Amber Enterprises India Limited IPO Review and GMP

Punjab based Amber Enterprises India Limited (Incorporated in 1990) is manufacturer of air conditioners and its component in India. With the market share of 55.4%, Amber is the market leader in the Room Air Conditioner . The company manufactures RAC’s for 8 out of the 10 top RAC brands in India including Daikin, Hitachi, LG, Panasonic, Voltas and Whirlpool. These 8 brands have over 75% of market share in India.The Company has 10 manufacturing facilities across seven locations in India.

Super anchor book! Sold 20.8 lakh equity shares to 15 anchor investors for Rs. 178.71 crore

Abu Dhabi Investment Authority
Blackrock India Equities Mauritius Limited
Goldman Sachs India Limited
Kuwait Investment Authority Fund
ICICI Prudential Business Cycle Fund Series 2
ICICI Prudential Value Fund – Series 10
HDFC Small Cap Fund
SBI Magnum Multicap Fund
Reliance Small Cap Fund
Aditya Birla Sun Life

List of Anchor Investors :

Download (PDF, 283KB)

 

amber11111

The Product portfolio includes :

1. Room Air Conditioners : This includes window air conditioners and indoor units and outdoor units of split air conditioners.

2. RAC Components : Critical components such as heat exchangers, motors and multi-flow condensers.

3. Other Components : Other related components including case liners for refrigerator, plastic extrusion sheets for consumer durables and automobile industry, sheet metal components for microwave, washing machine tub assemblies and for automobiles and metal ceiling industries.

The Company has a dedicated R&D centre at its Rajpura facility which is equipped and is accredited by National Accreditation Board for Testing and Calibration Laboratories (NABL) with ISO/IEC 17025:2005 certification and facilities for 3D modelling, quality and product testing.

IPO Particulars:

IPO Opens on : 17th Janaury 2018
IPO Closes on : 19th January 2018
Issue Type: Book Built Issue IPO
Issue Size:[.] Equity Shares of Rs 10 aggregating up to INR 600.00 Cr
#Fresh Issue of [.] Equity Shares of Rs 10 aggregating up to INR475.00 Cr
#Offer for Sale of [.] Equity Shares of Rs 10 aggregating up to INR 125.00 Cr
Face Value: INR 10 per Share
Price Band: INR 855-859 Per Equity Share
Minimum Order Quantity:17 Shares
Listing will at: NSE,BSE

Tentative Timetable:

Finalisation of Allotment : 24 January 2018
Refund : 25 January 2018
Transfer of Shares to Demat A/c:29 January 2018
Listing Expected on 30 January 2018

Objects Of The Issue:-

  • Prepayment or repayment of all or a portion of certain borrowings – INR400 crore
  • General Corporate purposes – remaining amount

Lead Managers:

Edelweiss Financial Services Limited
IDFC Bank Limited
SBI Capital Markets Limited
BNP Paribas

Registrar to the IPO:

Karvy ComputerShare Private Ltd

Promoters Of the Company:-

  1. Jasbir Singh
  2. Daljit Singh

Global Air Conditioner Market Split by Segments

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Global RAC Volume Market Size and Forecast (Million Units)

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RAC Market Penetration – Select Asian Countries and Global

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Competitive Strengths

1. Market leadership in the RAC OEM/ODM industry in India.

2. One stop solutions provider for the RAC industry with high degree of backward integration.

3. Strong customer relationships with the majority of leading RAC brands in India.

4. R&D and product design capabilities leading to high proportion of ODM business.

5. Track record of financial performance.

6. Economies of Scale.

7. Culture of innovation and highly experienced management.

Market Penetration of Consumer Durables, India vs. Global (%), Fiscal 2015

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Evolution of Room Air Conditioners in India

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Financial Highlights

  • Amber Enterprises net worth, as of Sept. 30, was close to Rs 363 crore, translating into book value of Rs 115 a share after fresh issuance.
  • Its revenue has been growing at an annualised rate of 17 percent, while net profit rose at 9 percent in five years to March 2017.
  • For the first half ended September, revenue and net profit stood at Rs 938 crore and Rs 27 crore, respectively.
  • Earnings before interest, tax and depreciation and amortisation grew at a CAGR of 23.5 percent, while Ebitda margins expanded 150 basis points in the last five years to 7.8 percent.
  • For the first half ended September, Ebitda and margins stood at Rs 84 crore and 9 percent, respectively.
  • The company has a total debt of close to Rs 554 crore, which would fall it looks to use Rs 400 crore from the IPO proceeds to pare debt.

Market Structure RAC

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Market Share Analysis RAC

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Key Strategies

Expansion of existing product portfolio with a focus on ODM.

Expand domestic customer base and grow export sales.

Continuing innovation and strengthening the R&D capacity.

Pursue selective acquisitions, partnership opportunities and inorganic growth.

Continue to focus on increasing efficiency and profitability.

Reliance Nippon Life Asset Management ( First MF ) IPO Review

Negative

Amber’s business is dependent on certain principal customers and the loss of, or a significant reduction in purchases by, such customers could adversely affect its business, financial condition, results of operations and future prospects.

If its customers do not continue to outsource manufacturing, or if there is a downward trend in OEM/ODM business, its sales could be adversely affected.

Any slowdown in the RAC industry may adversely impact its business, results of operations, financial condition and cash flows.

Amber’s inability to identify and understand evolving industry trends, technological advancements, customer preferences and develop new products to meet its customers’ demands may adversely affect its business.

Amber do not have firm commitment agreements with its customers. If its customers choose not to source their requirements from us, its business and results of operations may be adversely affected.

Amber have experienced growth in the past few years and if company are unable to sustain or manage its growth, its business and results of operations may be adversely affected.

Amber failure to compete effectively in the highly competitive RAC and equipment manufacturing industry could result in the loss of customers, which could have an adverse effect on its business, results of operations, financial condition and future prospects.

Pricing pressure from customers may adversely affect its gross margin, profitability and ability to increase our prices.

Amber manufacturing capacity may not correspond precisely to customers’ demands which may affect its results of operations.

Amber Enterprises and its Subsidiaries are involved in certain legal proceedings, which, if determined against us could have a material adverse effect on its financial condition, results of operations and its reputation.

Amber have undertaken and may continue to undertake strategic investments and alliances, acquisitions and mergers in the future, which may be difficult to integrate and manage. These may expose us to uncertainties and risks, any of which could adversely affect its business, financial condition and result of operations.

Dixon Technologies IPO – Review

Peer Comparison

Amber Enterprises has no listed competitors. Dixon Technologies Ltd. has a similar business model but caters to a different market—an equipment vendor for makers of washing machines, LED televisions, lighting products and mobile phones.

Valuations

“At the higher end of the price band of Rs 859, the issue is valued at 96.8 times price to earnings (PE) on FY17 basis (post dilution) and 49.4 times on first half of FY18 (annualized) basis. While the company holds leadership position , it is difficult to justify its valuation due to lack of clarity of the growth trend in the financial performance.

“Single digit earnings before interest, taxes, depreciation, and amortization (EBITDA) margin, average of 8% for last 5 years and return on equity is 10%.

Grey market premium

GMP is 575, Kostak is 550, Subject to Rs. 6000/-

Conclusion

Investors may consider for short to medium term gain.

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.

 

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

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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.

 

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.

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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.

 

Khadim India Limited IPO Review

The  Company is one of the leading footwear brands in India, with a two-pronged focus on retail and distribution of footwear. It is the second largest footwear retailer in India in terms of number of exclusive retail stores operating under the ‘Khadim’s’ brand, with the largest presence in East India and one of the top three players in South India, in fiscal 2016. It also had the largest footwear retail franchisee network in India in fiscal 2016. Its core business objective is ‘Fashion for Everyone,’ and it believes that the Company has established an identity as an ‘affordable fashion’ brand, catering to the entire family for all occasions. As at March 31, 2017, it operated 829 ‘Khadim’s’ branded exclusive retail stores across 23 states and one union territory in India, through its retail business vertical. Further, it had a network of 357 distributors in fiscal 2017, in its distribution business vertical.

Khadim India has allocated shares worth Rs 157.5 crore to 13 anchor investors at the upper end of the Rs 745 – 750 price band set for the IPO.

List of Anchor investor

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IPO Dates & Price Band:

  • IPO Open: 2-November-2017
  • IPO Close: 6-November-2017
  • IPO Size: Approx Rs. 545 Crore (Approx)
  • Face Value: Rs. 10 Per Equity Share
  • Price Band: Rs. 745 to 750 Per Share
  • Listing on: BSE & NSE
  • Retail Portion: 35%
  • Equity: 65,74,093 Shares

Market Lot:

  • Shares: Apply for 20 Shares (Minimum Lot Size)
  • Amount: Rs.15000

Allotment & Listing:

  • Basis of Allotment: 10-November-2017
  • Refunds: 13-November-2017
  • Credit to demat accounts: 13-November-2017
  • Listing: 14-November-2017

Company Promoters:

  • Siddhartha Roy Burman
  • Knightsville Private Limited

Khadim India IPO Registrar:

Link Intime India Private Ltd

 Lead Managers:

  • Axis Bank Limited
  • IDFC Bank Limited

Objects of the Issue:

The Offer comprises a Fresh Issue by the Company and an Offer for Sale by the Selling Shareholders.

The Offer for Sale

The Selling Shareholders will receive the proceeds of the Offer for Sale. The company will not receive any proceeds from this.

The Fresh Issue

The Net Proceeds from the Fresh Issue are proposed to be utilized towards the following objects:

1. Prepayment or scheduled repayment of all or a portion of term loans and working capital facilities availed by the Company; and
2. General corporate purposes.

khadimsindia

Key Strengths

A leading footwear brand, offering affordable fashion across various price segments.

Strong design capabilities to maintain seasonal trends and leading premiumisation through sub-brands.

A two-pronged market strategy that straddles efficiently across retail and distribution models.

Extensive geographical reach and penetration across East and South India.

Asset light model is leading to higher operating leverage.

Experienced Promoters supported by a professionally qualified, experienced and entrepreneurial management team.

KHADDIM2Strategies

Expand its geographical footprint in western India and certain markets in northern India and further penetrate markets in south India

Continue to focus on an asset-light model led growth

Premiumise product offering to increase average selling price and gross margins

Details of Utilisation of Net Proceeds

Pre-payment or scheduled repayment of all or a portion of term loans and working capital facilities availed by its Company.

bankNegative

Khadim is subject to risks associated with expansion into new geographic markets. Any inability to expand into new geographic markets or penetrate existing markets may adversely affect its growth and future prospects.

Any delay or default in payment from its franchisee-operated stores or distributors could adversely impact its profits and affect its cash flows.

Khadim may not be able to obtain sufficient quantities or desired quality of finished products from outsourced vendors in a timely manner or at acceptable prices, which could adversely affect its retail business, financial condition and results of operation.

Khadim rely on its franchisees with respect to its retail business and on its distributors with respect to its distribution business. Any failure to maintain relationships with such third parties could adversely affect its business, results of operations and financial condition.

Khadim’s Directors and Promoters are involved in certain legal proceedings, which, if determined against us could have a material adverse effect on its financial condition, results of operations and its reputation.

Khadim cost of procurement of products from outsourced vendors or cost of manufacture of products using contract manufacturers may increase in the future. Any inability to pass on costs to consumers and distributors, may result in a reduction in its margins.

Khadim’s inability to maintain an optimal level of inventory in its stores may impact its operations adversely.

Failure to successfully procure raw materials or to identify new raw material suppliers could adversely affect us.

If Khadim is unable to maintain and enhance the ‘Khadim’s’ brand, the sales of its products may suffer which would have a material adverse effect on its financial condition and results of operations.

Any inability to increase its market share in premium products may have an adverse effect on its business, financial condition, results of operations and prospects.

Khadim results of operations may be materially adversely affected by its failure to anticipate and respond to changes in fashion trends and consumer preferences in a timely manner.

Khadim depends on third parties for a major portion of its transportation needs. Any disruptions may adversely affect its operations, profitability, reputation and market position.

Khadim’s Promoters will retain a majority shareholding in its Company following the Offer, which will allow them to exercise significant influence over us and may cause us to take actions that are not in the best interest of its other shareholders.

KHADDIM3Valuation 

Net sales increased 16% to Rs 621.25 crore and the operating profit margins were up 80 basis points to 10.6% in FY 2017. Net profit jumped 22% to Rs 30.75 crore. .Net sales (net of discount and taxes) of the retail business rose 14% to Rs 456.49 crore and those of the distribution business by 36% to Rs 134.7 crore.

Net sales stood at Rs 178.43 crore and the OPM at 9.3% in the June 2017 quarter. Net profit stood at Rs 7.10 crore. Net sales (net of discount and taxes) of the retail business stood at Rs 124.9 crore, in line with the growth of existing stores and revenue contributions from 28 new stores and of the distribution business was Rs 48.38 crore, primarily from growth in the distribution base.

At the upper band of Rs 750, P/E works out to 43.8 times EPS of Rs 17.1 (on post-IPO equity) for FY 2017. On a comparable basis, Bata India is trading at a P/E of 57.5 times FY 2017 EPS of Rs 13.5, Liberty Shoes at a P/E of 63.6 times FY 2017 EPS of Rs 3.88 and Relaxo Footwear at a P/E of 51.7 times FY 2017 EPS of Rs 10.24.

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Grey market premium

Currently Grey market premium is Rs.19/-

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.

New India Assurance IPO Review and Current GMP

The New India Assurance Co. Ltd  ( NIA )  is in operation for almost a century (Incorporated on July 23, 1919 ) and largest general insurance company in India. The company was nationalized by the GoI on January 1, 1974. The Government of India holds 100% of the pre-Offer paid-up Equity Share capital of the company.

NIA offers insurance in categories including fire insurance; marine insurance, motor insurance, crop insurance, health insurance and other insurance products.

NIA is the market leader in the general insurance industry in India across the segments except for crop insurance.The Company’s distribution network includes 68,389 individual agents and 16 corporate agents, 25 banks, and a large number of OEM and automotive dealer.New India Assurance is rated A-(Excellent) by AM Best Company since 2007 and have been rated AAA/Stable by CRISIL since 2014.

After flop show of GIC, Once again LIC is bid for the NIA’s IPO 

LIC through multiple brokers has placed large bids. The total application size of LIC could be anywhere between Rs 8,500 crore and Rs 9,500 crore.

IPO Dates & Price Band:

  • IPO Open: 1-November-2017
  • IPO Close: 3-November-2017
  • IPO Size: Approx Rs. 10500 Crore (Approx)
  • Face Value: Rs. 5 Per Equity Share
  • Price Band: Rs. 770 to 800 Per Share
  • Listing on: BSE & NSE
  • Retail Portion: 35%
  • Equity: 12,00,00,000 Shares 
  • Discount: Rs. 30 for Retailers & Employees

IPO Market Lot:

  • Shares: Apply for 18 Shares (Minimum Lot Size)
  • Amount: Rs.14400 (For QIB & HNI)
  • Amount: Rs.13860 (For Retailers & Employees)

IPO Allotment & Listing:

  • Basis of Allotment: 08-November-2017
  • Refunds: 09-November-2017
  • Credit to demat accounts: 10-November-2017
  • Listing: 13-November-2017

IPO Registrar:

Link Intime India Private Ltd

Lead Managers:

  • Axis Bank Limited
  • IDFC Bank Limited
  • Kotak Mahindra Capital Company Limited
  • Nomura Financial Advisory And Securities (India) Pvt Ltd
  • YES Bank LimitedNIA FINALThe promoters :

President of India, acting through the MoF

Main  object of the issue is:

Offer for Sale The Company will not receive any proceeds from the Offer for Sale.

Fresh Issue

The Company proposes to utilize the Net Proceeds towards meeting its future capital requirements  & improving its solvency margin and consequently the solvency ratio.

Historical Evolution of General Insurance in India

NIA

Competitive Strengths

Market leadership and established brand

Longstanding global footprint and successful international operations

Customer satisfaction drives sustainable business model

Diversified product offering and product innovation capability

Multi-channel distribution network

Robust financial position

Robust IT infrastructure

Experienced senior management team

Growth drivers for select segments of non – life insurance

NIA 1Low Penetration

Rise in new vehicle sales

Demand for crop insurance

Increasing cost of healthcare

Increasing coverage of insurance in India

NIA 2Supportive regulations

Increase in online retail sales

General Insurance Corporation of India ( GIC ) Review

Business Strategies

Capitalise on significant market potential and increase our market share

Improve underwriting profitability

Leverage technology to drive growth, profitability and customer satisfaction

Continue to focus on product innovation

Expand its international operations

Negative

Any significant variation between actual claim payments from the assumptions and estimates used in the pricing of, and setting reserves for, its various insurance products, may have a material adverse effect on its business, financial condition and results of operations.

Any termination or adverse change in its relationship or arrangements with its agents, brokers, bancassurance partners or other distribution intermediaries, or a decline in their productivity, may have a material adverse effect on its business, financial condition, and results of operations.

NIA may not be able to sustain our historical growth rates or successfully implement its business strategies.

NIA Company, Directors, Subsidiaries and Group Companies are involved in certain legal and other proceedings.

NIA is subject to a comprehensive and evolving regulatory framework in a regulated industry that affects the flexibility of its operations and increases compliance costs.

ICICI Lombard IPO Review and Current Grey market premium

NIA investment portfolio is subject to the volatility in the market value of financial instruments and liquidity risk, which could decrease its value and have a material and adverse effect on its business, prospects, financial condition and results of operations.

Catastrophic events, including natural disasters, may result in significant liabilities for claims by policyholders which could have a material adverse effect on its business, prospects, financial condition and results of operations.

Any actual or alleged misconduct or fraudulent activity or non – compliance with applicable laws by its employees, agents and other distribution intermediaries may lead to customer claims as well as regulatory action against us, which could adversely affect its business, prospects, financial condition and results of operations.

Any actual or alleged misconduct or fraudulent activity or non – compliance with applicable laws by its employees, agents and other distribution intermediaries may lead to customer claims as well as regulatory action against us, which could adversely affect its business, prospects, financial condition and results of operations.

NIA had a deficit in its miscellaneous segment revenue account and negative net cash flows in the past and may continue to have a deficit in its revenue account and negative cash flows in the future.

There are certain risks related to its crop/weather insurance offering that could have a material adverse effect on its business, financial condition, results of operations and prospects.

A significant portion of its business comes from working with the government which subjects us to risks which could result in litigation, penalties, and sanctions including early termination, suspension and removal from the approved panel of insurers.

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Valuation

NIA is the largest general insurance company in India, with 15% market share of the domestic gross direct premium. The company is a market leader in all segments except crop insurance for last five straight years. The gross written premium of the company has increased at a CAGR of 15% from Rs 13200 crore in FY2013 to Rs 23230 crore in FY2017. The company has been funding its operations for more than 40 years without any external capital infusion. The company commands a healthy financial position, with a solvency ratio 2.27x end June 2017, compared to the IRDAI prescribed control level requirement of 1.50x. The operating expense ratio of the company was 20.40% in FY2017, the lowest among the top 10 multi-product insurers in India.

NIA’s EPS for FY2017 works out to Rs 10.52. The IPO is offered at P/E multiple 73.2 times FY2017 EPS at the lower price band and 76.1 times FY2017 EPS at the higher price band.

The post issue book value (BV) of NIA is Rs 184.5 end June 2017. P/BV works out to 4.3 times at the upper price band of Rs 800 per share.

The company is the second general insurance company to list on the exchanges, after ICICI Lombard General Insurance Company listed in September 2017. ICICI Lombard General Insurance Company is currently trading at 7.9 times its book value and is available at PE multiple of 36.1 times. The incurred claim ratio of ICICI Lombard General Insurance at 80.64% and the combined ratio at 104.1% for FY2017 is better than New India assurance incurred claim ratio at 92.2% and the combined ratio at 119.7%.

Grey market premium

Currently there is no trade Grey market.

Conclusion

Strongly avoid as like a GIC.

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.

Mahindra Logistics IPO Review and current GMP

Mahindra Logistics Limited (Incorporated in 2008 ) is end-to-end logistics solution and service provider. Mahindra Logistics is part of Mahindra Group (M&M), one of India’s leading groups with business spanning across several industries and countries. Before 2008, the logistics activities of M&M was operated as a division of M&M.

The logistics business of the company includes transportation and distribution, warehousing, in-factory logistics and value-added services to M&M and other more than 120 clients which provides for domestic and multinational companies operating in the IT, ITeS, business process outsourcing, financial services, consulting and manufacturing industries in 12 cities.

Its subsidiary, 2X2 Logistics, provides logistics and transportation services to OEMs to carry finished automobiles from the manufacturing locations to stockyards or directly to the distributors through specially designed vehicles.Other subsidiaries, Lords, provides international freight forwarding services for exports and imports, customs brokerage operations.

List of Anchor Investors

Mahindra Logistics has allotted 57.62 lakh equity shares at Rs 429 per share to 15 anchor investors, aggregating to Rs 247.2 crore, ahead of its initial public offering ( IPO ). Six mutual funds have applied for the issue through a total of 10 schemes.

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The promoters :

Mahindra & Mahindra Limited.

The main object of the issue is:

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

Lead Managers:

Axis Bank Limited
Kotak Mahindra Capital Company Limited

Registrar to the IPO:

Link Intime India Private Ltd,
Phone of the Registrar:+91-22-25963838

Registered Office of the Company :

Mahindra Logistics Limited

 IPO Dates & Price Band:

  • IPO Open: 31-October-2017
  • IPO Close: 02-November-2017
  • IPO Size: Approx Rs. 701 Crore (Approx)
  • Face Value: Rs. 10 Per Equity Share
  • Price Band: Rs. 425 to 429 Per Share
  • Listing on: BSE & NSE
  • Retail Portion: 35%
  • Equity: 1,93,32,346 Shares

Market Lot:

  • Shares: Apply for 34 Shares (Minimum Lot Size)
  • Amount: Rs. 14,586

Allotment & Listing:

  • Basis of Allotment: 8-November
  • Refunds: 9-November
  • Credit to demat accounts: 9-November
  • Listing: 10-November

Mahindra Logistics

BUSINESS STRATEGY

Continue to grow share of its business from non-Mahindra Group clients.

Focus on large revenue clients by providing integrated, end-to-end solutions and continue to provide additional services to existing clients.

Continue to diversify its revenues from industry verticals such as consumer goods, pharmaceuticals, e-commerce, and bulk.

Continue to focus on enhancements in technology.

Leveraging on the changing logistics industry dynamics, particularly with the implementation of the GST regime.

Continue to establish new multi-user warehouses.

Continue to explore new business opportunities in new industry verticals and business segments.

Qualitative factors

Some of the qualitative factors which form the basis for computing the Offer Price are:

  1. An“asset-light” business model which allows flexibility and scalability in operations and high capital efficiency;
  2. Customized, technology-driven logistics solutions;
  3. Integrated, end-to-end logistics services and solutions;
  4. The Mahindra brand and support from the Mahindra Group;
  5. Presence across diverse industry verticals with long-standing client relationships; and
  6. Experienced management team with strong domain expertise.
Below is a graphical representation of its SCM services as well as its integrated, end-to-end solutions.
INTEGRTED LOGISTIC SOLUTION

Salient trends in the Indian logistics industry

Indian logistics industry to grow at a CAGR of approximately 13.0% to ₹ 9.2 trillion in Fiscal 2020.

The Indian Government’s increased focus on infrastructure.

Integrated network development will promote use of multi-modal transportation.

A simplified tax regime to lower costs and provide an opportunity for outsourcing.

GST implementation to provide an opportunity for organized service providers.

3PL service providers: One stop shop for logistics end-users.

The future trend in the 3PL industry is an asset-light model.

A 3PL market in India to grow at a CAGR of 19-21% by Fiscal 2020.

PTS industry to reach a market size of ₹ 85 – 95 billion in Fiscal 2020.

Freight forwarding market to increase at a CAGR of 8-9%.

Road freight to continue to occupy a significant share.

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Key drivers for growth of 3PL service providers in India

GST implementation to drive 3PL growth.

Focus on core business results in increased outsourcing trend.

Increased flexibility and scalability.

Offer value added services.

Increasing global presence in India to further 3PL growth.

Large, organized 3PL service providers to enjoy a distinctive edge over smaller, unorganized service providers.

Negative

Mahindra Logistics depend significantly on clients in the automotive industry and are highly dependent on the performance of the automotive industry.

A loss of, or a significant decrease in business from clients in the automotive industry could adversely affect its business and profitability.

Mahindra Logistics depend on a limited number of clients, which exposes us to a high risk of client concentration. Fluctuations in the performance of the industries in which its clients operate may result in a loss of clients, a decrease in the volume of work we undertake or the price at which we offer its services.

Mahindra Logistics business and operations depend significantly on its parent and Promoter, Mahindra & Mahindra Limited and the other Mahindra Group entities.

MAS Financial Services IPO Review and GMP

Mahindra Logistics operate in a highly fragmented and competitive industry and increased competition may lead to a reduction in its revenues, reduced profit margins or a loss of market share.

Mahindra Logistics may not be able to manage the growth of its business effectively or continue to grow its business at a rate similar to what we have experienced in the past.

Mahindra Logistics business is highly dependent on technology and any disruption or failure of its technology systems may affect its operations.

Difficulties and uncertainties surrounding the implementation of a GST regime in India may adversely affect its business strategy.

Mahindra Logistics are susceptible to risks relating to compliance with labor laws.

Mahindra Logistics, its Directors, its Promoter and its Group Companies are involved in certain legal proceedings, which if determined unfavorably, may adversely affect its reputation, business, financial condition and results of operations.

Mahindra Logistics may face claims relating to loss or damage to cargo, personal injury claims or other operating risks that are not adequately insured.

Mahindra Logistics experienced negative cash flows from its operating activities, investment activities as well as financing activities.

Mahindra Logistics, its Subsidiaries, its Promoter and some of its Group Companies have availed of debt facilities that can be recalled by lenders at any time.

Loss making Group Companies

LOSS

Financial

  • Mahindra Logistics net worth stood at Rs 363 crore for the quarter ended June, translating into a book value of Rs 51/- share.
  • Revenue clocked a compounded annual growth rate of 15 percent, and net profit rose to 17 percent in five years to March.
  • Revenue and net profit for the quarter ended June stood at Rs 852 crore and Rs 15 crore, respectively.
  • Earnings before interest and tax margin have been close to 2 percent as it follows an asset-light business model.
  • The company has not declared any dividend in the last five financial years.

Valuations

At the upper end of the price band, earnings per share for the year to March stood at Rs 6.4 and the price-earnings ( P/ E ) ratio at 67 times.

 Grey market premium
 Grey market premium is  38/- to 39/-, Kostak is Rs.350/-
Conclusion

Investors may consider for medium to long 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 before making any actual investment decisions, based on information published here.

 

Reliance Nippon Life Asset Management ( First MF ) IPO Review

Reliance Nippon Life Asset Management (RNAM) is one of the largest asset management companies in India, managing total AUM of INR 3,62,550 Lakh crore as of June 30, 2017. The company is involved in managing (i) mutual funds (including ETFs); (ii) managed accounts, including portfolio management services, alternative investment funds (AIFs) and pension funds; and (iii) offshore funds and advisory mandates. It is ranked the third largest asset management company, in terms of mutual fund quarterly average AUM (QAAUM) with a market share of 11.4%, as of June 30, 2017, according to ICRA. For the financial year 2016, it was ranked the second most profitable asset management company in India, according to ICRA.systematic investment plan (SIP) accounts that generate inflows of close to Rs. 510 crore per month or Rs 6,120 crore annually. SIPs account for 10 percent of the company’s equity AUM.

The company started its mutual fund operations in 1995 as the asset manager for Reliance Mutual Fund and manages 55 open-ended mutual fund schemes including 16 ETFs and 174 closed-ended schemes for Reliance Mutual Fund as of June 30, 2017. It has a network of 171 branches and approximately 58,000 distributors including banks, financial institutions, national distributors and independent financial advisors (IFAs), as of June 30, 2017. Reliance Nippon Life Asset Management manages offshore funds through its subsidiaries in Singapore and Mauritius and has a representative office in Dubai.

As part of its managed accounts business, the company provides portfolio management services to high net worth individuals and institutional investors including the Employees’ Provident Fund Organisation (EPFO) and Coal Mines Provident Fund Organisation (CMPFO). Its Subsidiary, Reliance AIF Management Company Limited manages two alternative investment funds, which are privately pooled investment vehicles registered with SEBI. Further, it received a certificate of commencement of business as a pension fund manager from the Pension Fund Regulatory and Development Authority (PFRDA) in 2009 and manages pension assets under the National Pension System (NPS). As of June 30, 2017, it managed total AUM of INR 1,503.93 billion as part of its managed accounts business.

ipo

IPO Dates & Price Band:  

  • IPO Open: 25-October-2017
  • IPO Close: 27-October-2017
  • IPO Size: Approx Rs. 1542 Crore (Approx)
  • Face Value: Rs. 10 Per Equity Share
  • Price Band: Rs. 247 to 252 Per Share
  • Listing on: BSE & NSE
  • Retail Portion: 35%
  • Equity: 6,12,00,000 Shares

IPO Market Lot:

Shares: Apply for 59 Shares (Minimum Lot Size)

Amount: Rs. 14,868

IPO Allotment & Listing:

  • Basis of Allotment: 1-November
  • Refunds: 3-November
  • Credit to demat accounts: 3-November
  • Listing: 6-November

Company Promoters:

  • RELIANCE CAPITAL LIMITED
  • NIPPON LIFE INSURANCE COMPANY

Lead Managers:

JM Financial Institutional Securities Limited
CLSA India Private Limited
Nomura  Financial  Advisory  and  Securities  (India) Private Limited\
Axis Capital Limited
Edelweiss Financial Services Limited
IIFL Holdings Limited
SBI Capital Markets Limited
YES Securities (India) Limited

IPO Registrar:

Karvy Computershare Private Limited

Anchor investors

Reliance Nippon Life Asset Management IPO raises Rs 462.67 Cr from Anchor Investors (subscribed 30+ times)

This is one of the largest anchor responses any company has received for its IPO in the recent past. Rs.15,000+ Cr received from over 50 investors against anchor book size of Rs 462.67 Cr – allocation made to 24 investors.

  • Large Sovereign Wealth Fund – Abu Dhabi Investment Authority, Kuwait Investment Authority.
  • Foreign institutional investors – Fidelity International, Morgan Stanley, Eastspring Investments, Columbia Threadneedle Investments, Pictet, DE SHAW and Neuberger Berman.
  • Top mutual fund houses – HDFC MF, Birla MF, SBI MF, UTI MF, DSP Blackrock MF, IDFC MF
  • Large private insurance companies – ICICI Prudential Life,Bajaj Allian

Rs. 4 Lakh In Reliance Banking Fund Turns Over Rs. 1 Crore In Less Than 15 Years

The following chart sets forth a summary of the evolution of the Indian Mutual Fund Industry:

financial data1

The objects for which its Company intends to use the Net Proceeds are as follows:

1. Setting up new branches and relocating certain existing branches;

2. Upgrading the IT system;

3. Advertising, marketing and brand building activities;

4. Lending to its Subsidiary (Reliance AIF) for investment as continuing interest in the new AIF schemes managed by Reliance AIF;

5. Investing towards its continuing interest in new mutual fund schemes managed by us;

6. Funding inorganic growth and other strategic initiatives.

7. Meeting expenses towards general corporate purposes.

The following table sets forth the trend in the net financial savings of India.
fin data

Strengths

Leading Asset Management Company with Strong Credentials to Drive Growth.

Multi-Channel Distribution Network.

Comprehensive Suite of Products with Distinguished Investment Track Record.

Strong Focus on Processes.

Focus on Customer Centricity and Innovation.

Experienced Management Team.

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Strategies

Expand its Investor Base and Focus on Retail Customers.

Focus on Developing its AIF Business.

Inorganic Growth through Strategic Acquisitions.

Leveraging Technology to Improve Investor Experience.

Expand its Overseas Operations.

Continue to Focus on Robust Investment Process and Product Innovation.

Negative

There are outstanding proceedings against its Company, and certain of its  Subsidiaries, Promoters, Directors and Group Companies and any adverse  outcome in any of these proceedings may adversely affect its profitability and  reputation and may have an adverse effect on its business, results of operations and financial condition.

RNAM’s future revenue and profit are largely dependent on the growth, value and composition of AUM of the schemes managed by us, which may decline.

Underperformance of investment products in respect of which we provide asset management services could lead to a loss of investors and reduction in AUM and adversely affect its revenue and reputation.

RNAM’s business has grown consistently in the recent past and such growth might not continue or might reverse.

The regulations that apply to the industry in which RNAM operate may change.

Non-compliance with SEBI’s observations made during its periodic inspections could expose us to penalties and restrictions.

RNAM depend on third-party distribution channels and other intermediaries, and problems with these distribution channels and intermediaries could adversely affect its business and financial performance.

RNAM may not be able to attract and retain senior investment professionals and other personnel.

RNAM may be required to merge, wind up or change the fundamental attributes of some of the mutual fund schemes managed by us, to comply with the recent SEBI circular dated October 6, 2017.

RNAM are dependent on the Reliance Group and Nippon Life for certain aspects of its business and operations.

RNAM require a number of approvals, licenses, registrations, and permits for its business.

Employee misconduct or failure of its internal processes or procedures could harm us by impairing its ability to attract and retain clients and subject us to significant legal liability and reputational harm.

Valuation

At the upper end of the price band (Rs 252 per share), the issue is valued at 5.7 times price to FY18 projected book value. Though Reliance Nippon has no listed peers, given its growth trajectory and consistent return ratios, the valuation looks reasonable. To put things in perspective, over the last four years, the company’s top-line and bottom-line registered an impressive CAGR of 21 percent and 15 percent, respectively.

More importantly, the company sold a small portion of its stake at a relatively higher valuation in the past. In July 2017, a group of US and Singapore funds picked up a 4.43 stake in the company for Rs 675 crore, valuing it at around Rs 15,000 crore or 8 times its FY17 book value.

valuationGrey market premium

Grey market premium is Rs. 64 to 68 and Kostak is Rs. 725

Conclusion

Investors may consider for short to medium 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.

General Insurance Corporation of India ( GIC ) Review

General Insurance Corporation of India Ltd. (GIC) is the largest reinsurance company in India in terms of gross premiums accepted in Fiscal 2017, and is accounted for approximately 60% of the premiums ceded by Indian insurers to reinsurers during Fiscal 2017, according to CRISIL Research. GIC is also an international reinsurer that underwrote business from 161 countries as at June 30, 2017. According to CRISIL Research. Corporation ranked as the 12th largest global reinsurer in 2016 and the 3rd largest Asian reinsurer in 2015, in terms of gross premiums accepted. It provides reinsurance across many key business lines including fire (property), marine, motor, engineering, agriculture, aviation/space, health, liability, credit and financial and life insurance. Through more than 44 years of experience in, and commitment to, providing reinsurance products and services, GIC believe that it has become a trusted brand to its insurance and reinsurance customers in India and overseas.

IPO Dates & Price Band:

IPO Open: 11-October-2017
IPO Close: 13-October-2017
IPO Size: Approx Rs. 11500 Crore (Approx)
Face Value: Rs. 5 Per Equity Share
Price Band: Rs. 855 to 912 Per Share
Listing on: BSE & NSE
Retail Portion: 35%
Equity: 12,47,00,000 Shares

Market Lot:

Shares: Apply for 16 Shares (Minimum Lot Size)
Amount: Rs.14592

IPO Allotment & Listing:

Basis of Allotment: 18-October
Refunds: 23-October
Credit to demat accounts: 24-October
Listing: 25-October

Registrar:

Karvy Computershare Private Limited

Lead Managers:

Axis Capital Limited
Citigroup Global Markets India Private Limited
Deutsche Equities India Private Limited
HSBC Securities & Capital Markets Pvt Ltd
Kotak Mahindra Capital Company Limited

GICOffer for Sale:

GIC will not receive any proceeds from the Offer for Sale.

Fresh Issue

GIC proposes to utilize the Net Proceeds from the Fresh Issue towards:

(i) Augmenting the capital base of its Corporation to support the growth of its business and to maintain current solvency levels; and

(ii) General corporate purposes, subject to applicable law.

List of shareholder

PROMOTOR1Competitive Strengths:

Leader in Indian reinsurance industry with a trusted brand and 44 years of experience.

Significant global player with growing international presence.

Diversified product portfolio and revenue streams.

Robust and comprehensive risk management framework.

Diversified investment portfolio generating strong growth and attractive yields.

Strong financial track record and a strong balance sheet.

Experienced management team.

ICICI Lombard IPO Review and Current Grey market premium

Strategy:

Expand and leverage its leadership position in the domestic reinsurance industry and continue its strong business growth.

Expand its presence internationally and grow its overseas business.

Focus on improving profitability through a reduction in combined ratio.

Grow its life reinsurance and other business lines in India and overseas markets.

The following charts show the penetration for life and non – life insurance business in 2016 in Brazil, Russia, India, China, South Africa, South Korea, Taiwan, Japan, Hong Kong, Singapore, the United States, the United Kingdom and worldwide.

PENETRATION11Source: Swiss Re World insurance reports Sigma No 3/2017 as extracted from the CRISIL Report

Brazil – The proportion of primary life and non – life insurance premium is well balanced for  Brazil, with the life segment contributing a slightly higher proportion of 54%. (Source: CRISIL Report)

Russia – Russia is completely different compared with other BRICS countries, as the proportion of non -life insurance is far higher at 87%.  (Source: CRISIL Report)  However, the life segment’s share has been increasing over the past five years, as it has grown at a very high pace, while non – life premiums have been growing at a subdued pace. (Source: CRISIL Report)

India India is the second largest market among the BRICS nations, behind only China. India has a far higher domination of life insurance, which contributes to about 79% of the total premium collected. (Source: CRISIL Report)   However, over the past five years ended 2015, India has grown at a subdued pace compared to the rate of growth in non -life insurance premiums.Penetration levels (defined as premiums as a percentage of GDP), were at 0.8% in 2016, which is the lowest amongst BRICS and other Asian economies, reflecting the significant growth potential of the Indian non -life insurance market.

China – The Chinese market is similar to the Brazilian market, with the contribution of life insurance at 56% in 2016. (Source: CRISIL Report)  However, the share of non – life has been increasing, as it has grown at a much faster pace than life insurance premium over the past five years. (Source: CRISIL Report)

Top 20 Global Reinsurance group

TOP20Negative:

Its success depends upon its ability to accurately assess the risks associated with the businesses that GIC reinsure, and if actual losses exceed its estimated loss reserves, its net income and capital position will be reduced.

The catastrophe business that they reinsure may result in volatility of its earnings.

The usefulness of analytic models as a tool to evaluate risk is subject to a high degree of uncertainty that could result in actual losses that are materially different from its estimates, including probable maximum losses, and its financial results may be adversely impacted, perhaps significantly.

GIC are exposed to credit risk relating to its reinsurance brokers and cedants.

GIC may decide not to purchase or be unable to purchase retrocessional coverage for the liabilities they reinsure, and if GIC successfully purchase such retrocessional coverage, they may be unable to collect from its retrocession partners, which could have a material adverse effect on its business, financial condition and results of operations.

GIC operate in a highly regulated industry and any changes in the regulations or enforcement thereof may adversely affect the manner in which business is carried on and the price of the Equity Shares.

There are outstanding litigations against our Corporation, its Directors and its Group Companies and any adverse outcome in any of these litigations may have an adverse impact on its business, results of operations and financial condition.

Regulatory and statutory actions against us could cause reputational harm and could materially adversely affect its business, financial condition, results of operations and prospects.

If GIC are significantly downgraded by rating agencies, its standing with brokers and customers could be negatively impacted and may adversely impact its results of operations.

A substantial increase in its agriculture reinsurance business in recent years exposes us to risks, losses, uncertainties, and challenges which could have a material adverse effect on its business, financial condition and results of operations.

The exposure of its investments to interest rate, credit, and equity risk may adversely affect its net income and the adequacy of its capital.

Its investment portfolio is subject to liquidity risk which could decrease its value.

Political, regulatory, governmental and industry initiatives in and outside India could adversely affect its business.

Since GIC rely on a few reinsurance brokers for a significant part of its international reinsurance business, loss of business provided by these brokers or breaches by these brokers of their contractual or regulatory obligations could reduce its premium volume and net income and have an adverse effect on its business, financial condition and results of operations.

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Financials

Its gross premiums on a restated consolidated basis from its international business in Fiscal 2017, Fiscal 2016 and Fiscal 2015 were ₹103,004.52 million,₹ 83,396.92 million and ₹ 66,094.53 million, respectively, and its gross premiums have grown at a CAGR of 24.84% from Fiscal 2015 to Fiscal 2017. In Fiscal 2017, Fiscal 2016 and Fiscal 2015, its gross premiums for risks outside of India were 30.53%, 45.00% and 43.28%, respectively, of its total gross premiums. GIC develop its overseas business through its home office in Mumbai, branch offices in London, Dubai and Kuala Lumpur, a representative office in Moscow, a subsidiary in the United Kingdom that is a member of Lloyd’s of London and a subsidiary in South Africa.

Its gross premiums on a restated consolidated basis in Fiscal 2017, Fiscal 2016 and Fiscal 2015 were ₹337,407.91 million,₹ 185,342.45 million and ₹152,701.56 million, respectively, and have grown at a CAGR of 48.65% from Fiscal 2015 to Fiscal 2017. In the same fiscal years, its profit after tax on a restated Consolidated basis was ₹31,406.23 million, ₹28,234.15 million and ₹28,909.75 million, respectively, and has grown at a CAGR of 4.23% from Fiscal 2015 to 2017. Its productivity, as measured by profit after tax per employee on a restated consolidated basis, improved to ₹ 55.78 million per employee in Fiscal 2017 from ₹55.07 million in Fiscal 2015.

Further, as at March 31, 2017, 2016 and 2015, they had a restated consolidated net worth (including fair value change account) of ₹ 495,508.46 million, ₹ 408,702.58 million and ₹ 433,842.92 million, respectively. GIC’s total assets on a restated consolidated basis as at March 31, 2017, 2016 and 2015 amounted to ₹ 970,794.39 million, ₹ 761,027.46 million and ₹ 749,164.34 million, respectively. We had a solvency ratio of 2.41%, 3.80% and 3.32%, calculated on a restated standalone basis as at March 31, 2017, 2016 and 2015, respectively, against the minimum statutory requirement of 1.50%. GIC has been rated “A – ” (Excellent) with a stable outlook by AM Best for 10 consecutive years. In addition, GIC has paid successive annual dividends in the past five fiscal years (including a proposed dividend in Fiscal 2017) to the Government of India as its shareholder, and its dividends during last five fiscal years were an aggregate of ₹ 33,200.50 million.

Valuations

GIC has posted an average EPS of Rs. 34.81 and average RoNW of 16.61% for last three fiscals. The issue is priced at a P/BV of 3.89 and a P/E of around 31.19. If we annualize latest earnings and attribute it on fully diluted equity post issue, then asking price is around P/E of 32. Thus issue appears fully priced. It has no listed peer to compare with.

Grey market premium:

Currently there is no trade 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.

Godrej Agrovet IPO Review and Grey market premium

Godrej Agrovet , Incorporated in 1991, is a leading company having diverse product-portfolio of Animal Feed, Crop Protection, Oil Palm, Dairy and Poultry and Processed Foods. Godrej Agrovet is the largest crude palm oil producer in India.

Animal feed business: Cattle feed, poultry feed (broiler and layer), aqua feed (fish and shrimp) and specialty feed. These products are produced at 35 locations and sold through about  4000 distributors across India.Godrej Agrovet is the leading compound animal feed company in India, on the basis of installed capacity for the financial year 2016, according to the CRISIL Animal Feed report from 2016 Crop protection

Crop protection business: Plant growth regulators, Organic manures,  Agrochemicals and specialized herbicides. These products are sold in India and 24 other countries.The Company has more than 6000 distributors in this business line.

Oil palm business: Crude palm oil, Crude palm kernel oil and palm kernel cake. The company owns five palm oil mills where these products are manufactured

The dairy business is operated through its subsidiary: Creamline Dairy.  The company own nine milk processing units.It  has 2,500 milk-product distributors and 50 retail parlors.During FY2015-16, the company also acquired Creamline Dairy, a south India-focused milk and milk products firm along with Astec Lifesciences Ltd, an agri-chemical and pharma intermediates firm, further strengthening the company’s presence across the agri and food business value chain Company also produce processed poultry and vegetarian products under Company also produce processed poultry and vegetarian products under the its popular brands ‘Real Good Chicken’ and ‘Yummiez’.

GODREJ IPO

Godrej Industries is the largest shareholder in the company with a 63.7% stake.Godrej group enteres Capital market after  nearly a decade; the last being Godrej Properties (which went public in 2010).The calibre of promoters like the Godrej family only makes the issue more attractive to potential investors.

Godrej Agrovet today said it has raised a little over Rs 341 crore from anchor investors ahead of its initial public offer.

Institutional investors that participated in the anchor book allocation include the Reliance Capital Trustee Company, SBI Life Insurance Company, Nomura, Government of Singapore, First State Indian Subcontinent Fund, The India Fund Inc-Aberdeen, Russel Investment Co., Goldman Sachs India and Birla Sunlife Trustee Company.

Prataap Snacks Ltd. IPO Review and GMP

IPO Dates & Price Band:

  • IPO Open: 04-October-2017
  • IPO Close: 06-October-2017
  • IPO Size: Approx Rs. 1157 Crore (Approx)
  • Face Value: Rs. 10 Per Equity Share
  • Price Band: Rs. 450 to 460 Per Share
  • Listing on: BSE & NSE
  • Retail Portion: 35%
  • Equity Shares: 300 Crore + 12,300,000 Shares

Market Lot:

  • Shares: Apply for 32 Shares (Minimum Lot Size)
  • Amount: Rs. 14720

IPO Allotment & Listing:

  • Basis of Allotment: 11-October
  • Refunds: 12-October
  • Credit to demat accounts: 13-October
  • Listing: 16-October
  • The promoters :
  • Mr Nadir B. Godrej and Mr Adi B. Godrej
  • Objects of the issue are
  • The Company proposes to utilise the proceeds from the Fresh Issue towards:
  • repayment or prepayment of working capital facilities availed;
    b. repayment of commercial papers issued by the Company;

Lead Managers:

1. Axis Capital Ltd,
2. Credit Suisse Securities (India) Private Limited
3. Kotak Mahindra Capital Company Limited

Registrar to the IPO:

Karvy Computershare Private Limited

Competitive Strengths

Pan India Presence with Extensive Supply and Distribution Network.

Diversified Businesses with Synergies in Operations.

Strong R&D Capabilities.

Strong Parentage and Established Brands.

Experienced Promoters and Management Team.

Strategies

The primary elements of its business strategy are to continue to grow its existing businesses, leverage synergies between its businesses and opportunistically evaluate inorganic opportunities.

Continue to Grow its Overall Market Share by Leveraging our Presence in Existing Business Verticals.

Inorganically Grow its Business Offerings.

Consolidate its market position in existing business verticals; achieve operating leverage in key markets by unlocking potential efficiency and synergy benefits;

Strengthen and expand its product portfolio;

Enhance its depth of experience, knowledge base and know how; and increase its sales and distribution network.

Positive

Well diversified company, which has enabled them to grow their business double digit in last five years.

In last five years i.e. FY13-FY17, company’s revenue & profitability has grown at a CAGR of 15.6% and 29.8% respectively. With established Godrej brand coupled with Pan India presence, superior return ratios, and positive long-term outlook for each business verticals.

Margin are between 4.4% to 5.8% in the last 4 out 5 years.

SBI Life insurance IPO and Current GMP

Negative

Unfavourable local and global weather patterns may have an adverse effect on its business, results of operations and financial condition.

The comapny operate in five business verticals and its inability to manage its diversified operations may have anadverse effect on its business, results of operations and financial condition.

The comapny derive a significant portion of its revenue from its animal feed business and any reduction in demand or in the production of such products could have an adverse effect on its business, results of operations and financial condition.

The comapny do not have long term agreements with suppliers for its raw materials and an increase in the cost of, or a shortfall in the availability of such raw materials could have an adverse effect on its business and results of operations.

The improper handling, processing or storage of raw materials or products, or spoilage of and damage to such raw materials and products, or any real or perceived contamination in its products, could subject us to regulatory and legal action, damage its reputation and have an adverse effect on its business, results of operations and financial condition.

The company, its Directors, our Subsidiaries, Promoters and certain of its Group Companies are involved in certain legal proceedings. Any adverse decision in such proceedings may render us/them liable to liabilities/penalties and may adversely affect its business and results of operations.

The comapny utilize the services of certain third parties for its operations and any deficiency or interruption in their services could adversely affect its business and results of operations.

Certain of its businesses are subject to seasonal variations that could result in fluctuations in its results of operations.

If the comapny are unable to introduce new products and respond to changing consumer preferences in a timely and effective manner, the demand for its products may decline, which may have an adverse effect on its business, results of operations and financial condition.

Outbreaks of livestock diseases in general, and poultry and shrimp disease in particular, can significantly restrict its ability to conduct its operations.

The comapny inability to expand or effectively manage its distribution network may have an adverse effect on its business, results of operations and financial condition.

Certain of its operations are concentrated in the state of Andhra Pradesh and any adverse developments affecting this state could have an adverse effect on its business, results of operations, financial condition and cash flows.

A slowdown or shutdown in its manufacturing operations or under utilization of its manufacturing facilities could have an adverse effect on its business, results of operations and financial condition.

The company inability to effectively manage its growth could have an adverse effect on its business,results of operations and financial condition.

The comapny do not own the “Godrej” trademark and logo.

Financials:

Godrej Agrovet is well diversified company, which has enabled them to grow their business double digit in last five years. In last five years i.e. FY13-FY17, company’s revenue & profitability has grown at a CAGR of 15.6% and 29.8% respectively. With established Godrej brand coupled with Pan India presence, superior return ratios, and positive long-term outlook for each business verticals, we believe the company will maintain profitable growth in coming years. At Upper Price Band of IPO Price of Rs 460/-, company trades at 42x its FY17 EPS of Rs 10.95/-, which is fairly priced. Hence, we recommend to SUBSCRIBE to the issue on long-term basis.

Grey market premium

Grey market premium as on today at Rs.100-110 with Kostak at Rs.400-450

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.

Prataap Snacks Ltd. IPO Review and GMP

Prataap Snacks Ltd. (PSL) an Indore based company is one of the top six Indian snack food companies in terms of revenues in 2016, and among the fastest growing companies in the Indian organized snack market between 2010 and 2016. PSL is present in three major savory snack food categories in India and all its products are sold under the “Yellow Diamond” brand. As of July 31, 2017, PSL had 40 flavors of Chips and extruded snacks and 23 varieties of Namkeen in the market. It is set to launch special snacks for health conscious consumers and also sweet bites in the near future.

Despite operating in the same industry, Prataap Snacks does not directly compete with big players like Frito Lays or Parle. It focuses on underserved smaller markets.

Prataap Snacks raises Rs 143 crore from anchor investors.

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The Company has a pan-India distribution network of included 205 super stockists and over 3,400 distributors & is supported by strategically located manufacturing facilities. The company owns and operates three manufacturing plants, one located at Indore and the other two located at Guwahati, in Assam.( Detailed note about this Industry and the company is given in Page-bottom Box.Please study the same) Faering, another PE fund had picked up a 4% equity stake in Prataap Snacks for Rs. 45 crores ( valuing the company for Rs. 1125 crores) but it will not be participating in the IPO.

psl ipo

Issue Details:

•    IPO Open: 22-September-2017
•    IPO Close: 26-September-2017
•    IPO Size: Approx Rs. 200 Crores
•    Face Value: Rs. 5 Per Equity Share
•    Price Band: Rs. 930 to 938 Per Share
•    Listing on: BSE & NSE
•    Retail Portion: 35%
•    Equity Shares: 30,05,770 Shares

Market Lot:

•    Shares: Apply for 15 Shares (Minimum Lot Size)
•    Amount: Rs. 14,070

IPO Allotment & Listing:

•    Basis of Allotment: 29-September
•    Refunds: 03-October
•    Credit to demat accounts: 04-October
•    Listing: 05-October

Lead Managers:

Edelweiss Financial Services Limited

JM Financial Institutional Securities Limited

Spark Capital Advisors (India) Private Limited

Registrar:

Karvy Computershare Private Limited

The promoters :

  • Arvind  Mehta
  • Amit  Kumat
  • Apoorva  Kumat
  • Rajesh Mehta
  • Naveen Mehta
  • Arun Mehta
  • Kanta Mehta
  • Rita Mehta
  • Premlata  Kumat
  • Sudhir Kumat
  • Swati  Bapna
  • Rakhi Kumat
  • Sandhya Kumat

Objects of the issue are:

1.Repayment / pre-payment, in full or part, of certain borrowings (Rs .50 crores )

2 Funding capital expenditure requirements for  expansion including through setting up of new production facility and modernization of existing manufacturing facilities at Indore & Guwahati and contract manufacturing facility at Bangalore (Rs. 72 crores )

3. Investment in subsidiary, Pure N Sure, for repayment / pre-payment of certain borrowings (Rs 24 crores )

4.Marketing and brand building activities ( Rs. 40 crores )

PSP1

Negative

There are outstanding legal proceedings against its Company, Group Companies, and Directors which may adversely affect its business, financial condition and results of operations.

Any actual or alleged contamination or deterioration of its products or any negative publicity or media reports related to its products or its raw materials could result in legal liability, damage its reputation and adversely affect its business prospects and consequently its financial performance.

Inadequate or interrupted supply and price fluctuation of its raw materials and packaging materials could adversely affect its business, results of operations, cash flows, profitability and financial condition.

A company operate in a highly competitive industry. An inability to maintain its competitive position may adversely affect its business, prospects and future financial performance.

Failure to develop, launch and market new products due to unpredictable consumer preferences may have a material adverse effect on its business, results of operations, profitability, and financial condition.

Failure to effectively manage its future growth and expansion may have a material adverse effect on its business prospects and future financial performance.

CDSL IPO : Most awaited IPO in India


PSL’s business prospects and results of operations may be adversely affected if any future capacity expansion plans are not successfully implemented.

If PSL fail to maintain and enhance its brand and reputation, consumers recognition of its brands, and trust in PSL, and its products, its business may be materially and adversely affected.

PSL’s inability to expand or effectively manage its growing super stockists and distribution network or any disruptions in its supply or distribution infrastructure may have an adverse effect on its business, results of operations and financial condition.

Any disruption in the supply chain could have an adverse impact on its business, financial condition, cash flows and results of operations.

Termination of its agreements with its contract manufacturing facilities may adversely affect its business, results of operations and financial condition.

PSL’s procurement operations in relation to potatoes are concentrated in Madhya Pradesh and any adverse developments affecting this region could have an adverse effect on its business, results of operations and financial condition.

PSL’s Promoters may cease to be in control of the Company post listing of the Equity Shares pursuant to the Issue.

Stringent food safety, consumer goods, health and safety laws and regulations may result in increased liabilities and increased capital expenditures.

Positive

Deeper penetration in existing markets and explore select new territories.

Expand and modernize our production capabilities.

Increased advertising and marketing activities.

Expand its product portfolio into healthier snacks segment and confectionaries.

HOW CAN YOU SETTLE YOUR INSURANCE CLAIM IF REJECTED?

Business Strengths

Innovation has driven diversified product portfolio.

Value proposition for consumer.

Strategic supply chain for a pan-India distribution networ.

Successful track record and professional management.

Financials

Prataap Snacks’ net worth was close to Rs 238 crore as of March 31, translating into a book value of Rs 102 apiece after issuing the new shares.

At the upper end of the price band of Rs 938 , earnings per share and price-earnings ratio for the year ended March (after issuing new shares) stands at Rs 4.7 and 196 times, respectively. Revenue rose at a CAGR of 27.3 percent and EBITDA increased by 10.4 percent over five years to March.

Net profit showed a negative CAGR of 10 percent, as company’s profit fell 63 percent to Rs 10 crore in the year to March due to potato crop-related issues.

Its total debt stood at Rs 101 crore, while the debt-to-equity was 0.4 times. This will further reduce by Rs 40 crore as the company repays part of the debt from IPO proceeds.

The company has reduced its working capital cycle to nine days from 32 in five years to March, and improved its asset turnover ratio to 4.5 times from 2.7 times.

On the upper price band of Rs.938 and on consolidated restated FY17 EPS of Rs. 4.7,P/E ratio works out to 222x. Even based on last 3 years restated consolidated EPS of Rs. 7.63, P/E ratio works out to 122x. It means PSL’s asking higher price band of Rs. 938 in the P/E ratio of 122x to 196x. Its peers Britania industries are trading at P/E ratio of 56x and DFM foods at P/E ratio of 88x.

Hence Prataap Snacks Ltd. IPO issue price at P/E ratio of 122x to 196x is over priced.

Grey market premium

Current Grey market premium as on today at Rs.300-350 with Kostak at Rs.250-300.

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.