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Clean Science and Technology IPO: Fully priced, but strong growth potential

Clean Science and Technology Ltd (CSTL) is one of the fastest growing and among the most profitable specialty chemical manufacturing companies globally. CSTL manufactures functionally critical specialty chemicals such as Performance Chemicals, Pharmaceutical Intermediates and FMCG Chemicals. The company’s IPO will open for subscription on July 7 and will close on July 9. The IPO size is Rs 1547 crore. The IPO price band ranges from Rs 880 to Rs 900 per share. Read on more details.

About the company

Clean Science and Technology Limited was incorporated as â€˜Sri Distikemi Private Limitedâ€™ on November 7, 2003 in Pune, Maharashtra. Ashok Ramnarayan Boob, Krishnakumar Ramnarayan Boob, Siddhartha Ashok Sikchi and Parth Ashok Maheshwari (combined experience of over 60 years in the chemicals industry).

The companyâ€™s products are used as polymerisation inhibitors, intermediates for agrochemicals and pharmaceuticals, anti-oxidants, UV blockers, and anti-retroviral reagents. These are used functionally critical in a wide range of industries, including in the manufacture of paints and inks, agro-chemicals, pharmaceuticals, flavours and fragrance, food and animal nutrition (feed), and personal care (cosmetics) products. The company was established on â€˜greenâ€™ or eco-friendly manufacturing processes led by differentiated catalytic technologies.

CSTL has two manufacturing facilities in India located at Kurkumbh (Maharashtra), with a combined installed capacity of 29,900 MTPA and capacity utilisation rate of 72% in FY21.

The company’s key customers include Bayer AG, SRF Ltd, Gennex Laboratories Ltd, Nutriad International NV and Vinati Organics Ltd.

Business potential

The overall market for specialty chemicals is valued at $800 billion in 2019 and is expected to record a growth rate of 5% to 6% over the next five years.

As of FY21, CSTL has emerged as the largest manufacturer globally of certain specialty chemicals (like MEHQ, BHA, Anisole etc.) in terms of installed manufacturing capacities.

Revenue and PAT grew at a CAGR of ~14% and ~43% over FY19-FY21 backed by increase in exports, rise in demand for specialty chemicals and better operating performance.

IPO details

At the upper price band, total issue size stands at Rs 1,547 crore. The issue consists of only offer for sale (OFS), wherein the promoters and existing shareholders will dilute 10.62 crore shares of the company. The prime purpose of the issue is to enhance visibility, brand, provide liquidity to existing shareholders and achieve the benefits of listing shares on stock exchanges.

CSTL enjoys superior EBITDA margins (~51%) and PAT Margins (~39%) in FY21 led by economies of scale, competitive pricing, in-house capabilities, and adoption of cost optimisation techniques.

Clean Science and Technology has a healthy balance sheet with D/E ratio of 0.1x as of FY21. Moreover, the return ratios RoE and RoCE remain healthy at ~38% & ~26% (3-year Avg.).

Valuation

Clean Science and Technology is valued at 48 times price to earnings. Its listed peers such as Vinati Organics, Fine Organics, Camlin Fine, SRF Ltd., Navin Fluorine and PI Industries trade at a P/E of 77.41, 78.53, 290.52, 47.95, 74.60 and 63.86 respectively. As you can see, CSTL IPO is cheaper compared to peers.

Brokers comments:

Geojit – At the upper price band of Rs 900, CSTL is available at a P/E of 48x (FY21) which appears to be fully priced in. However, we assign a â€œSubscribeâ€ rating for the issue on a long-term basis considering its technical expertise, process innovation, consistent focus on R&D, positive industry outlook, superior margin profile and healthy return ratios.

Sharekhan – At the IPO price band of Rs 880-900 per share, the offer is valued at 47.1/48.2x its FY2021 EPS at the lower and upper end of the price band. CSTL posted strong results in FY2021 with revenues growing by 22% y-o-y and the operating profit growing by 40% y-o-y (OPM expansion of 635 bps y-o-y at 51%). Reported PAT grew by 42% y-o-y to Rs. 198 crore in FY2021. CSTL has a strong earnings track record with 59% PAT CAGR over FY2018-FY2021 and RoE of 36.8%. CSTLâ€™s earnings growth outlook is robust given its strong market share (among the largest producer globally of functionally critical specialty chemicals), consistent focus on R&D, greater cost control and strong long-standing relationships with key customers.

G R Infraprojects IPO: Reasonable valuations for integrated EPC player

G R Infraprojects, a Gujarat-based integrated road engineering, procurement and construction (EPC) company, is set to raise around â‚¹963 crore at the higher end of the IPO price band of â‚¹828 to â‚¹837 per share. The IPO opens on July 7 and is slated for closure on July 9. The stand out feature of this IPO is that the asking price is significantly lower than the price to earnings (P/E) multiples at which many listed infrastructure companies trade. Read on to know more.

IPO details

The public issue of G R Infraprojects will comprise an offer for sale of 1.15 crore shares by one of the promoters and other existing shareholders. There will be no fresh issue of equity. The company will not receive any proceeds from the issue. Applications will be accepted for a minimum lot of 17 shares and in multiples thereof. Not less than 35 per cent of the issue will be reserved for retail investors.Â The portion reserved for Qualified Institutional Buyers will be upto 50% of the offer. Non-Institutional Investors to have upto 15% of the portion reserved.
HDFC Bank Ltd, ICICI Securities Ltd, Kotak Mahindra Capital Company Ltd, Motilal Oswal Investment Advisors Ltd, SBI Capital Markets Ltd, Equirus Capital Pvt. Ltd are the Book Running Lead Managers to the issue. KFin Technologies Private Ltd is the registrar to the offer.

IPO Factbox
Company	G R Infraprojects Limited
Open Date	July. 7
Close Date	July. 9
Allotment Date	July. 14
Listing Date	July. 19
IPO Band	â‚¹828 to â‚¹837 per share
Share face value	â‚¹5 per share
Bid lot	17 shares
IPO registrar	KFin Tech

G R Infraprojects IPO Factbox

Company details

Established in 1995, G R Infraprojects is an integrated EPC player focussed on road and highway construction projects, particularly across north India. The company was promoted by Vinod Kumar Agarwal, Ajendra Kumar Agarwal, Purshottam Agarwal and Lokesh Builders Pvt. Ltd. Currently Promoters hold 45,339,840 Equity Shares in aggregate, representing 46.89% of the pre-offer issued, subscribed and paid-up Equity Share capital of the company.

The company has forayed into railway projects too. The company reported operational revenue of â‚¹7,844 crore and net profit of â‚¹953 crore for FY21. On debt-to-equity, G R Infraprojects fares better than highly-leveraged players such as Ashoka Buildcon and Sadbhav Engineering. The companyâ€™s EBITDA and net profit margins are at par with those of KNR Construction and higher than those of PNR Infratech.

IPO valuation

At IPO price of â‚¹837, G R Infraprojects discounts its FY2021 earnings by 8.5 times. This is lower than the price to earnings (P/E) multiples at which many listed infrastructure companies trade. Companies such as Ashoka Buildcon, PNC Infratech, KNR Constructions, Dilip Buildcon and IRB Infrastructure Developers trade at a trailing twelve month- P/E ratio ranging from 10 to 50 times. As on March-end 2021, G R Infraprojects had an order book of â‚¹19,026 crore, which comprises 16 EPC projects, 10 HAM projects and 3 other projects. The order book to sales ratio is 2.4 times.

Here’s what brokers say

Axis Capital – The road construction industry in India is very competitive. The companyâ€™s competition depends on various factors, such as the type of project, total contract value, potential margins, complexity, location of the project and risks relating to revenue generation. While service quality, technical ability, performance record, experience, health and safety records and the availability of skilled personnel are key factors in client decisions among competitors, price often is the deciding factor in most tender awards.

Hem Securities – We like the financial performance posted by company with healthy balance sheet status. Also, the company has healthy order book which gives strong revenue visibility going forward. With company strives to maintain robust financial position and low debt levels along with emphasis on strong balance sheet enable company to pursue future opportunities for growth. Hence we recommend â€œSubscribeâ€ on issue both for listing gain & long term purpose.

India Pesticides Limited IPO: Will it give a bumper listing?

India Pesticides Limited (IPL) has hit the primary market with its maiden public issue of shares worth Rs 800 crore. A majority of stock brokers are recommending ‘subscribe’ to this IPO amid the midst of China +1 (global supply chain reducing reliance on China) based rally in chemical company stocks and the enthusiasm around such companies. Let us have a detailed look.

About the company

IPL was incorporated on December 13, 1984. It is an R&D driven agroâ€chemical manufacturer of technicals (active pharmaceutical ingredients) with a growing formulations business. Around 78 per cent of its revenues come from technicals. Exports account for around 57 per cent of the company’s revenues.

IPL is the fastest growing agroâ€chemical companies in India in terms of volume of technicals manufactured. The company has witnessed 37.17% yearâ€onâ€year growth in technicals manufacturing (by volume) between Fiscal 2020 and Fiscal 2021. The company is the sole Indian manufacturer of 5 technicals and among the leading manufacturers globally for Captan, Folpet and Thiocarbamate Herbicide, in terms of production capacity. IPL also diversified into manufacturing herbicide and fungicide technicals, active pharmaceutical ingredients for dermatological products.

IPL currently has 2 manufacturing facilities located at Lucknow and Hardoi in Uttar Pradesh.

About the IPO offering

India Pesticides Limited IPO consists of â‚¹100 crore fund raise via fresh issue of shares. There is also a â‚¹700 crore fund-raise through offer for sale. While the pre issue share holding of promoter is 82.68 per cent, the post issue share holding will be 72 per cent.

The IPO has a price band of â‚¹290â€“296 per share, valuing it at â‚¹3,400 crore or 24.5 times its FY21 earnings. IPL has low debt but working capital investments are higher and fresh proceeds from IPO will be utilised for working capital purposes.

The share face value is Re. 1. The minimum IPO lot size is 50 shares. This means retail investor can apply for minimum Rs â‚¹14,800 investment and maximum of Rs 1.92 lakh.

IPO factbox

Company	India Pesticides Limited
Open date	Jun. 23
Close date	Jun. 25
Allotment date	Jun. 30
Listing date	Jul. 5
IPO band	â‚¹290 to â‚¹296 per share
Bid lot	50 shares

Comparison with peers

India Pesticides Limited has a price to earnings (PE) valuation of 25 times based on FY21 financials. This is quite cheap compared to Bharat Rasayan, Rallis India, PI Industries, Atul etc.

Chemical stocks are market darling due to Indian companies expected to benefit from the â€˜China plus oneâ€™ strategy, whereby global consumers will avoid overinvesting in one country, i.e., China, and promote diversification of business in other countries.

Many multinational giants are taking proactive steps to reduce dependence on China for their manufacturing operations and looking at India as an alternative option.

Broker views

Anand Rathi: We believe that due to the lower valuations as compared to its peers, India Pesticides is placed at an attractive valuation. Going forward with the planned expansion and lowering debt, we are also confident that company will maintain the growth levels which is mirroring in the pricing of the IPO.

Angel Broking: The company having one of the best ROE & ROCE of 34 per cent and 45 per cent respectively. The company having a very healthy balance sheet with negative
Net Debt to Equity. We expect the upcoming expansion plan and higher capacity utilisation will be the growth drivers for the company in future.

ICICI Direct: At Rs 296, the stock is available at 25.3 times FY21. Since the company caters to a few large formulators globally, the upcoming capacity expansion is likely to
improve the economies of scale. Further, technicals being a higher margin segment compared to formulations, increase in revenue share bodes well for return ratios and thereby valuations.

Motilal Oswal: We like IPL given its presence in fast-growing agrochemical space, diversified product portfolio and robust financials. Strong R&D, long-term relations with MNCs, cost competitiveness and extensive distribution network are some of the other key positives. Expanding product portfolio, growing customer base and increasing wallet
share of existing customers can help IPL maintain its growth momentum.

Reliance Securities: Notably, despite reporting better return ratios compared to peers like PI Industries and Rallis India, IPL is valued at a significant discount to peers, which offers comfort. IPLâ€™s growth prospects look promising, considering the strong emerging opportunity for domestic agrochemical companies in global markets and its established presence in export markets.

Key risks

* Delay in granting of product approvals

* Client concentration risk (largest client contribute 19 per cent to revenue)

* Lack of market acceptance of new products

Should you invest in Krishna Institute of Medical Sciences IPO?

Started by renowned cardiothoracic surgeon Dr Bhaskara Rao Bollineni in 2000, Krishna Institute of Medical Sciences (KIMS) is one of the largest corporate healthcare groups in Andhra Pradesh and Telangana. It is hitting the stock market with its maiden public issue worth Rs 2144 crore on June 16. Want to know all the details? Here you go.

Offer details

The issue comprises Rs 200 crore in fresh issuance and Rs 1,944 crore from offer for sale. The IPO is set at a price band of Rs 815 â€“ 825 per share and will be open for subscription between June 16 and June 18.

A total of 1,60,03,615 equity shares are being offered by General Atlantic Singapore KH Pte Ltd under the offer for sale, up to 3,87,966 equity shares by Dr Bhaskara Rao Bollineni, up to 7,75,933 equity shares by Rajyasri Bollineni, up to 3,87,966 equity shares by Bollineni Ramanaiah Memorial Hospitals and 60,05,058 equity shares by other existing selling shareholders.

Post IPO, the promoter group and a large shareholder – General Atlantic Singapore, will retain around 38 per cent (47 per cent pre IPO) and 20 per cent (40 per cent) of shareholding respectively. The promoters pledging is expected to decrease to less than 10 per cent from 35 per cent earlier after the IPO.

KIMS will have a starting market cap of Rs 6601.4 crore.

About the company

Krishna Institute of Medical Sciences (KIMS) offers a range of healthcare services across 25 specialties and super specialties. The company has a strategic focus on the southern India healthcare market.
Currently, KIMS operates nine specialty hospitals with a bed capacity of 3,064, including over 2,500 operational beds as of FY21. KIMS has grown from a single hospital to a chain of multi-specialty hospitals through organic growth and strategic acquisitions. The companyâ€™s flagship hospital at Secunderabad (Telangana) is one of the largest private hospitals in India at a single location (excluding medical colleges), with a capacity of 1000 beds.

In FY21, KIMS recorded average revenue per occupied bed of Rs 20,609, a bed occupancy rate of 78.60 per cent and an average length of stay of 5.53 days, on an aggregate basis.

IPO factbox

Company	Krishna Institute of Medical Sciences
Open date	Jun. 16
Close date	Jun. 18
Allotment date	Jun. 23
Listing date	Jun. 28
IPO band	â‚¹815 to â‚¹825 per share
Bid lot	18 shares

Financials

Krishna Institute of Medical Sciences owns one of the largest hospital chains in AP and Telangana. It reported Rs 1340.1 crore of revenues and Rs 381.0 crore of adjusted EBITDA in FY21, the highest in AP and Telangana.

It has achieved healthy profitability in both Tier I and Tier II, III markets by identifying markets with significant underserved healthcare demand and delivering quality healthcare services at affordable prices.

As of FY21, the company’s debt-to-adjusted EBITDA ratio was 0.71 times and gearing ratio was 0.31 times compared to industry range of 0.1-5.2 times. It has achieved strong free cash flow by effectively managing capex.

Anchor book

Krishna Institute of Medical Sciences on Tuesday raised over Rs 955 crore from anchor investors, ahead of its initial public offering, which opens on Wednesday. The company has allocated 1,15,84,060 shares to anchor investors at Rs 825 apiece, which is the upper end of the price band.
Among the anchor investors are Nomura Funds Ireland Republic Limited Company, Goldman Sachs (Singapore) Pte-ODI, BNP Paribas Arbitrage-ODI, Elara India Opportunities Fund, Moon Capital Trading Pte Ltd and Integrated Core Strategies Asia Pte Ltd. In addition, HDFC Mutual Fund (MF), Axis MF, ICICI Prudential MF, L&T MF, UTI MF, HDFC Life Insurance Company, Tata AIA Life Insurance Co Ltd took part in the anchor bidding.

Valuation

At FY21 earnings per share of Rs 26.5, the IPO price of Rs 825 means a 31 times price to earnings (PE) multiple. This is not very expensive. Apollo Hospitals trades at a PE of 294 times its 12 months earnings. Aster DM trades at 45 times. In fact, many listed hospital companies such as Fortis and Narayana are still reporting annual losses aggregately.

ICICIdirect says based on current performance, it assigns ‘SUBSCRIBE’ for listing gain. However, due to steep competition, expanding in others geographies may depress its financials, going ahead, it adds.

According to Anand Rathi, the companyâ€™s dominant position in the region of Andhra Pradesh and Telangana, diversified revenue across specialties, growth prospects, strong balance sheet along with high RoNW in FY21 reason a “subscribe” rating.

Key risks

* Risk of additional Covid-19 waves

* Highly dependent on hospitals in Hyderabad (Telangana)

* Concern on increase in competition

IPO briefing: EV-focused Sona BLW Precision Forgings’ public issue open

The initial public offer of Sona BLW Precision Forgings is open for subscription from Monday. The Rs 5,550-crore public issue offers shares at Rs 285-291. There is a buzz around this IPO given that about 40 per cent of Sona’s revenues come from hybrids (mostly micro hybrids) and EVs. So, should you bet on this unique play on the growing market for cleaner vehicles across the globe? Let us find out.

About the company

Sona was incorporated on October 27, 1995. It is one of Indiaâ€™s leading automotive technology companies, designing, manufacturing and supplying highly engineered, mission critical automotive systems and components. It supplies products to automotive OEMs across US, Europe, India and China, for both electrified and non-electrified powertrain segments. Sona Comstar is among the top 10 players globally in the differential bevel gear market. They are also among the top 10 global starter motor suppliers based on their exposure to the PV segment in calendar year 2020.

Sona Comstar has 9 manufacturing and assembly facilities across India, China, Mexico and USA, of which 6 are located in India and they have 8 warehouses, of which, 5 are located in India and 3 across USA, Germany, and Belgium.

The companyâ€™s global OEM customer portfolio includes a Global OEM of EVs (this is being speculated as Tesla though there is no official confirmation), Ampere Vehicles, Ashok Leyland, CNH, Daimler, Escorts, Escorts Kubota, Geely, Jaguar Land Rover, John Deere, Mahindra and Mahindra, Mahindra Electric, Maruti Suzuki, Renault Nissan, Revolt Intellicorp, TAFE, Volvo Cars and Volvo Eicher.

The company derives 75 per cent of their income from sale of goods with end-use in the overseas markets, including 36.1 per cent in North America, 26.5 per cent in Europe and 7.6 per cent in China and 25 per cent from sale of goods with end-use in India, for fiscal 2021.

IPO summary

The company is planning an issue size of Rs 5,550 crore. Out of this, the offer for sale (OFS) portion is of upto Rs 5,250 crore. The OFS is by its two promoters. Part sale by Blackstone backed Singapore VII Topco II Pte.Ltd and ii) Sona Autocomp Holding Pvt Ltd. The face value of shares is Rs 10.

The IPO lot size is 51 and so minimum IPO application will be about Rs 14,800. Post issue implied market cap of Sona will range between Rs 16,600 crore to Rs 17,000 crore.

IPO factbox

Company	Sona BLW Precision Forgings
Open date	Jun. 14
Close date	Jun. 16
Allotment date	Jun. 21
Listing date	Jun. 24
IPO band	â‚¹285 to â‚¹291 per share
Bid lot	51 shares

Financials

Sona BLW Precision Forgings is a consistent performer as far as its profitability is concerned. It has been reporting the most robust margins, ROE and ROCE among the entire listed auto component space in the Indian industry.

Despite spending maximum on R&D expenses when viewed as a percentage of sales, the company with its strong engineering prowess, improving content per vehicle, hedging its risk geographically as well as product offerings and segment wise has maintained its operating margins in the 26-28 per cent range.

Going forward with EV proliferation we believe the company can report even better margins with improving utilization rates (which have temporarily gone down in FY 21 due to pandemic) will rise again due to operating leverage.

IPO valuation

The IPO is coming at a rich valuation. The IPO price values Sona BLW Precision Forgings at 76-77 times its trailing 12-month earnings (consolidated). This is not unique because most auto and auto component players such as Motherson Sumi (74 times), Endurance Technologies (40.5 times) and Bosch (97 times) also trade at rich valuation. Bharat Forge and Varroc Engineering are loss-making at the consolidated level.

Brokers such ICICI Securities, LKP Securities have recommended ‘subscribe’ to the IPO of Sona Comstar for the long-term.

Grey market premium (GMP) for Sona Comstar IPO is said to be in single-digits, but this should not be taken as a key factor while applying for Sona BLW Precision IPO.

Key risks

* Slower than anticipated revival in auto sales volume

* Steep rise in metal prices to hamper margins in interim period

* Forex transactional impact on financials

Shyam Metalics IPO opens Monday; issue details, anchor investors

Shyam Metalics and Energy Ltd, a leading integrated metal producing company and also amongst the largest producers of ferro alloys in India, is hitting the capital market with its maiden public issue. The IPO application period closes June 16. The asking price for the IPO shares is Rs 303-306 apiece. Given the fancy for metal stocks and the strong commodity price cycle, should you invest in this IPO? Let us find out more details.

Offer details

Shyam Metalics and Energy (SMEL) is planning to raise Rs 909 crore through the IPO, which is a combination of fresh issue of shares (for about Rs 657 crore) and offer for sale (Rs 252 crore).

Post-IPO, the promoter holding of Shyam Metalics and Energy will drop to about 88.35 per cent from 100 per cent now. The market capitalisation of the company post-IPO would be around Rs 7,800 crore. Significant portion of the public offer proceeding will be utilised for repayment or pre-payment of the debt.

Total no. of shares offered – 2.97 crore

Face value – Rs 10 per share

IPO bid lot – 45 shares

Application amount for retail investors – At the upper end of IPO price Rs 13,770 (1 lot) and Rs 1,92,780 (14 lots)

About the company

SMEL is an integrated metal producing company focussing on long steel products and ferro alloys with the ability to sell intermediate and final products across the steel value chain. Incorporated in 2002, they are amongst the largest producers of ferro alloys in terms of installed capacity in India, as of February 2021.

The company currently operates 3 manufacturing plants that are located at Sambalpur in Odisha, and Jamuria and Mangalpur in West Bengal. As of December 31, 2020, the aggregate installed metal capacity of the manufacturing plants was 5.71 million tonne per annum (MTPA).

The company sells products to institutional customers and end consumers through the distribution network. Their domestic customers include Jindal Stainless Limited, Jindal Stainless (Hisar) Limited, and Rimjhim Ispat Limited. The international customers include Norecom DMCC, Norecom Limited, POSCO International Corporation, World Metals & Alloys (FZC), Traxys North America LLC, JM Global Resources Limited, Goenka Steels Private Limited and Vijayshri Steel Private Limited.

Brij Bhushan Agarwal is Vice Chairman & Managing Director of Shyam Metalics & Energy Ltd. Sanjay Kumar Agarwal is Joint Managing Director of Shyam Metalics & Energy Ltd.

IPO factbox

Company	Shyam Metalics and Energy
Open date	Jun. 14
Close date	Jun. 16
Allotment date	Jun. 21
Listing date	Jun. 24
IPO band	â‚¹303 to â‚¹306 per share
Bid lot	45 shares

Financials, advantages

Shyam Metalics and Energy has a diversified product mix such as, iron pellets, sponge iron, steel billets, TMT, structural products, wire rods, and ferro alloys.

For FY18-20, the company revenue grew at a CAGR of 8 per cent while PAT de-grew by 19.7 per cent CAGR due to expansions underway and COVID related disruptions.

SMEL is expected to double its current aggregate installed metal capacity from 5.71 MTPA, as of December 31, 2020, to 11.60 MTPA by FY25.

Analysts say that domestic steel demand impacted by COVID-19, will pick up in FY22 and continue its strong growth at 6 per cent through FY25. Restrictions on Chinese exports due to higher domestic demand and surging international steel prices will benefit Indian Steel makers like SMEL.

Anchor book subscription

Marquee investors who participated in the anchor portion of Shyam Metalics IPO include Edelweiss Alternative Investment Opportunities Trust, Abakkus Growth Fund, Aditya Birla Sun Life, Kotak MF, Integrated Core Strategies, SBI General Insurance, Aurigin Master Fund, IIFL Asset Management, Kuber India Fund, Elara India Opportunities Fund, Nippon Life, Dovetail India Fund, L&T MF, Saint Capital Fund, and GAM Multistock.

IPO valuation

At the upper end of the price, the Shyam Metalics and Energy stock is valued at 11.8 times its annualised FY21 earnings (Rs 19.53 per share for 9 months FY21). If we annualise FY21 earnings and attribute it to fully diluted post issue equity, then the valuation is a P/E of around 12.8.

As per the IPO document data, SMEL counts Tata Steel, JSW Steel, SAIL, Jindal Steel & Power and Tata Steel Long Products as its listed peers. These stocks are currently trading at a P/E of 11.6, 20, 14.4, 5.7 and 7.3 times. Truthfully, SMEL has no immediate comparable peers due to its diversified output. Do note that SMEL is the least leveraged among its peers with the D/E (debt to equity) at 0.3 times in 9MFY21.

Brokers like Geojit have assigned a ‘Subscribe’ rating to the Shyam Metalics and Energy IPO with a short to medium term perspective due to optimistic international prices and rise in domestic demand.

Do note that as per latest information, the GMP of Shyam Metalics and Energy IPO stock is over Rs 100, indicating 35 per cent premium. However, do not base your IPO investment decision based on Shyam Metalics and Energy GMP etc., as these are not very reliable.

Key risks

* Steel prices fall as strong commodity price cycle ends

* Steel demand does not recover as per expectations

* The company is unable to manage the scale as it nearly doubles capacity over the next few years

BSE vs NSE: How are they different

Stock market or equity investors in India can trade in any of the regional stock exchanges or the National Stock Exchange (NSE). The most sought-after stock exchange is the Bombay Stock Exchange (BSE). NSE is as popular as BSE. These are two of the biggest stock exchanges in India and are available all over India. The bulk of the trading volume in the country happens on these stock exchanges. BSE and NSE are among the largest stock exchanges in all of Asia right after Japan, China, and Hongkong.

Traders and investors investing in stocks often donâ€™t know the differences between these exchanges. Hereâ€™s all the info you need on them.

What are stock exchanges?

Companies raise money by issuing shares to the public. Once the shares are issued, they are listed on the stock exchange where investors get an opportunity to sell or buy shares. Stock exchange is the place where all shares get traded. These are regulated by the Securities Exchange Board of India (SEBI). You can trade in stocks by opening a demat or trading account with a depository participant or stockbroker.

What is NSE?

This stock exchange was founded in the year 1992. It is Indiaâ€™s biggest stock exchange in terms of market capitalization and volumes. The NSE was the first stock exchange to introduce electronic and fully automated trading for Indian investors. Earlier, there was paper based trading and a physical share certificate was provided. Now, after the NSE started an electronic system of trading, all trades are automated.

The stock exchange has the popular benchmark index NIFTY 50. The NIFTY index derives its value from 50 of the biggest companies listed on the stock exchange (in terms of market capitalization). These are the most frequently traded companies listed on the NSE. When it comes to the number of contracts traded, NSE is one of the worldâ€™s largest stock exchanges in the derivatives segment.

What is BSE?

The Bombay Stock Exchange (BSE) started its operations in the year 1875. Earlier it was called â€œThe Native Share & Stock Brokers Association.â€ BSE is one of the oldest stock exchanges in Asia. The BSE shifted from the physical share trading system to fully electronic trading (BOLT) only in 1995.

The popular Sensex which is considered as the Indian stock market benchmark is part of the BSE. This index was first introduced in the year 1986. The index has the top 30 companies that are listed on the BSE in terms of market capitalisation.

Differences between NSE and BSE

Â· When it comes to global stock exchange rankings, BSE is ahead of NSE as it is one of the oldest stock exchanges.

Â· From the time of its launch, NSE has been a fully electronic stock exchange encouraging paperless trading system.

Â· In the derivatives contracts segment, NSE has monopolized the entire segment. NSE indices, the NIFTY 50 and Bank NIFTY, are popular and are the most highly traded contracts in the derivative segment in India.

Â· The NSE has more than 1600 companies listed, while the BSE has more than 4700 companies on its exchange.

Â· Even though the BSE is the only listed exchange in India, NSE is coming up with its Initial Public Offering (IPO). The BSE is listed on its rival stock exchange platform, the National Stock Exchange. While NSE also had plans of getting listed on a stock exchange, it unfortunately never came to pass due to several legal hurdles.

Conclusion

Both the BSE and the NSE are among the best stock exchanges in the world. However, with a greater number of listed companies, BSE is the ideal platform for beginners. For experts, the NSE has an excellent repertoire of derivative contracts.

If you are a beginner to equity investing, then try investing in mutual funds and learn the ropes. Wealthzi can help you start.

Aditya Birla Sun Life AMC files DRHP with SEBI for IPO

Aditya Birla Capital has announced that its arm Aditya Birla Sun Life AMC has filed a draft red herring prospectus (DRHP) with capital markets regulator SEBIi to launch an initial public offering (IPO).

Aditya Birla Sun Life AMC Ltd, the investment manager of Aditya Birla Sun Life Mutual Fund, is a joint venture between the Aditya Birla Group and the Sun Life Financial Inc of Canada. It will be the fourth fund-house to be listed in Indian stock exchanges after HDFC AMC, Nippon India, and UTI AMC.

â€œAditya Birla Sun Life AMC Ltd (ABSLAMC), a material subsidiary of Aditya Birla Capital, filed a draft red herring prospectus (DRHP) dated 19th April 2021 with the Securities and Exchange Board of India for an initial public offering by way of an offer for sale (IPO) of shares of ABSLAMC, subject to relevant approvals as required,â€ Aditya Birla Capital said in a regulatory filing.

Aditya Birla Capital has approved sale of up to 28,50,880 equity shares held in ABSLAMC out of the total paid-up share capital of 28,80,00,000 equity shares of Aditya Birla Sun Life AMC, the company added.

As per the filing, Sun Life (India) AMC Investments Inc, the joint venture shareholder in Aditya Birla Sun Life AMC, approved sale of up to 3,60,29,120 equity shares held in Aditya Birla Sun Life AMC through the IPO.

The proposed sale of equity shares by Aditya Birla Capital and Sun Life India in the IPO will together constitute up to 13.50 per cent of the paid-up share capital of Aditya Birla Sun Life AMC, Aditya Birla Capital said.

Aditya Birla Sun Life AMC has a total assets under management (AUM) of over Rs 2,74,000 crore for the quarter ended December 30, 2020. As per the prospectus, the AMC’s 9-month revenues stood at Rs 873.63 crore as of December 31, 2020. Net profit for the period was at Rs 369.54 crore. Its standalone return on equity of 37.24 per cent for the financial year ended March 2020 was the third highest among the five largest AMCs in India by quarterly average AUM, according to Crisil.

Kotak Investment Banking, Bofa Securities, Citigroup Global markets India, Axis Capital, ICICI Securities, IIFL Securities, JM Financial, Motilal Oswal Investment Banking, SBI Capital and Yes Securities are the book running lead managers to the issue.

Macrotech Developers floats 1st realty IPO in over two years; should you apply?

Shares of Macrotech Developers are up for IPO bidders. The price band of the IPO is Rs 483 to Rs 486 per equity share. The public issue which has opened on April 7, will close on April 9. The Rs 2,500-crore IPO money will be used by the company to cut debt and buy land. Here are more details.

IPO details

Shares of the Macrotech Developers IPO are likely to be allotted on April 16 and the stock is expected to make its debut on April 22. Lot size of the IPO is 30 shares for which one will have to spend Rs 14,580. The shares have a face value of Rs 10 each.

Post public issue, promoter holding will be 88.5 per cent.

Macrotech Developers filed draft papers with the capital market regulator Securities and Exchange Board of India (SEBI) in its third attempt to go public. The company tried to go float an IPO in 2009 and again in 2018 but backed down citing challenging times for the realty sector.

The company has raised Rs 740 crore from 14 anchor investors. The company informed the bourses that it has allocated 1.52 crore shares at Rs 486 per share on Tuesday, April 6, 2021 to anchor investors. 12 Foreign Portfolio Investors who participated in the anchor were Capital Group; Nomura; Ivanhoe Cambridge, real estate arm of CDPQ; Wellington Asset Management,; Abu Dhabi Investment Authority, Abu Dhabiâ€™s sovereign fund; Platinum Asset Management, Marshall Wace, Brookfield Asset Management, Segantii, York, Oxbow and Discovery. Two domestic investors HDFC Mutual Fund and Premji Invest, were also allocated shares.

IPO factbox

Company	Macrotech Developers
Face value	â‚¹10 per equity share
Open date	Apr. 7
Close date	Apr. 9
Allotment date	Apr. 16
Listing date	Apr. 22
IPO size	â‚¹2500 crore approx.
IPO band	â‚¹483 to â‚¹486 per equity share
Bid lot	30 shares

A play on MMR

The Mumbai Metropolitan Region (MMR) is considered the most attractive real estate market in the top seven Indian Markets, having the largest share of supply and absorption, and highest average base selling price. In this region, Macrotech has developed a strong brand and has existing land reserves, industry knowledge and regulatory environment know-how. This, in turn, has aided the company to attain a leadership position in South Central Mumbai, Thane and the Extended Eastern Suburbs micro-markets of the MMR, with the largest share of supply (by units), absorption (by value) and completion (by area) of residential developments, says ICICIdirect.

The company focuses on branded realty and has created strong brands such as â€˜CASA by Lodhaâ€™, â€˜Crown-Lodha Quality Homesâ€™, and â€˜Lodhaâ€™ for affordable and mid-income housing projects, the â€˜Lodhaâ€™ and â€˜Lodha Luxuryâ€™ brands for premium and luxury housing projects and the â€˜iThinkâ€™, â€˜Lodha Excelusâ€™ and â€˜Lodha Supremusâ€™ brands for office spaces.

The strength of Macrotech’s brand and its association is primarily driven by its track record of delivering quality products, with modern amenities and innovative design elements. It leverages its brand presence, customer confidence, track record of successfully delivering projects and superior construction quality to increase sales volumes and also command premium pricing for its products.

As of December 31, 2020, 35 per cent of its unsold inventory of residential developments was priced under Rs 1 crore, 21 per cent was priced between Rs 1 crore and Rs 3 crore, 7 per cent between Rs 3 crore and Rs 5 crore, 22 per cent between Rs 5 and Rs 8 crore while 15 per cent was priced above Rs 8 crore.

For 9MFY21, 39% of the company’s residential sales value was obtained through the sale of residential developments that were priced under Rs 1 crore, 23 per cent between Rs 1 crore and Rs 3 crore.

What brokerages say

Reliance Securities: The IPO is valued at 26.3 times of FY20 earnings and 4.8 times of FY20 book value, which appear to be reasonably priced vis-Ã -vis its peers like Godrej Properties and DLF.

Choice Broking: The issue seems to be attractively priced. Moreover, the real estate sector is witnessing significant consolidation, especially after the NBFC crisis. Dominant players like Macrotech are likely to benefit in the medium to long term.

Angel Broking: The company has posted sales degrowth of 68% in 9MFY21 and reported a negative profit after tax of Rs 265 crore. Given weak revenue growth in the past and leverage balance sheet we assign a “NEUTRAL” rating to the IPO.

Key risks and concerns

* Substantial amount of debt

* Reported a restated loss in 9MFY21; may incur losses in future

* Spread of Covid-19 may affect operations in near future

Barbeque Nation: Should you invest in casual dining company’s IPO?

Barbeque Nation is another Rakesh Jhunjhunwala backed company doing IPO, after gamng company Nazara Technologies. The Rs 453 crore public offer opens on March 24. Should you buy? Here is all the information you would need.

IPO key details

Issue opens â€“ Mar 24 (Wednesday)
Issue closes â€“ Mar 26 (Friday)
Issue size â€“ Rs 453 crore
Price band â€“ Rs 498 â€“ 500 per equity share
Bid lot â€“ 30 shares and in multiples thereof
Book Running Lead Manager: IIFL Securities Limited, Axis Capital Limited, Ambit Capital Private Limited, SBI Capital Markets Limited
Registrar to issue: Link Intime India Private Limited

About Barbeque Nation

Barbeque Nation Hospitality Ltd (BNHL) owns and operates Barbeque Nation Restaurants, a leading casual dining restaurant chains and International Barbeque Nation Restaurants. It also owns and operates Toscano Restaurants and UBQ by Barbeque Nation Restaurant. It has 147 Barbeque Nation Restaurants (including opened, temporarily closed and under construction outlets) across 77 cities in India and six International Barbeque Nation Restaurants in three countries outside India as of December 31, 2020.

IPO proceeds usage

Initial public offer of equity shares aggregating up to Rs 1.8 billion (bn) and an offer for sale of up to 5.5 million (mn) shares by CX Investor, AAJV Investor, SHKSL, Sadiya Dhanani, Sanya Dhanani and Azar Dhanani.

Proceeds of the public offer are proposed to be utilized for (i) Capex to the tune of Rs 54.6 crore for opening new restaurants in India (ii) Pre-payment/repayment of certain outstanding borrowings worth Rs 75 crore.

CX Advisors is offloading 10% through offer for sale, post which its holding will stand at 16.5%.

Jubilant Foodworks is a pure play financial investor but it is also a key strategic player in the industry. While there is no commitment from either side, both parties will see how the partnership pans out once things settle down.

IPO factbox:

Company	Barbeque Nation Hospitality
Face value	â‚¹5 per equity share
Open date	Mar. 24
Close date	Mar. 26
Allotment date	Apr. 1
Listing date	Apr. 7
IPO size	â‚¹453 crore approx.
IPO band	â‚¹498 to â‚¹500 per equity share
Bid lot	30 shares

Store expansion plan

The company has opened 70 stores in the last 3 years and plans to open 20 new stores in FY22. Going ahead, 70% of store openings would be in existing metro/tier-I markets and 30% in new markets.

Each outlet requires capex of Rs 2.5-2.7 crore. Average revenue per mature store stands at Rs 7 crore. Gross margin stands at 65-66%.

The company has closed two international restaurants since FY18 due to commercial reasons. The company is not planning to add any new outlets in the international markets as of now.

USP of company

Barbeque Nation generates 50% of its revenue during weekdays (Monday-Thursday). Lunch covers as a % of revenue at Barbeque Nation stand at ~45%.

For the company, 85% contribution came from dine-in & 15% from delivery. Management does not believe that delivery can significantly replace dine-in as the experience that the latter offers canâ€™t be packed in a box.

The companyâ€™s pricing strategy is dynamic. In metros, the average per cover (APC) is Rs 900 whereas in tier-II/tier-III towns it is Rs 650.

Average bill size is about Rs 2,900-3,000.

The rent-to-revenue ratio for the company is low compared to other brands at 10%. Employee cost forms 20% of sales and other expenses form 10-12%, resulting in a store level EBITDA margin of 3% at maturity. Depending on store location, breakeven happens within 2-4 months. Payback period at the restaurant level is 3 years.

Concerns

The company has been posting losses since FY19.

For the first eight months of FY21, the company has posted a loss of Rs 100 crore.

The IPO is priced nearly double against pre-IPO placement a few months before.

Resurgence of pandemic scare and their effect looms large.

Question mark over promoter group track record in terms of scale-up, as seen in Sayaji Hotels.

Valuations

Prabhudas Lilladher said the stock at 46 times FY23 EPS offers limited upside.

“Commenting on the price & valuation of the pre-IPO placement, the management stated that they were not fussy about valuation or stake dilution while raising equity since the industry was going through liquidity crunch and was in a difficult spot,” says Nirmal Bang Institutional Research that attended Barbeque-Nation Hospitality Ltd IPO Analyst Meet.

Pre-IPO fund raise

Casual dining chain Barbeque Nation Hospitality announced on Tuesday that it has raised Rs 203 crore from anchor investors ahead of its IPO.

The company’s IPO committee has decided to allocate 40,57,861 shares at Rs 500 apiece to 21 anchor investors. At this price, the company raised Rs 202.89 crore, according to a statement.

The anchor investors include Goldman Sachs India Ltd, Nomura Funds Ireland Public Limited Company,Â Fidelity Investment Trust, SBI Mutual Fund (MF), ICICI Prudential MF, Kotak MF, Aditya Birla Sunlife MF, HDFC MF, HDFC Life Insurance Company, Kuber India Fund, Pioneer Investment Fund and UPS Global Trust.

Analyst views

“Company is targeting a market cap of Rs 18.8bn post-issue which equates to 12.2x FY20 EV/EBITDA and 2.2x P/S, which is significantly lesser than QSR peers like Westlife and Burger King. But given the highly capital intensive and more volatile dine-in business model, we believe the discount is justified. Moreover, given the recent pre-IPO allotment in December and January was done at 50% less than IPO price and COVID concerns have again come back which would be a near term headwind for the space, the pricing looks on the higher side with not a lot left on the table for investors. We also note that earlier fund raises in 2018 have been done at a much higher price, but fundamentals have deteriorated since. Despite a strong growth outlook for the space (18% expected industry CAGR) and strong brand equity for the company which should help market share gains, we would advise avoiding the IPO and awaiting better entry opportunities post listing, ” says Yes Securities.

Angel Research says: “While the company has posted revenue growth of 20% CAGR between FY18-FY20 it has been continuously incurring losses at PAT level despite topline growth. The Covid-19 pandemic too has had an adverse impact on the operations of the company hence we expect profits will remain under pressure over the medium term. At the higher end of the price band the company is asking for a valuation of 2.4x FY20 EV/Sales which we believe is expensive given the current environment and hence we recommend a NEUTRAL rating to the IPO.”

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