Polycab India Ltd IPO Review and list of anchor investors

Polycab India Ltd is a manufacturer and seller of wires, cables and fast moving electrical goods. Its a popular brand for wires in India. They sell their products under brand name “POLYCAB”. They are one of the largest manufacturers of wires in the industry. The product range includes power cables, control cables, solar cables, building wires and more. The other products includes welding cables, round cables, railway signaling cables, speciality cables and green wires. The other business includes electric fans, LED lighting and luminaires, switches and switchgears, solar products and conduits and accessories.

For Fiscal 2018, they have a market share of approximately 18% of the organized wires and cable industry and approximately 12% of the total wires and cables industry in India, estimated at ₹ 525 billion based on manufacturers realization. Apart from wires and cables, they manufacture and sell FMEG such as electric fans, LED lighting and luminaires, switches and switchgears, solar products and conduits and accessories.

polycab

Polycab India raises Rs 401 cr from anchor investors and the List of anchor investors

IPO Dates & Price Band:

  • IPO Open: 05-April-2019
  • IPO Close: 09-April-2019
  • IPO Size: Approx ₹1346 Crore
  • Face Value: ₹10 Per Equity Share
  • Price Band: ₹533 to ₹538 Per Share
  • Listing on: BSE & NSE
  • Retail Portion: 35%
  • Equity: 17,582,000 Shares

Market Lot:

  • Shares: Apply for 27 Shares (Minimum Lot Size)
  • Amount: ₹14,526

Allotment & Listing:

  • Basis of Allotment: 12-April-2019
  • Refunds: 15-April-2019
  • Credit to demat accounts: 16-April-2019
  • Listing: 18-April-2019

Company Promoters:

  • Inder T Jaisinghani
  • Ajay Jaisinghani
  • Ramesh T Jaisinghani

Polycab IPO Lead Managers:

  • Axis Capital Ltd
  • Citigroup Global Markets India Pvt Ltd
  • Edelweiss Financial Services Ltd
  • IIFL Holdings Ltd
  • Kotak Mahindra Capital Company Ltd
  • Yes Securities (India) Ltd

Polycab IPO Registrar:

Karvy Computershare Private Limited

Object of the issue:

The Company shall not receive any proceeds from the Offer for Sale
The Net Proceeds from the Fresh Issue are proposed to be utilised towards the following objects:
1. Scheduled repayment of all or a portion of certain borrowings availed by the Company;
2. To fund incremental working capital requirements of the Company; and
3. General corporate purposes

Qualitative Factors:

Market leader in wires and cables in India
Diverse suite of electrical products with varied applications across a diverse customer base
Strong distribution network
Manufacturing facilities with high degree of backward integration
Strong brand in the electrical industry
Experienced and committed management team

 key

Key Business Strategies:

Enhance and strengthen our leadership position in wires and cables

Continue to expand the FMEG business

Expand distribution reach

Continue to invest in technology to improve operational efficiencies, customer satisfaction and sales

Strengthen brand recognition

Basic Financial Details:

financial

Financials( Consolidated) of Polycab India Ltd:

Earnings per Share (EPS)2017-18 Rs 26.23
Earnings per Share (9 M)2018-18 Rs 25.31
Book value as on 31.12.2018 Rs. 192.64
RoNW  for 2017-18 : 15.78%
Upper Price Band/last EPS: 20.49
Upper offer price/Book Value Ratio: 2.79

If we annualize consolidated EPS of Rs 25.31 for 9 months ended Dec-18 and a higher price band of Rs 538, the P/E works out to 16x. Similarly, if we take consolidated EPS of 3 years average of Rs 20.79, P/E works out to be 26x. Means company is asking highest price band of Rs 538 in the P/E of 16x to 26x. Its competitors like Havell India is trading at P/E of 72.5x (Highest), Bajaj electricals are trading at 61.42x and KEI Industries at P/E of 23x (Lowest) and the industry average is at 54x,hence the highest Polycab IPO Price of Rs 538 per share is reasonably priced.

peers

Risk:

Its Company, Subsidiaries, Joint Ventures, Directors and Promoters are involved in certain criminal and civil legal proceedings. Any adverse decision in such proceedings may render us/them liable to liabilities/penalties and may adversely affect our business, financial condition, results of operations and cash flows.

Significant increases or fluctuations in prices of, or shortages of, or delay or disruption in the supply of primary raw materials could affect its estimated costs, expenditures and timelines which may have a material adverse effect on its business, financial condition, results of operations and cash flows.

Polycab continued operations at its manufacturing facilities are critical to it’s business and any disruption, breakdownor shutdown of its manufacturing facilities may have a material adverse effect on its business, financial condition, results of operations and cash flows.

Polycab is heavily dependent on the performance of the wires and cables market. Any adverse changes in the conditions affecting the wires and cables market can adversely impact its business, financial condition, results of operation s,cash flows and prospects.

Polycab inability to maintain the stability of its distribution network and attract additional distributors and dealers may have a material adverse effect on its results of operations and financial condition.

If polycab are unable to maintain and enhance its brand, the sales of its products will suffer, which would have a material adverse effect on its results of operations.

Polycab is highly dependent on its key management team as well as its mid-to-senior personnel and its success depends in large part upon its Promoters. The loss of or its inability to attract or retain such persons could materially adversely affect its business performance.

Polycab has substantial capital expenditure and working capital requirements and may require additional financing to meet those requirements, which could have a material adverse effect on its results of operations and financial condition.

Polycab faces significant competitive pressures in its business. Its inability to compete effectively would be detrimental to its business and prospects for future growth.

Polycab operates in a labor-intensive industry and is subject to stringent labor laws and any strike, work stoppage or increased wage demand by its employees or any other kind of disputes with its employees could adversely affect its business, financial condition, results of operations and cash flows.

Polycab depend on a limited number of third parties for the supply of its primary raw materials and delivery of products and such third parties could fail to meet their obligations, which may have a material adverse effect on its business,results of operations, financial condition and cash flows.

Grey market premium

Current GMP is Rs.75/- to 80/-  and Kostak is Rs. 700/-

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

Metropolis Healthcare IPO Review and List of anchor investors

Metropolis Healthcare, a diagnostics company, has a presence across 19 states, with operational network spread across 197 cities in India. The company offers a range of clinical laboratory tests and profiles used for prediction, early detection, diagnostic screening and confirmation and/or monitoring of the disease.

During the nine months period ending December 31, 2018, company conducted approximately 12.3 million tests from approximately 6.6 million patient visits as compared to approximately 16 million tests from approximately 7.7 million patient visits during the financial year 2018.

Moreover, the company has shown good revenue growth in the last 5 years. It is a debt free company.

The company offered a broad range of approximately 3,487 clinical laboratory tests and 530 profiles, as of December 2018.

metropolis

Metropolis Healthcare on Tuesday raised ₹530 crore by selling shares to anchor investors ahead of its initial share-sale. The company allotted 60,23,293 equity shares to 26 anchor investors at ₹880 per unit. Among the anchor investors are Small Cap World Fund, Fundsmith Emerging Equities Trust, Sundaram Mutual Fund, UTI Equity Fund, Edelweiss Crossover Opportunities Fund.

List of anchor investors :

Download (PDF, 1.02MB)

 IPO Dates & Price Band:

  • IPO Open: 03-April-2019
  • IPO Close: 05-April-2019
  • IPO Size: Approx ₹1204 Crore
  • Face Value: ₹2 Per Equity Share
  • Price Band: ₹877 to ₹880 Per Share
  • Listing on: BSE & NSE
  • Retail Portion: 10%
  • QIB Portion: 75%
  • HNI Portion: 15%
  • Equity: 15,269,684 Shares

Market Lot:

  • Shares: Apply for 17 Shares (Minimum Lot Size)
  • Amount: ₹14,960

IPO Allotment & Listing:

  • Basis of Allotment: 10-April-2019
  • Refunds: 11-April-2019
  • Credit to demat accounts: 12-April-2019
  • Listing: 15-April-2019

Lead managers:

JM Financial, Credit Suisse, Goldman Sachs, HDFC Bank and Kotak Mahindra Capital are the lead managers to the offer.

Shareholder of the company:

shareholders

3 lakh shares are reserved for employees. One of the promoters, Sushil Kanubhai Shah, will offload 63 lakh shares, while investor CA Lotus Investments, part of Carlyle Group, will sell 74 lakh shares through the IPO.

Object of the Issue:

1) to achieve the benefits of listing the Equity Shares on the Stock Exchanges and

2) for the Offer for Sale.

Overview of Indian Healthcare Market:

The size of the Indian healthcare industry, in revenue terms, was USD 125 billion in the financial year 2015,which is estimated to have increased to USD 171 million by the financial year 2017. The healthcare industry is expected to grow at a CAGR of 16.9% from USD 125 billion in the financial year 2015 to USD 273 billion in the financial year 2020. India’s healthcare market is expected to be among the top three healthcare markets globally, in terms of incremental growth, by the financial year 2020.

Our Competitive Strengths

One of the leading diagnostics companies in India which is well positioned to leverage the expected growth in the Indian diagnostics industry.

Widespread operational network, young patient touch point network and asset light growth of service network

Comprehensive test menu with wide range of clinical laboratory tests and profiles

Strong and established brand with a focus on quality and customer service

Robust Information Technology Infrastructure with Focus on Improving Efficiency

Established track record of successful acquisition and integration in India and overseas

Experienced Senior Management Team and Qualified Operational Personnel

Our Strategy

Continue to Focus on Organic Growth Initiatives to Expand Our Reach

Continue Our Focus on Providing Quality Tests and Services

Focus on the Expansion of Our Service Network

Focus on Increasing our Business from Individual Patients

Pursue New Avenues of Growth

Focus on Consolidation Opportunities in a Largely Unorganized Diagnostic Sector

Financial:

From financial year 2016 to financial year 2018, revenue from operations grew from Rs 475.47 crore to Rs 643.57 crore, representing a CAGR of 16.3 percent and profit for the year grew from Rs 81.95 crore to Rs 109.75 crore, representing a CAGR of 15.7 percent.

financial details

3 lakh shares are reserved for employees. One of the promoters, Sushil Kanubhai Shah, will offload 63 lakh shares, while investor CA Lotus Investments, part of Carlyle Group, will sell 74 lakh shares through the IPO.

Object of the Issue:

1) to achieve the benefits of listing the Equity Shares on the Stock Exchanges and

2) for the Offer for Sale.

Overview of Indian Healthcare Market:

The size of the Indian healthcare industry, in revenue terms, was USD 125 billion in the financial year 2015,which is estimated to have increased to USD 171 million by the financial year 2017. The healthcare industry is expected to grow at a CAGR of 16.9% from USD 125 billion in the financial year 2015 to USD 273 billion in the financial year 2020. India’s healthcare market is expected to be among the top three healthcare markets globally, in terms of incremental growth, by the financial year 2020.

Our Competitive Strengths

One of the leading diagnostics companies in India which is well positioned to leverage the expected growth in the Indian diagnostics industry.

Widespread operational network, young patient touch point network and asset light growth of service network

Comprehensive test menu with wide range of clinical laboratory tests and profiles

Strong and established brand with a focus on quality and customer service

Robust Information Technology Infrastructure with Focus on Improving Efficiency

Established track record of successful acquisition and integration in India and overseas

Experienced Senior Management Team and Qualified Operational Personnel

Our Strategy

Continue to Focus on Organic Growth Initiatives to Expand Our Reach

Continue Our Focus on Providing Quality Tests and Services

Focus on the Expansion of Our Service Network

Focus on Increasing our Business from Individual Patients

Pursue New Avenues of Growth

Focus on Consolidation Opportunities in a Largely Unorganized Diagnostic Sector

Financial:

From financial year 2016 to financial year 2018, revenue from operations grew from Rs 475.47 crore to Rs 643.57 crore, representing a CAGR of 16.3 percent and profit for the year grew from Rs 81.95 crore to Rs 109.75 crore, representing a CAGR of 15.7 percent.

Peers:

Peers

Grey market premium:

Currently, Grey market premium is Rs. 60/- to 65/- and Kostak is Rs. 200/- to 250/-

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

 

Do your mutual funds have exposure to Essel Group?

Many investors are concerned about the impact the Essel Group fiasco will have on their mutual fund investments.

The Essel Group claims to have reached an understanding with lenders who hold pledged shares of the group’s promoters. This could arrest the decline in the Essel Group stocks. Group companies shares had plummeted 10-33% on Friday, triggered by reports of payment defaults and sale of pledged shares.

zee

While the sharp fall in stock prices dented the NAVs of equity funds holding these scrips, there were fears that the crisis would spread to debt funds as well. More than Rs 8,000 crore worth of bonds and debentures issued by group companies is held by 150 debt mutual funds. Of this, Rs 6,329 is invested in 60 open-ended debt funds while the balance Rs 1,672 crore is in 90 fixed maturity plans (FMPs).

In a statement issued after the meeting with lenders, the Essel Group stated that it has been agreed that the no default will be declared due to the steep fall in price and there will be synergy and co-operation amongst lenders.
esselgroup

The Aditya Birla Sun Life Mutual Fund is the biggest investor, with an exposure of Rs 2,936 crore spread across 28 schemes. This is almost 37% of the total debt fund exposure to the Zee group. 

However, Aditya Birla Mutual fund is confident that the prices of these bonds and debentures will not be impacted. “These bonds are secure.” 

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One scheme alone has Rs 1,288 crore invested in Zee group bonds. As on 31 December 2018, the Aditya Birla Sun Life Medium Term Plan held zero-coupon bonds worth Rs 720 crore issued by Sprit Infrapower & Multiventures Pvt Ltd. (credit rating A) and Rs 568 issued by Adilink Infra & Multitrading Private Ltd (unrated). The two holdings account for 12.5% of the fund’s total Rs 10,272 crore portfolio and are its top holdings.

Download (PDF, 16KB)

Another scheme, the Aditya Birla Sun Life Credit Risk Fund, held Rs 740 crore worth of zero-coupon bonds of Sprit Infrapower & Multiventures Pvt Ltd. and Adilink Infra & Multitrading Private Ltd. The two holdings account for 9.2% of its portfolio, with Spirit Infrapower as its top holding (5.62%). The Aditya Birla Sun Life Dynamic Bond Fund has over 8% of its Rs 5,136 crore portfolio invested in Sprit Infrapower bonds.
In percentage terms, Baroda Mutual Fund schemes have the largest exposure to bonds issued by Zee group companies. As on 31 December 2018, the Baroda Credit Risk Fund had Rs 168 crore invested in zero-coupon bonds of ARM Infra & Utilities Pvt Ltd. and Cyquator Media Services Pvt. Ltd. Together, this is 17.7% of its Rs 947 crore portfolio.

The silver lining for debt fund investors is the new rule that allows side pocketing of distressed assets. It is an accounting method that separates illiquid bonds from quality investments in a debt portfolio. If the Zee group bonds crash, open-ended debt funds may cushion themselves by putting them aside in a separate side portfolio. The fund’s NAV then reflects the value of the liquid assets, with a separate NAV assigned to the side pocket assets based on their estimated value.

However, this will not apply to fixed maturity plans (FMPs) where the scheme has a limited tenure and bonds are held till maturity. HDFC Mutual Fund, the second largest investor in Zee group debt with an exposure of Rs 1,196 crore, has most of its exposure through FMPs. It has invested over Rs 900 crore in bonds and debentures through 38 FMPs. Some FMPS have over 20% of their assets invested in Zee group companies.

Note: Mutual fund investments are subject to market risks read all scheme related documents carefully.

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

What happens to MF exposure to DHFL debt after downgrades by CARE

For mutual funds with exposure to DHFL debt, a rating downgrade means that there will be a mark to market impact on individual bond prices, also affecting NAV

After CARE cut ratings from “AAA” to “AA+” for debentures, loans and deposits. Rating for commercial paper (“A1+) has kept under watch with developing implications.

With DHFL group companies debt mess coming under the lens, global brokerage Credit Suisse has warned that it could trigger a second wave of risk aversion in India’s debt fund industry.

Earlier, India’s debt mart faced a major risk aversion during September-October following a debt default by the IL&FS group.

The DHFL debt mess is expected to have a resonating effect as the company is among the larger borrowers from mutual funds (MFs) and their aggregate exposure stood at around Rs 8,650 crore as of December 2018. That amounts to about 0.7 per cent of debt mutual funds asset under management as of December 2018.

DHFL ALLOCATION

About Rs.7,800 crore of such debt has been purchased by open-ended MF schemes, while the rest of the money is with closed-ended funds. Open-ended funds are where investors have the highest liquidity since you can come in or go out anytime. Closed-ended funds don’t allow you to exit before maturity.

Several fund houses have large exposures to DHFL, at 2-15 per cent of total debt AUM, with some schemes having up to 30 per cent of their AUM to DHFL

dhfl mf

UTI Mutual Fund had the maximum exposure of around Rs 2,144 crore as of December 31, 2018, followed by Reliance AMC at Rs 1,488 crore, Axis AMC at Rs 771 crore and Franklin Templeton Rs 571 crore.

Master

Master (1)

Master 3

Master 6

The DHFL issue may result into more scrutiny of credit risk in debt funds, and considering the fact that NBFC funding relies on MFs for 10-30 per cent of their borrowings, debt funds flow will see some hiccups in the coming days.

Some schemes have taken mark-to-market (MTM) losses on this exposure with DHFL paper being repriced at higher yields. Credit Suisse warned if this continues and leads to redemption pressure, it may cause a second wave of risk aversion in domestic debt funds and volatility in their flows.

In the open-ended space, about Rs 300 crore of exposure is to Aadhaar Housing Finance, which will now become the responsibility of Blackstone. DHFL is a Rs 6,200 crore of debt exposure for funds.

Debt raised by firms like DHFL is repaid within a few months (or years) as per maturity. If DHFL at some point is not able to honour its obligations, then that will be default like situation eg. IL&FS. However, such a situation may not really happen.

As a precautionary measure, some mutual funds may, however, write down the value of the bonds.

There is also the option to segregate or side-pocket bad assets so that the impact of the downgrade does not lead to panic redemptions. However, side pocketing can happen only in extreme cases, and that too when there is a default-like scenario.

Existing investors – For mutual funds with exposure to DHFL debt, a rating downgrade means that there will be a mark to market (MTM) impact on individual bond prices. This means there will be an impact on the Net Asset Value (NAV) of the funds.

In some cases, the MTM impact of the first series of downgrades on bond prices can be as significant as 25%. This means a 5% position for the bond in a fund would result in a negative 1.25% MTM performance attribution due to bond holding.

Any redemption from such funds at this point would result in an actual booking of losses.

Keep an eye on schemes with 10-33% exposure to single DHFL security.

Such examples are DHFL Pramerica Ultra Short Term (Dewan Housing Finance Corpn. Ltd. TR-1(30-Apr-19), JM Income (Dewan Housing Finance Corporation Ltd. SR-I CATG III & IV 09.10% (09-Sep-19)), JM Short Term Fund (Dewan Housing Finance Corporation Ltd. SR-I CATG III & IV 09.10% (09-Sep-19)), JM Low Duration (Dewan Housing Finance Corporation Ltd. SR-I CATG III & IV 09.10% (09-Sep-19)), Baroda Dynamic Bond (Dewan Housing Finance Corporation Ltd. SR-III CATG III & IV 09.25% (09-Sep-23)), DHFL Pramerica Medium Term (Dewan Housing Finance Corporation Ltd. SR-II CATG III & IV 9.15% (09-Sep-21)), DHFL Pramerica Floating Rate (Dewan Housing Finance Corporation Ltd. SR-I CATG I & II 09.05% (23-Sep-19)), DHFL Pramerica Low Duration (Dewan Housing Finance Corporation Ltd. SR-I CATG I & II 09.05% (23-Sep-19)), BNP Paribas Medium Term (Dewan Housing Finance Corporation Ltd. SR-I CAT I-IV 08.90% (04-Jun-21)), BOI AXA Short Term Income (Dewan Housing Finance Corporation Ltd. CATG I & II SR-IV 9.1% (16-Aug-19)), Tata Medium Term (Dewan Housing Finance Corporation Ltd. SR-I CAT I-IV 08.90% (04-Jun-21)).

 

Note: Mutual fund investments are subject to market risks read all scheme related documents carefully.

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

 

Mistakes investors make without an advisor

Easy access to financial information on the internet means that any investor can access a list of top performing schemes. Newer, easy to use online investment platforms have also taken the pain out of the transaction process. So do investors need expert guidance on financial matters?

The answer is a resounding yes. This is because an advisor’s role is not limited to identifying the best performing schemes; he matches client needs to right investments and helps them make wiser investment choices.

Here are seven investment mistakes that clients tend to make without the guidance of an advisor.

mentor1

Saving but not investing:

Most individuals save a certain portion of their earnings. However, these savings are often lying idle in their bank accounts. Owing to their busy work-schedule, investors may not get time to immediately research and invest their savings.

A financial advisor helps investor channelize his savings into investments. By helping an investor budget his earnings and expenses, he reduces the amount of cash lying idle in the bank. In short, an advisor helps an investor manage his money better and invest more.

cash

Starting late:

Delaying financial planning is quite common among investors. Goals like retirement and financial planning for a family seem far away for a millennial investor. However, many of them forget that time is the best friend of investments. Starting early gives investors more time to accumulate the required corpus. It allows them the flexibility to stop or adjust their investments temporarily in case of an emergency. Starting late can put a financial burden on investors, as they will have to save more to reach their key financial goals such as retirement.

Often people splurge their earnings on items they really don’t need.  Through a discussion on financial goals, an advisor can help the individual visualise the corpus he needs to accumulate to fulfil his financial dreams. This may encourage an individual to invest rather than spend frivolously.

compound

Wrong investment choices:

Wrong investment choices do not just refer to investments made in a Ponzi scheme; it also includes investments made out of line with an investor’s risk-return profile. To elaborate an investor may consider himself to be a risk-taker and invest in high yield bonds. Alternatively, he may invest a majority of his corpus in equities. However, in reality, his personal responsibilities and goals require him to take a more conservative approach. This is an example of a wrong investment choice.

A financial advisor makes a holistic evaluation of the investor’s risk tolerance, liquidity needs, goals and income before recommending an investment. This analytical and exhaustive approach helps advisors recommend the most suitable investment options to their clients. Moreover, an advisor can also help warn you against any investment scam.

New ImageInvesting based on the preconceived notion:

Our friends, family members often influence our investment decisions. For example, a young professional may invest the majority of his money in gold and FDs just like his parents. He may shun equities having seen his relatives lose money in day-trading. However, based on risk profile and age, he may be better off investing in riskier products.

Financial advisors can help clear any investment related misunderstandings from the minds of investors and guide them on making better investment choices.

LIC Jeevan Shikhar Plan : Tax Saver or Loser

Letting behavioural biases influence their decision:

Selling off their investments during a slight market correction, holding on to loss-making investment, ignoring research which does not align with the investor’s view are all examples of behavioural biases influencing investor’s decisions.

Advisors can help investors identify these biases and encourage them to stick to their financial plan rather than acting under the influence of emotions.11111

Taking too much debt:

Many investors dream of building their own home or buying a car. Generally, investors fund these purchases through a loan or EMI. If the amount of debt is not kept in check, it can balloon and become unmanageable. Excess debt may also hurt an investor’s credit score which in turn lead to higher rates on future loans.

By budgeting their income and expenses, advisors help evaluate whether an investor can comfortably service a loan.

Future Supply Chain Solutions Ltd IPO Review

Future Supply Chain Solutions Ltd. (FSC) is a supply chain and logistics company. Future Supply Chain Solutions is part of Kishore Biyani’s Future Enterprise Ltd. The company was incorporated in 2006. The company offers automated and IT-enabled warehousing, distribution and other logistics solutions. It has customers in various sectors all across India, including ATMs, automotive and engineering, retail, fashion & apparel, food – beverage, FMCG, e-commerce, health-care, electronics and technology, home and furniture.

It has 42 distribution centers across India, which covers approximately 3,500,000 square feet of warehouse space.

List of anchor investors

Download (PDF, 601KB)

The company offers customers services in three key areas:

  1. Contract Logistics
  2. Express Logistics
  3. Temperature-Controlled Logistics

The promoters :

Future Enterprises Limited ( Kishore Biyani Group company)

Main objects of the issue are:

1. Avail the benefit of listing of the Equity Shares on the Stock Exchanges;
2.To Enhance stability and brand image and
3.To provide liquidity to its existing shareholders.

FUTURE

IPO Dates & Price Band:

  • IPO Open: 06-December-2017
  • IPO Close: 08-December-2017
  • IPO Size: Approx Rs. 650 Crore (Approx)
  • Face Value: Rs. 10 Per Equity Share
  • Price Band: Rs. 660 to 664 Per Share
  • Listing on: BSE & NSE
  • Retail Portion: 35%
  • Equity: 9,784,570 Shares

Market Lot:

  • Shares: Apply for 22 Shares (Minimum Lot Size)
  • Amount: Rs.14,608

Allotment & Listing:

  • Basis of Allotment: 12-December-2017
  • Refunds: 14-December-2017
  • Credit to demat accounts: 14-December-2017
  • Listing: 18-December-2017

IPO Registrar:

Link Intime India Private Ltd

Lead Managers:

  • IDFC Bank Limited
  • IIFL Holdings Limited
  • Yes Securities (India) Limited

Do Not Compare Yourself with Other Investors While Making Investment

Risks and Upsides

Logistics service providers face the following general challenges in the market:

Foreign direct investment activity is uncertain and is dependent on global policies and market volatility.

A slowdown in the user industry could affect the volumes handled by logistics service providers.

Quality and availability of infrastructure could impact performance.

Intense competition and low barriers to entry in certain segments could affect logistics service providers.

Increasing scale could be challenging.

The express logistics industry is sensitive to high operating costs; and

There is a need to continuously invest in and evolve technology.

Strengths

One of the largest service providers with an extensive network of facilities in a fast-growing third-party logistics market.

Comprehensive solution for supply chain requirements.

Diverse customer base across many sectors.divrsificationAt the forefront in introducing new standards of technology and automation in the logistics industry in India.

Longstanding relationship with Future Entities.

Experienced management team with logistics and retail sector-specific knowledge.

Khadim India Limited IPO Review

Strategies

Capitalise on the growth of the third-party logistics industry in India.

Target growth by identifying new customers, increasing its share of existing customers’ third-party logistics spending and leveraging existing relationships.

Expand addressable market through customized and new service offerings.

Invest further in infrastructure and expand its network.

Explore inorganic growth opportunities.

Continue to improve operating efficiencies and implement technological and process enhancements.

indian log mktNegative

The Future Entities are its key customers and its Promoter and certain of its Group Companies account for a significant portion of its revenue. Any failure to maintain its relationship with these customers will have a material adverse effect on its financial performance and results of operations.

FSC’s business is affected by prevailing economic conditions in India and indirectly affected by changes in consumer spending capacity in the sectors we serve within India.

FSC may face competition from a number of international and domestic third-party logistics companies, which may adversely affect its market position and business.

Delays or defaults in payment by its customers could affect its cash flows and may adversely affect its financial condition and operations.

An inability to pass on any increase in operating expenses to its customers may adversely affect its business and results of operations.

FSC are heavily dependent on machinery and equipment for its operations. Any breakdown of its machinery or equipment will have a significant adverse effect on its business, reputation, financial results and growth prospects.

FSC business is highly dependent on technology and automation and any disruptions of or failure to update such technology or automation could have an adverse effect on its results and operations.

Changing regulations in India could lead to new compliance requirements that are uncertain.

The trend toward outsourcing of supply chain management activities, throughout India or within specific sectors, may change, thereby reducing demand for its services.

Conditions and restrictions imposed on FSC by the agreements entered into with some of its customers could adversely affect its business and results of operations.

The performance of its express logistics and temperature-controlled businesses may continue to decline.

Dependence on third-party vendors could have an adverse effect on its business financial condition and results of operations.

Some of its lease agreements may have certain irregularities.

FSC’s Promoter, Group Companies, and Directors are involved in certain legal proceedings and potential litigation.Any adverse decision in such proceedings may render us/them liable to liabilities/penalties and may adversely affect its business and results of operations.

Compititive positioning of Logistics service providers 

KEYFinancials

For FY 2017, 2016 and 2015, the revenue from operations was Rs. 5,611.83 crores, Rs. 5,198.70 crores, and Rs. 4,079.63 crores, respectively. (A CAGR of 17.3%.)

For FY 2017, 2016 and 2015, the net profit was Rs. 457.54 crores, Rs. 294.27 crores, and Rs. 246.57 crores, respectively, (A CAGR of 36.2%.)

For FY 2017, 2016 and 2015, the EBITDA was Rs. 742.82 crores, Rs. 699.40 crores, and Rs. 639.40 crores, respectively, (A CAGR of 7.8% during the last three Fiscals.)

Financial snapshot of Key companies.

financial snapshotValuations

On the upper price band of Rs.664/- and Restated FY17 EPS of Rs.11.69, P/E ratio works out to be 56x. Even based on last three years restated EPS of Rs. 9.41, P/E ratio works out to be 70x. Means, companies are asking higher price band of Rs.664/- in the P/E ratio of 56x to 70x. Its only listed peers Mahindra Logistics Ltd. is trading at P/E ratio of 68x. Hence we compare this way; Future supply chain is overpriced.  

Grey market premium

Currently, Grey market premium is Rs. 20/- ( Seller )

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

 

The biggest worry for global financial markets is China

China is the 2nd largest economy in the whole world and carries substantial economic hit with its trading partners. However, the slight fall in China’s equity market on 23rd November 2017 has set a fret in financial markets of China.

China Blue-chip stock index, CSI 300 had experienced its worst downfall in 17 months on 23rd of November. CSI 300 index fell by 2.93% as the market became worried about rising bond yields and PBoC deleveraging campaign.

CHINA

The current year, China’s bond yields have risen by 93 bps and are trading at 3-year highs. The sharp rise in China bond yields specifies the government’s determination to control corporate debt, which involves them in a talk that Chinese economy could fall in the coming future.

                                                        China CSI 300 Index

CSIThe top stock on Hang Seng was WH Group Ltd which stood up 1.69% and the stock which suffered loss was AAC Technologies Holdings Inc which sustained a downfall of 4.24%.

The 3 biggest H-shares percentage decliners were China Pacific Insurance Group Corporation Ltd which had a downfall of 4.73%, New China Life Insurance Corporation Ltd which has 4.7% and China Merchants Bank Corporation Ltd down by 4.1% while the biggest stocks which perform well were China Minsheng Banking Corporation Ltd which stood up 2.41%, Great Wall Motor Corporation Ltd which gained 0.98% and China railway Construction Corporation Ltd who stood up 0.77% in the Chinese financial market.

                                                China 10 Years Bond Yields

BONDSThe CSI 300 index is moving smoothly by 3.3% and closed down at 3% which is its biggest loss since June 2016 i.e., within 17 months. The ChiNext Index stood down by 3.2% which is its highest downfall in 4 months. The other two stocks, i.e., Shanghai Composite Index and Shenzhen Composite Index fell more than 2% that day.

Three finance lessons for your child

According to the report, China’s five years corporate bond yields had risen by 33 bps in November 2017, which has hit a three year high of 5.3%. In China, there is more than 1 trillion dollar of local bonds which are going to get matured in the coming year 2018-2019, therefore, it is going to be expensive for these firms to roll over financing.

 

Do Not Compare Yourself with Other Investors While Making Investment

There is very fine line said by Dan Jensen that, ‘The only goal is to be better than myself, my biggest competition is with no one but myself only.’ that simply means that one should not compare himself with others in any aspect of life but try improving his own work and skills and same applies while making an investment and expecting positive results from it.

In other words, comparing yourself with others can be a very futile and caustic act as we all have our own different goals and skills and we all are not in the same race, our ways to make investments are dissimilar.

Have you ever seen Warren Buffett making any investment with Carl Ichan strategies or Peter Lynch making any investment in David Tepper’s style? The answer is a clear No because they all have their own rules and strategies to make investments and create positive results out of it. Some ways of investing are for long-term, some are short-term, some are for value, some are for growth, some bet on the change and some bet on the things that won’t. It’s even more captivating to hear the different opinions from the two value investors looking at the same company. So, the key point is not making a comparison with others instead compared you with yourself one or two years ago.

compare

Also, one must keep in mind that to be a good investor he must follow more discipline and try to make less investment decision as possible. That simply means you have to believe in your investment decisions that will do good without your involvement. Not comparing yourself to other investors and their performance is not enough for you; you must not worry about other’s opinion also. If you are a contrarian investor, you should not even listen to and worry about people’s opinion about yourself. If you listen to their opinion, it is because you are having more confidence in them than you have in yourself.

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Here are three key points that can help you in making beneficial results from the investments-

Believe in yourself

If you see yourself as a successful investor in future, you must believe in the rules made by you for you. You must have proper planning and strategies for different investments, and you have to believe in that philosophy and the strategies even during tough times. The thing is if you are not willing to take risks and you do not have courage and patience then you can never be an investor.

Do not make unnecessary investments

It is mandatory to know that every investment is not going to give you positive results, so you do not have to invest in all kinds of opportunities or environment. For example, in 1999 the technology is in boom period but Warren Buffett did not make any investment in it, and people said, ‘that’s it for Buffett, he’s too old now.’ And at that time Warren said that ‘I don’t do tech because I don’t understand it and I think it is not for me. I am going to sit it out.

Have the guts to face the failure

The more you get experience in making investments you will come to know that discipline is a must in investing. Sometimes you have to sit out and watch other investors making money in the exact investments that you have already passed on. It is not necessary to follow the trend and invest in everything; you only have to make investments in the things you really know about and then stick to your process with confidence.

HDFC Life IPO Review and Current GMP

HDFC Standard Life Insurance Company Ltd ( HDFC Life ) (Incorporated in 2000) is life insurance provider in India. HDFC Life offers a wide range of individual and group insurance solutions.

The Company is a joint venture between HDFC and Standard Life Aberdeen plc. Standard Life is an Edinburgh based investment company offering a wide range of financial services across the world. Standard Life is a public company established in 1825.

The Company sells Insurance policies through a multi-channel network, which includes direct sales through own branches, Insurance agents, Partner Banks and through other financial institutions. The company has more than 414 branches and 15,406 full-time employees located across India. It has more than 58,147 individual agents.

HDFC Standard Life Insurance raises Rs 2,322 crore from anchor investors.

List of anchor investors.

Download (PDF, 2.03MB)

IPO Dates & Price Band:

  • IPO Open: 07-November-2017
  • IPO Close: 09-November-2017
  • IPO Size: Approx Rs. 7500 Crore (Approx)
  • Face Value: Rs. 10 Per Equity Share
  • Price Band: Rs. 275 to 290 Per Share
  • Listing on: BSE & NSE
  • Retail Portion: 35%
  • Equity: 29,98,27,818 Shares

Market Lot:

  • Shares: Apply for 50 Shares (Minimum Lot Size)
  • Amount: Rs. 14500

IPO Allotment & Listing:

  • Basis of Allotment: 14-November-2017
  • Refunds: 15-November-2017
  • Credit to demat accounts: 16-November-2017
  • Listing: 17-November-2017

hdfc lifePromoters:

1.Housing Development Finance Corporation Limited (“HDFC”);

2. Standard Life (Mauritius Holdings) 2006 Limited (“Standard Life Mauritius”); and

3. Standard Life Aberdeen plc (“Standard Life Aberdeen”).

The objects of the issue are:

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

2. To carry out the sale of Offered Shares by the Selling Shareholders.

Top 10 Shareholder

SHARE

Lead Managers:

1.CLSA India Private Limited
2. Credit Suisse Securities (India) Private Limited
3. Edelweiss Capital Limited
4. Haitong Securities India Private Limited
5. HDFC Bank Limited
6. IDFC Bank Limited
7. IIFL Holdings Limited
8. Morgan Stanley India Company Pvt Ltd
9. Nomura Financial Advisory And Securities (India) Pvt Ltd
10. UBS Securities India Private Limited

Registrar to the IPO:

Karvy Computershare Private Limited

Life insurance penetration  ( 2016 )

life insurance penetration 2016Competitive Strengths

Strong parentage and a trusted brand that enhances our appeal to consumers

Strong financial performance defined by consistent and profitable growth.

Growing and profitable multi-channel distribution footprint that provides market access across various consumer segments in India.

HOW CAN YOU SETTLE YOUR INSURANCE CLAIM IF REJECTED?

Focus on customer centricity enabling growth across business cycles.

Leading digital platform that provides a superior experience for customers and distributors.

Independent and experienced leadership team.

mshare

market shareStrategies

Reinforce it’s agile,multi-channel distribution platform to fortify and diversify its revenue mix across business cycles.

Drive innovation in product sales to enhance customer value proposition and to capture niche segments.

Invest in digital platforms to establish leadership in the growing digital space.

Continue to build economies of scale to ensure profitability and cost leadership.

asiaNegative

HDFC Life may be unable to implement its growth strategies and develop and distribute an appropriate product mix for specific customer segments through its multiple distribution channels.

Any termination of, or any adverse change to, its relationships with or performance of its bancassurance partners, including HDFC Bank, could have a material adverse impact on its business, profitability, results of operations and financial condition.

Changes in regulation and compliance requirements could have a material adverse effect on its business, financial condition, results of operations and prospects.

Misconduct by its agents, employees, distribution partners or other third parties is difficult to detect and deter and could harm our brand and its reputation, or lead to regulatory sanctions or litigation against us.

Its Company and certain of its Subsidiaries, Directors, Promoters and Group Companies are involved in certain legal proceedings which, if determined against us, may adversely affect its business and financial condition.

HDFC Life’s results are dependent on the strength of its brand and reputation, as well as the brand and reputation of other HDFC group entities.

Variation in its persistency experience from its estimates, as well as concentrated surrenders, may materially and adversely affect its cash flows, results of operations and financial condition.

If actual claims experience and other parameters are different from the assumptions used in pricing its products and setting reserves for its products, could have a material adverse effect on its business, results of operations and financial condition.

HDFC Life depends on its leadership and key management and its actuarial, information technology, investment management, finance, frontline sales staff, underwriting and other personnel, and its business would suffer if we lose their services and are unable to adequately replace them.

SBI Life insurance IPO and Current GMP

Adverse market fluctuations and economic conditions would have a material adverse effect on its business, financial condition, results of operations and prospects.

Failure to secure new distribution relationships, as well as any termination or disruption of its existing distribution relationships, may have a material adverse effect on its competitiveness and result in a material impact on its financial condition and results of operations.

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

There is a risk that customer data could be lost or misused.

In the event that HDFC and/or Standard Life Mauritius reduce the percentage of their respective shareholding in its Company, or the Name Usage Agreement or the Trademark Agreement is terminated, we may not be permitted to use the “HDFC” and/or “Standard Life” trademarks as part of our brand and name for our business.

Catastrophic events, such as natural disasters, which are often unpredictable, may materially and adversely affect its claims experience, investment portfolio, financial condition and results of operations.

total

Valuation

HDFC Standard Life Insurance Company is among the top three life insurers in India by terms of market share in new business premium one of the most profitable life insurers based on the VNB margins, and among the top five private life insurers in India. The overall total premium recorded a CAGR of 14.5% to Rs.19445 crore between FY2015 and FY2017. The VNB margins improved from 18.5% in FY2015 to 22.0% in FY2017 by improvement in cost-efficiencies, increasing persistency ratios and selling a balanced product mix. Profit after tax registered a CAGR of 6.3% to Rs 886.92 crore in FY2017 from FY2015.

The company is valued at Rs 58260 crore at the upper price band of Rs 290 per share. With embedded value (EV) at Rs 14010 crore end September 2017, the scrip is offered at 4.2 times the EV.

Comparison with Peers:

ICICI Pru. Life: PE 33.40, RoNW : 28.70%

SBI Life PE 69.40,RoNW : 18.60%

HDFC Std.Life: PE:65.91 ,RoNW:25.70%

Grey market premium

Current Grey market premium is Rs.11/-

Conclusion

Strnogly avoid.

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