Edelweiss Asset Management Limited has announced that it is converting its Edelweiss Maiden Opportunities Fund – Series 1 (EMOF), a close ended fund that focuses on recently listed IPOs with AUM of Rs 522 crore (as on April 2021) into an open-ended fund.
This will be India’s first open-ended fund focused on investing in 100 recently listed IPOs and will be re-named as Edelweiss Recently Listed IPO Fund.
This conversion will be effective from June 29, 2021.
EMOF was launched as a close-ended fund in February 2018, with a tenure of 3+ years, which ends in June 2021.
The fund provides access and right selection of IPOs to capture listing and post listing gains and has returned 14.3% vs. 11.2% Nifty 500 TRI (benchmark).
The fund has been investing in new-age businesses across multiple sectors that went public through IPO in recent years.
Explaining the reasoning behind the conversion, Radhika Gupta, MD & CEO, Edelweiss Asset Management Ltd. said, “India is currently witnessing its busiest pipeline of IPOs which is expected to remain buoyant….We believe converting this fund into an open-ended one will give a wider base of investors access to this fund, democratizing the IPO opportunities for these investors.”
Gupta added that an IPO opportunity is not just about listing gains but also about an earnings momentum that bodes well for the right selection of IPOs and Edelweiss Mutual Fund will bring that opportunity to the investor.
EMOF’s existing unitholders have an option to exit at the prevailing NAV, without exit load, from May 28, 2021 to June 28, 2021. Investors who wish to stay invested will automatically get converted to the open-ended scheme.
Edelweiss Recently Listed IPO Opportunities Fund will be an open-ended scheme and the subscription will open from 29th June, 2021. The fund will invest in high-quality IPO stocks through its 3-step strategy of selecting the right post-IPO stocks for investment, providing access to these companies through the fund and taking advantage of post-listing gains by continuing to invest in the right selection of stocks.
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.
“Aditya 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,†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.
Suryoday Small Finance Bank, one of leading small finance banks (SFB) in India and has been serving customers in the unbanked, underbanked segments, is coming out with its Rs 580-crore IPO on March 17. The IPO is slated for closure on March 19. The price band is Rs 303 to 305 per share. The bank has a dominant MFI business, just like Bandhan Bank. Given the stellar listing of Bandhan, will Suryoday Small Finance Bank IPO be a repeat? Read on to know more details.
About bank history, business
SSFB started operations as an SFB on January 23, 2017, before which it operated as an NBFC-MFI. Its gross loan portfolio (GLP) has witnessed a CAGR of 35% as of FY18 to nine months of FY21. Growth in the current year has been significantly impacted by Covid and 9 month FY21 disbursements were down 50% yoy.
SSFB’s key products are Microfinance loans (70% of GLP), CV finance (9%), Affordable Housing Loans (6%), Secured BLs (4%) and NBFC loans (5%).
Since becoming a bank, the deposits have been ramped up to 88% of advances (FY18-9m FY21 CAGR of 72%). Cost metrics has been controlled through addition of moderate-sized banking outlets, calibrated employee addition and lower average cost of employees.
Baskar Babu Ramachandran is MD & CEO.
Suryoday’s asset portfolio remains MFI dominant at 71% of loans (similar to Ujjivan), with urban-rural mix of 70:30 and geographically concentrated in Maharashtra (35%), TN (27%) and Odisha (15%).
Why the IPO
SSFB is floating the IPO to comply with the regulatory listing requirement. Suryoday Small Finance Bank (SSFB) is coming out with an IPO of Rs 580 crore which comprises a fresh capital raise of Rs 250 crore and an OFS of nearly Rs 330 crore.
What are the IPO details
Shares on offer – The IPO is for upto 19,093,070 equity shares. Fresh issue is upto 8,150,000 equity shares while Offer for sale is for upto 10,943,070 equity shares.
The issue shall constitute 17.99% of the post issue paid up equity share capital.
SSFB’s post issue implied market cap is Rs 3,216 crore to Rs 3,237 crore.
Face value of shares is Rs 10/share.
Listing will be on BSE & NSE.
The IPO price band is Rs 303 – 305 per share.
The minimum bid lot is 49 shares.
The IPO BRLMs are Axis Capital, ICICI Securities, IIFL Securities, SBI Capital Markets Registrar: KFin Technologies Pvt. Ltd.
IPO factbox
Company
Suryoday Small Finance Bank
Face value
₹10 per equity share
Open date
Mar. 17
Close date
Mar. 19
Allotment date
Mar. 24
Listing date
Mar. 30
IPO size
₹581 crore approx.
IPO band
₹303 to ₹305 per equity share
Bid lot
49 shares
Positive points
Well-diversified portfolio – Suryoday SFB has been able to diversify its product portfolio and proportion of net unsecured portfolio has reduced from 94.81% of net advances in FY18 to 74.59% as on Q3FY21. It has diversified into other products, which broadly include CV loans, affordable home loans, micro business loans, etc., according to ICICIdirect.
Track record of cost efficient operations -Operating expense ratio as percentage of its average balance of Gross Loan Portfolio has reduced from 10.72% in Fiscal 2018 to 7.99% in Fiscal 2020 and was 8.38% (annualized) / 6.29% (unannualized) in the nine months ended December 31, 2020. The relatively moderate size of Banking Outlets has led to reduction in the overall capital expenditure and operating expenditure per Banking Outlet, as per HDFC Securities.
Negative points
Sub-par liability profile and higher NPAs – The bank’s deposit-to-AUM ratio improved to 88%, but CASA remained abysmally low at 13% (12% of AUM), similar to Ujjivan. Deposits per branch too remain the lowest among peers at Rs 60 million vs. Rs 100 million-Rs 200 million for peers and thus need to be ramped up. We believe that the sub-par liability profile along with an expected surge in NPAs and changing asset mix to non-MFI could cast pressure on NIMs/core RoA in the long run, as per Emkay.
Overall stress inadequately addressed – SSFB’s proforma Gross and Net NPLs (adj. for Covid buffer) stood at 9.3% and 3.7% respectively as of Dec 2020. Besides this, the bank is likely to have a substantial portfolio in PAR 30-90 bucket which can be construed from the trends in paying customers (82% in Dec & 68% in Sept) and overall collection efficiency (111% in Dec & 77% in Sept). The above collection indicators are significantly lower in the states of Maharashtra and Tamil Nadu which together contribute 60%+ of SSFB’s GLP. Notably, other MFIs and SFBs under our coverage have reported significantly better collections in these states and for same products, according to Yes Securities.
To diversify its asset franchise, the bank has aggressively grown its portfolios of CV loans, Secured BLs and FIG (smaller NBFCs/MFIs/HFCs). In these segments, the growth was substantially driven by ramping-up the ticket size (ATS CAGR of 29%/61%/87% for CV/SBL/FIG over FY18-9m FY21). This will be the first adverse credit cycle for these products. Considering a moderate Covid buffer and likelihood of PAR 90 increasing in the near term, the credit cost could remain elevated for the next couple of quarters and thus weigh on bank’s profitability.
IPO valuation
Suryoday SFB witnessed strong growth in advances along with maintaining asset quality. Unserved and underserved customers as target offer a vast opportunity for business growth. At Rs 305, the stock is available at 2.1 times Q3FY21 P/BV (post fresh issue).
“Factoring the good return ratios, FY20 ROA/ROE of 11.3%/2.5%, we believe that Suryoday Small Finance Bank Limited is worth subscribing. Thus we recommend SUBSCRIBE,” says LKP Securities.
Emkay says among SFBs, it rather prefer Equitas (Buy) for its healthy asset diversification, better liability profile and reasonable valuations.
“SSFB’s IPO pricing at 2.1x current P/ABV (post-money) is at par with listed larger peers, ESFB and USFB. However, considering the gaps in the franchise and execution capabilities (management depth), we believe that IPO valuation is relatively unattractive,” says Yes Securities.
Surat based, custom synthesis and manufacturing focused specialty chemicals company Anupam Rasayan India has launched its IPO on Friday, March 12, 2021 and will close on Tuesday, March 16, 2021. The price band for the offer has been decided at Rs 553–555 per equity share. The issue aggregating up to Rs 760 crore comprises a complete fresh issuance of equity shares. The company proposes to utilize the net proceeds towards repayment/prepayment of certain indebtedness availed by the company and for general corporate purposes. Read on to know more.
Who is Anupam Rasayan
Anupam Rasayan is one of the leading companies engaged in the custom synthesis and manufacturing of specialty chemicals in India. The company has two distinct verticals which includes life science related specialty chemicals comprising products related to agrochemicals, personal care and pharmaceuticals; and other specialty chemicals, comprising specialty pigment and dyes, and polymer additives.
Anupam Rasayan claims to have developed strong and long-term relationships with various multinational corporations, including Syngenta Asia Pacific Pte. Ltd., Sumitomo Chemical Company Limited and UPL.
As of December 31, 2020, the company operates through six multi-purpose manufacturing facilities based in Gujarat, India; with four facilities located at Sachin, Surat, Gujarat and two located at Jhagadia, Bharuch, Gujarat.
From FY18 to FY20, the company’s total revenue has increased at a CAGR of 24.29 per cent. Despite the impact of the COVID-19 pandemic, the company’s revenue from operations significantly increased by 45.03 per cent to Rs 539.22 crore in the nine months ended December 31, 2020.
The company’s listed peers can be SRF, PI Industries, Aarti Industries, Astec Lifesciences, Navin Fluorine etc.
IPO factbox
Company
Anupam Rasayan India
Open date
Mar. 12
Close date
Mar. 16
Allotment date
Mar. 19
Listing date
Mar. 24
IPO size
₹760 crore approx.
IPO band
₹553-555 per share
Bid lot
27 shares
Registrar
KFin Technologies
IPO details
The IPO issue is being made through the Book Building Process.
No. of total shares on Offer is 1.35 crore.
The IPO minimum lot size is 27 shares. The shares have a face value of Rs 10.
Valuation
At Rs 555, the stock is available at 104.7 times FY20 earnings.
“We believe valuations are on the higher side given that it has been facing constraints towards generating FCF owing to higher working capital cycle, leading to a bloated balance sheet and thereby subdued return ratios,” says ICICIdirect.
Based on post-IPO enterprise value of Rs 5,754 crore, the operating earning yield of the IPO stock would be around 2.5 per cent.
While the stock asks for higher than peers Price to Earnings, it is cheaper when seen from Price to Book perspective.
Key risk & concerns
1. Client concertation remains a key risk – Top five clients constitute 50 per cent of overall revenue while top 10 clients contribute to the tune of nearly 84 per cent.
2. Higher working capital cycle keeps FCF subdued – The company enters into fixed price annual contract with buyers at the end of calendar year. Similarly, it keeps higher inventory to offset any price fluctuation. This leads to higher working capital cycle and limits FCF generation.
3. Inability to pass on higher RMAT cost to impact bottomline – The company’s key raw materials (RMAT) are para chloro phenol and meta dichloro benzene, whose prices have remained volatile in the past. Anupam Rasayan does not enter into long-term supply contracts with any raw material suppliers while purchase prices for customers are predetermined either annually or for the duration of the agreement. Accordingly, any subsequent variation in price of raw materials may not be passed on to customers and can impact gross margins of the business.
Stove Kraft Ltd, a kitchen solutions and an emerging home solutions brand, is launching its initial public offer of equity shares on January 25. The company, promoted by Benguluru-based Gandhis, has raised a little over Rs 185 crore from anchor investors ahead of the over Rs. 400-crore IPO. Here are the details of the Stove Kraft public issue and the company’s business. Read on.
The public offer details
Stove Kraft Limited IPO opens on Jan. 25 and will close on Jan. 28. Shares are available for subscription at IPO price band of Rs. 384/- to Rs. 385/- per equity share. The Stove Kraft IPO minimum lot size is 38 equity shares, entailing a minimum investment of Rs 14,630.
Stove Kraft offer comprises a fresh issue of Rs. 950 million and Offer for sale of 82,50,000 equity shares. The offer for sale comprises up to 6,90,700 shares by promoter Rajendra Gandhi; up to 59,300 shares by promoter Sunita Rajendra Gandhi; up to 14,92,080 shares by Sequoia Capital India Growth Investment Holdings and up to 6,007,920 shares by SCI Growth Investments II.
The face value of each Stove Kraft share is Rs.10/-.
Listing of shares will be on BSE & NSE.
Resident Indian individuals, HUFs, Companies, Corporate Bodies, Scientific Institutions, Societies and Trusts, Eligible NRIs, Category III Foreign Portfolio Investors can invest in Stove Kraft IPO.
The book running lead managers to the offer are Edelweiss Financial Services and JM Financial.
Company background
Incorporated in 1999, Stove Kraft is engaged in the manufacture and retail of kitchen solutions under the Pigeon and Gilma brands. It proposes to commence manufacturing of kitchen solutions under the BLACK + DECKER brand, covering the entire range of value, semi-premium and premium kitchen solutions respectively.
The company is into cookware and cooking appliances across their brands, and their home solutions comprise various household utilities.
Sequoia had first picked up a significant minority stake in Stove Kraft in 2010 for Rs. 50 crore. In 2013, it had infused more capital into the company, and currently holds a 25.37% stake.
Financials
During the six month periods ended September 30, 2020 and September 30, 2019 and for Fiscals 2020, 2019 and 2018 their Pigeon branded products contributed 76.90%, 80.86%, 86.20%, 81.24% and 86.89% to their overall sales, respectively.
Stove Kraft’s Restated Total Income for the year ended March 31, 2020 Rs. 6,729.14/- million, while Restated Profit after tax for the year ended March 31, 2020 Rs. 31.70/- million.
The company’s Restated Return on Net worth for financial year ended on March 31, 2020 is 2.51%. Restated Net Asset Value (“NAVâ€) per Equity Share as on March 31, 2020 is Rs. 41.84/-, as per Kotak Securities.
The company’s leading brands in the market for certain products such as free standing hobs, cooktops, non-stick cookware, LPG, gas stoves and induction cooktops.
Use of IPO funds
IPO factbox
Company
Stove Kraft Ltd
Open date
Jan. 25
Close date
Jan. 28
Probable allotment date
Feb. 2
Approx. listing date
Feb. 4
Face value
Rs 10 per share
IPO band
Rs 384 to 385
Minimum order
38 shares
The Sequoia Capital-backed firm (Stove Kraft) proposes to utilise the net proceeds from the fresh issue towards repayment or pre-payment of certain borrowings availed by the firm and for other general corporate purposes.
Industry outlook
The Indian consumer appliances market is expected to grow at a CAGR of ~9% during FY17-22. This growth will be driven by incremental spending on consumer durable goods by Indian households bolstered by Government policies and initiatives.
Policies favourable for the consumer appliances industry include lower tax brackets (5%, 12% and 18%) for Indian kitchen items vs excise + VAT taxed at ~31% and the target to provide 5 Crore LPG connections to under privileged womenthrough the Pradhan Mantri Ujjwala Yojana, as per Ventura Securities.
Positives
Stove Kraft has three main positives.
1. It offers investors a one stop shop for well recognized, award winning portfolio of kitchen solutions brands with a diverse range of products across consumer preferences.
2. The company enjoys a widespread, well connected distribution network with a presence across multiple retail channels and a dedicated after-sales network. Stove Kraft has partnered with e-commerce platforms like Flipkart. It also exports its products in the U.S. and Mexico.
3. Stove Kraft IPO gives an opportunity for you to take advantage of manufacturing capability with efficient backward integration.
Negatives
There are some investment concerns for Stove Kraft IPO.
Firstly, the trademark for their marquee brand ‘Pigeon’ is the subject matter of litigation.
Secondly, the company sources their raw materials from third parties with whom they do not have long term contract.
Thirdly, Stove Kraft relies heavily on their brand portfolio.
Also, there are various proceedings involving the Company, their Promoters and their Director.
IPO Valuation
Stove Kraft IPO has priced its issue at 34.5 times PE (price to earnings) on a trailing basis. Its much larger peers TTK Prestige and Hawkins Cookers are currently trading at 61.0 times and 47.5 times respectively, as per Angel Broking.
Do note the company’s brand value, margins and return on capital are lower than its peers.
Indigo Paints Ltd will open its initial public offer (IPO) for subscription on January 20 with a price band of Rs 1,488-1,490 per share. The company is targeting to raise Rs 1,170 crore for the IPO. The Indigo IPO opens on 20th January 2021 and closes on 22nd January 2021. Here are 10 things you must know about this upcoming IPO.
1. The beginning
From a humble start in 1999-2000, when it set up a cement paint manufacturing unit in Jodhpur, Indigo has become the fifth largest decorative paint manufacturer in India.
The company today has three manufacturing facilities – in Jodhpur, Kochi and Pudukkottai, strategically located in close proximity to the company’s raw material sources.
As of FY20, the company had a distribution network of 36 depots and 11,230 active dealers and a tinting machine population of 4,296 across India. Indigo is currently present in 27 states and 7 union territories as of date.
2. Fresh issue plus offer for sale
The public issue of Indigo Paints consists a fresh issue of Rs 300 crore and an offer for sale of 58,40,000 equity shares by investors Sequoia Capital India Investments IV and SCI Investments V, and the promoters Hemant Jalan. The offer for sale portion can fetch Rs 870 crore at the upper price band of Rs 1,490 per share.
The offer includes a reservation of up to 70,000 equity shares for subscription by eligible employees of the company. Eligible employees will get these shares at a discount of Rs 148 per share to the offer price.
3. How Indigo is different
Compared to the top 4 players, around 28% of the company’s revenue comes from highly differentiated products, which have high gross margins. Such differentiated products take about 4-5 years to gain traction and the company believes that by the time larger players try to enter these categories, Indigo is already the leader in them.
Indigo has entered one state every year since inception. It follows a bottom-up approach for entering a new geography i.e., first it enters tier 3/4 towns & rural areas and then penetrates into larger cities. Around 85 per cent of the company’s sales come from areas with population less than 300,000-400,000, whereas for the large players, about 50-55% sales come from small towns & rural areas.
In terms of dealer base and tinting machines, the company intends to grow at a faster pace in the coming years. At a dealer base of 11,230, Indigo is inching closer to the No. 4 player but has a long way to go compared to the market leader’s base of +70,000. About 40 per cent of Indigo’s dealers have its tinting machines. This ratio stands at 90 per cent for Asian Paints and 65-70 per cent for Berger Paints.
4. Better margins
Given that Indigo generates nearly 28% of its revenue from high gross margin differentiated products where no discounts are offered, the company’s overall gross margin tends to be higher compared to its peers.
Further, since the company’s plants are located in close proximity to raw material sources, inward freight costs are lower, thereby aiding higher gross margins.
In terms of A&SP spends, all the large paint companies have been advertising for emulsions, but Indigo has been focusing on advertising its differentiated products over the past 4-5 years. In absolute terms, core media spends of Indigo was as high as that of Berger Paints and Kansai Nerolac.
The company claims low attrition rate as it prefers to recruit freshers even for the mid-level management (which has fair amount of responsibility, thereby driving employee performance) and eventually incentivizing them with variable compensation and ESOPs.
5. Fresh issue of shares worth Rs 300 cr use
The proceeds of the fresh issue are proposed to be utilized for financing the project cost towards expansion of the Pudukkottai (Tamil Nadu) plant (likely to commence in August 2022), purchase of tinting machines & gyro shakers and repayment/prepayment of certain borrowings.
6. Finances
Post the IPO, Indigo would be a debt free company.
Sequoia Capital, which invested in FY15, intends to remain invested for another 5-6 years.
Indigo’s average working capital cycle of 23 days is the lowest in the business.
From P&L perspective, Indigo Paints reported net sales of Rs 625 crore in FY20. First half or FY21 net sales is Rs 260 crore, due to Covid impact.
FY20 adjusted profit after tax is Rs 48 crore, a growth ofof 50 per cent. Profit margin in last few years has been between 4-10 per cent.
As per the management, the company has a significantly high level of corporate governance on account of Sequoia being a marquee investor and E&Y being the company’s auditor for the last 6 years.
7. Strategy
Since the conventional method of a top-down approach would have been counter-productive, the company took up a bottom-up approach while entering new markets.
While large paint players have 12-15 sub-brands, Indigo has followed the one-brand strategy (similar to AMUL).
The company has no intention of manufacturing raw material for captive consumption.
Management finds it logistically feasible for manufacturing activities to remain in its current locations for the next 5-6 years.
All large players use Bollywood personalities as their brand ambassadors while Indigo chose M.S. Dhoni.
8. Valuation, mcap
Indigo Paints is targeting a market cap of Rs 7,100 crore at the issue price. This implies a P/E multiple of 66 times FY22 and 44 times FY23 earnings assuming an earnings CAGR of 50 per cent over FY20-23.
In comparison, Asian Paints and Berger currently trade at 62 times and 73 times FY23 earnings, respectively..
9. Tough industry, weaknesses
Indigo Paints is the 5th largest player but it has 2.5 per cent market share only
Although there are fewer competitors, the competition is very stiff since the competing companies are bigger and have larger operational budgets. Hence, a small lapse of judgment can be costly.
Also, Indigo Paints spends a large portion of its revenue on marketing. In 2020, the company spent around 12.7 per cent of its revenue on marketing alone. This can put a strain on its finances in the long-run and seems unsustainable.
The trick for the company would be to continuously execute it’s strategy without flaws.
10. Kerala dependence
Indigo Paints derives a significant portion of sales from the state of Kerala. This puts a lot of emphasis on its business in the state and exposes it to risks.
Just to give you an idea, Kerala is the largest revenue generating state for the company where it ranks third (Asian Paints is the leader, followed by Berger). Around 7-8 states compete for the second and third spot for the Indigo Paints (including states like West Bengal, Bihar, Maharashtra, Uttar Pradesh, etc)
Listing details
IPO Open Date: Jan 20, 2021IPO Close Date: Jan 22, 2021Allotment Date: Jan 28, 2021IPO Listing Date: Feb 2, 2021
Face Value
₹10 per equity share
IPO Price
₹1488 to ₹1490 per equity share
Market Lot
10 Shares
Min Order Quantity
10 Shares
Listing At
BSE, NSE
Company Promoters:
Hemant Jalan, Anita Jalan, Parag Jalan, Kamala Prasad Jalan, Tara Devi Jalan and Halogen Chemicals Private Limited.
The Rs 4600-crore initial public offer (IPO) of public sector NBFC Indian Railway Finance Corporation (IRFC) is hitting the markets next week. IRFC IPO will be the first by a non-banking financial company (NBFC) in PSU segment. Here is all you wanted to know about this awaited share-sale.
What is IRFC
Indian Railway Finance Corporation has its registered office in New Delhi. The company has 26 permanent employees. IRFC is the dedicated market borrowing arm of the Indian Railways. It is wholly-owned by the Government and registered with the RBI as an NBFC.
Its primary business is financing the acquisition of Rolling Stock Assets and Project Assets of the Indian Railways and lending to other entities under the Ministry of Railways.
For fiscal 2021, the target to be borrowed from IRFC is Rs 625.67 billion. For FY20, IRFC posted a profit of Rs 3,192 crore and earnings per share was Rs 3.40. The company has generated strong revenue growth in last four years.
When does the IPO open
The IPO will open on January 18 and close on January 20.
What is the price band
The price band for the IPO will be Rs 25-26 per share.
What are IPO details
The issue size is for up to 178.20 crore shares, out of which 118.8 crore shares is the fresh issue, and 59.40 crore shares is under offer for sale. The offer for sale proceeds will go the Government of India. The net proceeds of the fresh issue are proposed to be utilised towards augmenting IRFC equity capital base to meet future capital requirements arising out of growth in business, and general corporate purposes. The face value of each share is Rs 10.
As per a tweet by Secretary, Department of Investment and Public Asset Management, “IRFC coming up for listing with a Rs 4600 crore+ issue in a price band of Rs 25-26 per share. Anchor book on Jan 15 and the Main book from Jan 18-20.”
Pre-IPO, the Government of India controlled 100% of the company. Upon completion of the issue, the GoI will control approximately 86.36% of IRFC paid-up equity share capital.
What is the minimum IPO investment
The lot size is 575 shares. So, at the upper band of Rs 26 per share, the minimum IPO investment for IRFC will be Rs 14,950.
What is the IPO listing date
IPO shares will be listed on bourses on Jan. 28-29 (tentative).
How does IRFC earn money
The vast majority of IRFC revenue is generated from leasing Rolling Stock Assets to the Indian Railways. Lease income, interest on loans and pre commencement lease interest income together represented 99.75% and 99.87% of IRFC total revenue from operations in Fiscal 2020 and in the six months ended September 30, 2020, respectively.
The business and revenues are substantially dependent on the policies of the MoR (Railways Ministry) and operations of the Indian Railways. Therefore, the overall prospects of IRFC business are closely tied to the relationship with the MoR.
It operates on a cost-plus based model. In Fiscal 2020, IRFC was entitled to a margin of 40 bps over the weighted average cost of incremental borrowing for financing Rolling Stock Assets. In Fiscal 2018, the margin for financing Rolling Stock Assets was reduced to 30 bps from 50 bps in Fiscal 2017.
How does IRFC raise money
IRFC funding requirements historically have been met through various sources including from taxable and tax-free bonds in India, term loans from banks/ financial institutions, external commercial borrowings including bonds and syndicated loans, internal accruals, asset securitization and lease financing. Its Cost of Borrowings was 6.82%, 7.09% and 7.27% in Fiscals 2018, 2019 and 2020, respectively, and 3.55% (non-annualized) in the six months ended September 30, 2020.
Do note IRFC is a non-deposit taking NBFC, and so has restricted access to funds in comparison to banks and deposit taking NBFCs. IRFC has in the past raised money from LIC.
What are the company’s debt ratings
IRFC has been accorded ratings of ‘AAA’ by CRISIL, ‘ICRA (AAA)’ by ICRA and ‘CARE AAA’ by CARE each with respect to its debt programme.
International credit rating agencies such as Moody’s have rated IRFC Baa3 (Negative) while Fitch, Standard & Poor’s and Japan Credit Rating Agency have rated BBB-‘Negative’, BBB- (Stable) and BBB+ (Stable).
What is the valuation of IRFC shares sold in IPO
NBFCs are usually valued based on Return on average Net Worth (RoNW). The six months ended September 2020 RoNW % is 6.09, which if annualized becomes 12.18%. The RoNW for FY20 was 11.57%.
There are no listed peers to IRFC business at the moment.
From Net Asset Value perspective, IRFC NAV is Rs 26.67 per share as on Sept. 30, 2020. So, IPO stock price is at a small discount to NAV.
Who are BRLMs to this IPO
The book running lead managers to the issue are DAM Capital Advisors Limited (formerly known as IDFC Securities Limited), HSBC Securities and Capital Markets (India) Private Limited, ICICI Securities Limited and SBI Capital Markets Limited.
Founded in January 2001, Antony Waste Handling Cell (AWHC) is one of the top five players in the Indian municipal solid waste (MSW) management industry with an established track record of more than 19 years. The company is tapping the primary market to raise Rs 300 crore via an Initial Public Offer (IPO). The issue is closing today (Dec. 23). The IPO shares are being offered in a price band of Rs 313 to 315. So far i.e. close of Dec. 22 business hours, the IPO has been subscribed 1.77 times, as per NSE data. Read on to know more about the IPO.
IPO details
The IPO issue size is Rs 300 crore for about 95.22 lakh shares. Out of this, the company will get Rs 85 crore (a fresh share issue of 26.98 lakh). The rest will go to an investment fund that is directly selling 68.24 lakh shares.
The market lot for Antony Waste Handling Cell IPO application is 47 shares. This means your minimum investment has to be about Rs 14,800. Each share has a face value of Rs 5.
Post-IPO, AWHC’s promoters, including Jose Jacob and Shiju Jacob, will hold a 46.2% stake. The general public will hold 53.8%.
Listing is likely in the first week of January 2021 in BSE & NSE.
The IPO book running lead manager is Equirus Capital Private Limited, IIFL Securities Limited.
Registrar to issue is Link Intime India Private Limited.
IPO proceeds purpose
The company will use the Rs 85 crore (pre-expenses) to part-finance Pthe impri-Chinchwad Municipal Corporation (PCMC) waste-to-energy project (WTE) through investment in the subsidiaries of the company, AG Enviro and/or ALESPL.
Also, the company will use money to reduce consolidated borrowings by infusing debt in the subsidiary – AG Enviro (for repayment / prepayment of portion of their outstanding indebtedness).
Do remember Antony Waste Handling Cell had tried to do an IPO in March 2020 but the market response was bad amid Covid-19 fears.
Company business
Antony Waste Handling Cell earns two-third revenue from collecting urban municipal waste. The rest comes from sweeping and processing works.
The company primarily undertakes specialised MSW collection & transportation (C&T) projects, MSW processing projects and mechanised sweeping projects for municipalities and private players. It has undertaken more than 25 projects as of November 15, 2020, of which 18 are ongoing. Of the 18 ongoing projects, 17 have been awarded by municipal corporations.
Potential
With increasing energy demand and government initiatives, the waste to energy (WTE) market is anticipated to see more public private partnership (PPP) based projects, says ICICIdirect. AWHC believes that with assured raw material and a power offtake agreement, the business offers limited risks and will help in improving predictability of its cash flows. The company, through its stepdown subsidiary ALREPL, has been awarded a contract for setting up and operating a WTE plant having a capacity of up to 1,000 TPD by Pimpri Chinchwad Municipal Corporation (PCMC).
The Municipal waste management industry in India is pegged at Rs 5,000 crore and is expected to grow at a CAGR of 14.4% till FY25 reaching Rs 9800 crore.
Competitors
Antony Waste Handling Cell competes with various players like Ramky Enviro Engineers, Metro Waste Handling, BVG, A2Z, SPML Infra, Terra Firma etc.
Positives and negatives
According to Angel Broking, the positives are (a) Presence in the fast-growing MSW management industry with end-to-end capabilities, (b) Strong track record of project execution, (c) Long term contracts with municipalities, and (d) Experienced promoters and management team with strong domain expertise
Key risk & concerns are: 1. High dependence on municipal corporations (involves receivables risk) 2. Working capital intensive business (large numbers of workers, deployment of heavy transport vehicles etc.) 3. High customer concentration (top 5 clients contributed 81.8% of the revenue of the FY2020)
Financials
In FY20, the company made net sales of Rs 450 crore and a net profit of Rs 62.1 crore. There was a substantial jump in topline as well as bottom-line compared to FY19 numbers. AWHC reported revenue, EBIDTA & PAT growth CAGR of 27.7%, 34.2% & 27.9%, respectively, in FY18-20. The company has maintained healthy return ratios that were upwards of 20%+ in the last three years. One can expect future growth to be lumpy in some sense. The company at the end of first half of FY21 had over Rs 160 crore in terms of total loans.
Valuation
If you buy the IPO stock at an upper price band of Rs 315/share, you will be paying Rs 12 for every rupee profit made by the company in FY20 (reported earnings per share is Rs 27.48). We believe AWHC’s pricing has left some scope for upside in the long term and recommend subscribing to the issue, says Nirmal Bang.
The buoyant Indian IPO market is reaching frenzy levels. Burger King India’s stock closed 130% over its issue price on Monday, and from Tuesday onwards one of its suppliers, Mrs Bectors Food Specialty is tapping the market to raise Rs 540.5 crore in what promises to be another exciting investment opportunity. A play on consumption, Mrs Bectors Food is in the business of manufacturing and marketing a range of biscuits (including cookies, creams, crackers, digestives, and glucose) and bakery products in savory and sweet categories (including breads, buns, pizza bases & cakes) to its retail & institutional clients. All eyes are on this IPO. Read on to know more.Â
Mrs Bectors Food Specialty IPO facts
The initial public offer of Mrs Bectors Food Specialty opens on 15th December and closes on 17th December. The total issue size is Rs 540.5 crore, comprising fresh Issue of Rs 40.5 crore and offer for sale of Rs 500 crore. The company will receive gross Rs 40.5 crore only.
There are a total 1.87 crore shares on offer. The IPO price band is Rs 286-288 per share. The minimum lot size is 50 and so the minimum investment based on the upper price band is Rs 14,400.
What is the business
Mrs Bectors Food Specialty (MBFS) is one of the leading companies in the premium, mid-premium biscuits segment and the premium bakery segment in North India. The company manufactures and markets a range of biscuits like cookies, creams, crackers, digestives and glucose under the flagship brand ‘Mrs Bector’s Cremica’. Bakery products are made in savoury & sweet categories and cakes are sold under the brand ‘English Oven’. The company is promoted by Anoop Bector (one of the sons of the iconic Mrs Rajni Bector). Promoter group will hold 51.1% stake post-IPO.
Who does it supply to?
Yes, the company is the largest supplier of buns in India to reputed QSR chains like Burger King India, Connaught Plaza Restaurants (McDonald’s), Hardcastle Restaurants and Yum! Restaurants (Pizza Hut). Do note the supplier company does not have any long term supply agreements with any of the QSR customers.
However, Mrs. Bectors is the sole supplier of burger buns and pan muffins (frozen) to Connaught Plaza Restaurants Pvt. Ltd. (associated since 1995) and it is a preferred supplier to leading players such as Hardcastle Restaurants, Yum! Restaurants, Rebel Foods and PVR. Â
What is unique about the business?
Apart from the company’s brands, there is something different. Do note that leading branded biscuit industry players like Britannia and Parle use a combination of in-house manufacturing and outsourced models to fulfil their demand. Mrs Bectors operates with 100% in-house manufacturing for its product to command higher margins. In-house manufacturing provides better visibility and control on quality assurance and food safety standards and faster product development cycles.
The Indian biscuits & bakery retail market is valued at Rs 45,000 crore and is expected to grow at ~9% CAGR in the next five years. Biscuits & other snacking bakery products like rusks, wafers and tea cakes contribute almost Rs 40,000 crore to the total market. The balance 11% is contributed by breads including loaves, buns, pizza bases that together account for Rs 5,000 crore.
Mrs Bectors’ rivals are Parle, Britannia, ITC, Anmol, Surya and Bonn.
What about operations?
Mrs Bectors Food Specialty’s operations are divided into:
Biscuits – domestic (37% of FY20 revenue)
Biscuits – exports (22% of FY20 revenue)
Branded breads & bakery products (17% of FY20 revenue)
Institutional Bakery (17% of FY20 revenue)
Others – Contract Manufacturing (6% of FY20 revenue). It manufactures ‘Oreo’ biscuits and ‘Chocobakes’ cookies for Mondelez India Foods Pvt. Ltd.Â
What kind of growth has happened
Mrs Bectors Food supplies its products to retail consumers in 26 states in India, besides institutional customers pan-India and to 64 countries across six continents.
The Domestic Biscuit business has grown at a CAGR of 7.5% over FY18-FY20 despite capacity constraints in FY18 and a part of FY19. The company has a strong presence in North India (4.5% of the premium and mid-premium biscuits market in North India in FY20).
It is present at 458k retail outlets across India, which are serviced through an in-house sales team of 250+ personnel. It is also one of the largest suppliers of biscuits to the CSDs, supplying in 33 locations across India.
As per Technopak, MBFS’s market share in the Indian biscuit export market is nearly 12%. Collection period for export business ranges between 50 days and 60 days.
The Branded Breads business has grown at a CAGR of 29% over FY18-20 with realization improving from Rs 18.50/pack in FY18 to Rs 22.10/pack in 1HFY21. It is the largest selling brand in Delhi NCR, Mumbai and Bengaluru.
Within the Institutional business, the company has the capacity to produce nearly 1.2 million burger buns/day. It has also started producing value-added products, including garlic breads, calzones etc. Despite a 61% YoY decline in 1HFY21 (sales to QSRs were affected due to Covid-19), the management is very confident about its institutional business given the fact that the QSR market is likely to grow by 22.7% over FY20-FY25.
What about the company’s financial results?
In FY18, Mrs Bectors Food clocked net revenue of Rs 690 crore and in FY20 the number was Rs 762 crore. In the first half of FY21, the 6-month topline was Rs 431 crore, which indicates an annualized figure of Rs 862 crore for entire FY21.
EBITDA margins have improved from 12.4% in FY18 to 16.7% in first half of FY21. Due to focus on high margin/premium products, overall gross margins have increased from 44% in FY18 to 47% in FY20. If not for lost sales in the domestic business, exports business and provision made for exports receivables, the operating margin in FY20 would have been higher than the reported 12%.
Profit after tax of the company has grown from Rs 36 crore in FY18, Rs 39 crore in first half of FY21.
Yes, a quick look at the company’s P&L and revenues shows unsteady growth.
The company’s long-term and short-term borrowings total Rs 101 crore (end of first half of FY21). Cash and bank balances were Rs 47 crore.
Dividend payout ratio has ranged about 15-18% in the last 3 years. Return ratios have fallen over FY18-FY20 due to capex investments.
What will the company do with IPO proceeds?
The company will be able to use IPO funds of Rs 40.5 crore (before expenses). In 2020, the company has proposed expansion of the Rajpura manufacturing facility (utilizing the proceeds of the IPO), which is likely to get commercialized by the end of 2022 and will add 14,000 tons of additional capacity for biscuits.
Do note the company has already invested Rs 260 crore between FY18 and Sept’2020 to build capacities with superior capabilities.
Does the IPO price offer value?
Mrs Bectors Food stock is valued at 55.5 times FY20 price to earnings & 2.3 times FY20 EV/sales. On a price to earnings metrics, Nestle trades at 86 times FY20 earnings, Britannia trades at 62 times its FY20 earnings and DFM Foods trades at 74 times its FY20 earnings. P/E figures for the peers are computed based on closing market price as on November 27, 2020.
So, on the P/E basis, Mrs Bectors Food IPO is priced lower than its peers.
Investors considering the IPO have to weigh the positives such as a leading brand of biscuits & bakery products in North India, a leading exporter of biscuits, a strong distribution network with the negatives such as concern that export benefits may end, that there may be an inability to expand manufacturing, that QSR contracts may get terminated and plausible supply/transportation disruptions.
Burger King India’s initial public offering (IPO) will open for bidding on December 2. The quick service restaurant chain’s IPO is reserved up to 10 per cent for retail investors, up to 15 per cent for non-institutional investors and up to 75 per cent for qualified institutional investors. Here are 8 commonly asked questions and answers about this lip-smacking IPO. Read on.
What is Burger King India
Burger King India (BKI) is a fast growing international QSR chain in India. It started its operations in 2014 and within five years established 261 restaurants across major cities. The company has exclusive rights to develop, establish, operate and franchise Burger King branded restaurants in India as a master franchisee. The master franchisee arrangement has been entered till December 2039. BKI would be paying 5% fixed royalty for the use of the brands, technical, marketing & operational expertise. The average size of a Burger King Store is 1300-1400 sq ft that is almost half of an average McDonald’s store (2600-3200 sq ft).
How many shares are being sold in the IPO and what price
The IPO price band is Rs 59-60 per share. The face value of each share is Rs 10. The issue proceeds of the initial public offer of 7.5 crore equity shares aggregates up to Rs 450 crore and an offer for sale of up to Rs 360 crore for 6 crore shares by QSR Asia Pte. Ltd. In total, Rs 810 crore via 13.5 crore shares at upper price band of Rs 60. Minimum IPO application will be for 250 shares.
The IPO opens on 2nd Dec’ 20 and closes on 4th Dec’ 20. IPO share listing is expected on 14th Dec’ 20.
What growth has the company shown
When Burger King entered the Indian market, it observed that Indian consumers like their burgers crispy, crunchy and juicy (in case of non-vegetarian offerings). Burger King started with a vegetarian product and priced it a little higher than the competitor. As per the management, Burger King has built the most extensive vegetarian burger portfolio, where 8 out of 18 burgers are vegetarian. Whopper is Burger King’s flagship product. The company launched its gourmet collection during Diwali. It has also launched an all-day breakfast menu and rice bowls. Since beverages are a part of every combo, it forms a decent chunk of the portfolio.
How has the company performed financially
Burger King India grew at a faster pace in the last five years by mainly leveraging the disruption at McDonalds franchise in North India. Financially, net sales of Burger King India have grown from Rs 230 crore in FY17 to Rs 841 crore in FY20. In 1st half of FY21, net sales was Rs 135 crore due to Covid, lockdown etc. At an adjusted profit after tax level, Burger King India has not delivered profit in any year. EBITDA margin in the last 2-3 years has been around 12-13%.
Currently, Burger King India has Rs 200 crore as gross debt. After pre-IPO placement, net debt stood at Rs 60 crore. Post IPO, Burger King India will become a zero-debt company. QSR businesses generate high operating cash flows. Further, given the nature of the QSR industry, the company has a negative working capital level of 23-24 days and intends to maintain it at that level.
What is the future plan of the company
The company has a well defined restaurant rollout plan to open 700 restaurants across geographies by 2026. The proceeds from the IPO would be sufficient to open 190 new stores until 2023. Typically, Burger King India launches the brand from flagship locations in high traffic and high visibility locations in key metropolitan areas and cities across India and then develops new restaurants within that cluster.
For any QSR business, value offerings have the largest contribution. The management believes that BKI has not come close to penetrating even its existing markets and thus there is scope to grow further in existing markets. The industry has seen a massive ramp-up of delivery since 2018. Burger King India believes that companies that have invested in technology are the ones that have realised the benefits in markets like India.
Who are Burger King’s rivals in India
Domino’s Pizza has achieved the largest market share of the chain QSR sub-segment by number of outlets, followed by Subway, McDonald’s, KFC and then comes Burger King. In terms of sales, Domino’s Pizza has the largest market share, followed by McDonald’s, KFC, Subway and then comes Burger King. Do remember companies with the higher proportion of deliveries and takeaways would take advantage of expansion of food delivery companies Apps like Zomato, Swiggy.
Other international QSR chains have been introducing food products that cater to India specific palates while maintaining their core offerings. Though Burger King India is directly competing with McDonalds considering similar food offerings, competition in burgers can come from other established QSRs as well in future.
How has the company responded to Covid challenge
As a response to the Covid-related lockdown, the management made sure that the company had sufficient liquidity besides also undertaking some cost-saving initiatives (re-negotiating rentals and reducing rental costs, reduction in staff salary wherein the CEO has taken the highest cut, re-negotiating with supply chain vendors).
Burger King India has also made additions to its menu, relaunched its app, worked on its value proposition and packaging. The company has seen footfalls gradually increase month-on-month (even week-on-week improvement witnessed in the recent months). Delivery has significantly recovered to pre-Covid levels.
What does the IPO price indicate about valuation
Burger King India shares are priced at EV/S (Enterprise Value by Sales) of 2.9 times FY20 (post issue) at the IPO upper price of Rs 60.
This is in comparison to 8.4 times for Jubilant Foodworks (master franchise for Domino’s Pizza in India, Nepal, Sri Lanka and Bangladesh, and also for Dunkin’ Donuts in India), and 4.4 times for Westlife Development (master franchise for McDonald’s in western India and South India).
