six months in Asia’s top performance. The nation’s 10-year bond yield of 6.45 percent ranks second after Indonesia among major Asian economies and compares with 0.07 percent in Japan.

The combined assets of three India funds run by Nissay Asset Management Corp. have topped 100 billion yen since their launch 2015.

For Franklin Templeton’s Michael Hasenstab, “unprecedented” structural reforms by Modi and relatively high yields make India a “sweet spot” among emerging markets. On July 1, India introduced a goods and services levy designed to unify the nation into a common market and widen the tax net.

noumura

Kato shared his views in an interview in Tokyo on Friday.

Key Point

Why is India so popular now?

  • India is becoming a popular destination because of improvements in fundamentals.
  • The fiscal deficit has narrowed and is likely to shrink further, while the current-account deficit has also decreased. Inward direct investment can finance the current-account gap, which is positive for the rupee and currency stability.
  • Inflation has been under control and the Reserve Bank of India has gained credibility for curbing it.
  • A series of positive news including the ruling party’s win in state elections have helped boost Prime Minister Narendra Modi’s government; the goods and services tax roll out has led to limited disruption, nd the impact from the scrapping of high-value currency bills has been smaller than expected.

How does India compare with other countries?

  • Stocks in developed markets look relatively expensive and face more downside risks, while bond yields in those markets may rise amid hawkish tone of major central banks.
  • India’s defensive character also makes it stand out; it is less dependent on exports and when the global economy is weakening, because domestic demand is solid, the impact from a slowdown is less.
  • The South Asian country’s reliance on China is low in terms of trade and the two don’t compete in terms of the goods they sell in global markets. That makes India resilient to external shocks.
  • India is a net importer of oil and falling crude prices contribute to a lower trade deficit and slower inflation. Foreign ownership of Indian bonds is also relatively low, which shields it at a time of capital flight.

What is your outlook on RBI’s monetary policy, impact on bonds?

  • Even if the RBI cuts rates, yields are unlikely to drop sharply because the move has been priced to a certain extent. The 10-year rate will probably stay above 6 percent, which remains relatively high, while the rupee may also remain stable. The real yield will still be high and the nation’s debt will continue to be attractive for foreigners.

What is your outlook for the rupee?

  • The rupee is likely to trade steady, near the 65 per dollar area. From a valuation standpoint, the currency seems to have become expensive but a narrower current-account deficit and ability to finance it with the direct investment should be supportive.

Rupee

What does the India bond fund hold now?

  • Rupee bonds account for about 70 percent of total assets, while dollar-denominated notes make up the rest. The fund is becoming cautious about its dollar-bond holdings on prospect for higher interest rates.
  • Duration of the dollar notes is also relatively shorter at about three years, while that of local-currency securities is longer at about 6 to 6.5 years as yields are under pressure because of stable inflation outlook

With assistance by Garfield Clinton Reynolds

Are New Fund Offers From Mutual Funds Beneficial?

We can see that as the market rises, new fund offers from the mutual funds are on the hike. Numerous fund houses offer the investors by using an appealing and thematic advertising. NFOs might be for many types of funds like fixed maturity plans, hybrid funds, close end/open end debt funds and equity funds.

Reason behind introducing NFOs

NFOs (New Fund Offers) are introduced for a new scheme launched by the asset management company. NFOs are mainly first time subscription offers to come with a new scheme. It is initiated to collect more capitals from the public to purchase securities from the market like shares, government bonds etc. Several times an NFO is introduced by a fund house or a management company just to complete the monthly target or its product basket or if investors demand any certain theme which can’t be played in an open end strategy. NFOs can be introduced for both open and close-end funds. Closed-end funds usually have a tenor between 3 to 4 years. One can make an investment during the offer period only in a closed-ended NFO. But an open-end fund opens again for subscription and investors have the possibility to subscribe at any time after its re-opening at the existing NAV (Net Asset Value).

Why is an NFO different from equity IPO?

NFO

An NFO and an IPO (Initial Public Offering) is totally different from each other.

ipo

IPOs are issued for mainly two purposes, either by companies seeking capital to expand or by big privately-owned organizations to market themselves publicly. On the other hand, an NFO from a mutual fund is just used to pull out the money from the investors and that money is then invested in purchasing the securities like stocks and govt. bonds etc. based on a specified strategy. It is very hardly seen nowadays that IPOs are done at face value as mostly they are done at a premium to face value while an NFO is always available at a minimal cost of Rs.10.

Conclusion

According to financial planners, ‘Since NFOs are offered at a minimal price of Rs.10, most of the investors got to engage in this trick as a comparison to open-end schemes which might have higher NAVs which is not right. According to many wealth managers, investors must not go for close-end NFOs which often play an existing theme. They suggest investors, to remain attached to the open-end schemes from the mutual fund houses which have an earlier track record.

The plus point in the case of existing schemes is that the portfolio is well known, the investment techniques of the fund managers are also known and the schemes are very well tested and tracked by the investment analysts. On the other side, in an NFO it is not properly known what the portfolio will look like, how much assets the fund will collect and many more things. Some financial planners suggest that the investors should invest in an NFO only if the offer has something dissimilar to the offer from the existing funds or if in the case it is not possible to do something in an open-end fund.

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.