POs of CAMS, Chemcon Speciality Chemicals Ltd, and Angel Broking opening for subscription. Collectively the three issues look to raise Rs 3,160 crore.
Gland Pharma's manufacturing facilities have established a consistent record of regulatory compliance with the USFDA
The initial public offering (IPO) market is in for an exciting week with three fresh issues opening for subscription and one listing as well. Last week markets saw the bumper listing of Happiest Minds Technologies which surged 111%, over the upper end of the price band, to make its market debut. Now, this week, investors will witness Route Mobile’s share getting listed along with IPOs of CAMS, Chemcon Speciality Chemicals Ltd, and Angel Broking opening for subscription. Collectively the three IPOs opening look to raise Rs 3,160 crore.
CAMS IPO opens for subscription today. The issue is made up of an offer for sale (OFS) of 1.82 crore shares by NSE Investments and will not see a fresh issue. Hence, none of the capital raised through the issuance will go towards the company. While NSE Investment is selling all of its 37.48% stake in the company through the issue to raise Rs 2,244 crore, Great Terrain, the promoter will also trim its stake to 31% from the pre-issue 43.5% but this will not be a part of the IPO. At the offer price of Rs 1,229-1,230 per share investors can bid for equity shares in a bid lot of 12 equity shares.
The issue has 90 lakh shares being reserved for Qualified Institutional Buyers (QIB), 27 lakh shares offered to Non-Institutional Investors (NII), and Retail portion consisting of 63 lakh shares. Employee portion has 1.82 lakh shares reserved. CAMS, a Chennai based Mutual Fund Transfer Agency has a market share of 70%. It caters to four of the five largest MFs in India as well as nine of the 15 largest MFs based on AAUM as of July 2020.
Brokerage and research firm Motilal Oswal said that over FY 2017-2020, CAMS’ Revenue/EBITDA/PAT grew at a CAGR of 14%/13%/12%. “The balance sheet is lean with zero debt and negative working capital, thus resulting in healthy return ratios.” it said. IIFL Securities said that CAMS is a play on India mutual fund industry. The mutual fund industry still has a large market to tap into. India’s AUM-to-GDP ratio is at 12% for while the average across the globe is 63%.
Should you subscribe?
IIFL Securities values CAMS at 35x FY20 EPS, at a 10-15% discount to listed AMCs, Exchanges and Depositories based on its upper price band and has a subscribe rating. Motilal Oswal likes the company for its leadership position, integrated business model, pan India presence and robust financials as it recommends subscribing with a long-term view. Geojit Financial Services too recommends subscribing the issue and so does Yes Securities.
Chemcon Speciality Chemicals Rs 318 crore issue also opens for subscription along with CAMS today. Chemcon’s IPO consists of an OFS of Rs 153 crore and a fresh issue of Rs 165 crore. The price band for the issue has been fixed at Rs 338-340 per share and investors can bid in a bid lot of 44 shares. A manufacturer of pharmaceutical chemicals, the company plans to use the proceeds of the issue to fund the capacity expansion and the rest for working capital requirements and general corporate purposes. Post issue the promoter share will be 74.47%.
The company is entering the market at a time when pharmaceuticals have had a decent rule and speciality chemical manufacturers are looking up. Along with pharma chemicals, Chemcon is also a leading manufacturer of Oil Well completion chemicals in India. 50% of the offer is reserved for QIBs while NIIs get 15% and 35% of the issue is reserved for retail investors. “Revenue and PAT CAGR from FY18-FY20 is 29% and 36% respectively. On FY20 PE basis it is demanding a valuation of 22.2x. Company ROE is quite strong, it is 49.2%, 44.9% and 34.2%, for FY18, FY19 and F20 respectively,” said Keshav Lahoti – Associate Equity Analyst, Angel Broking.
Chemcon derives revenue primarily from sale of products and job work services. In the previous fiscal over 93% of the revenue came from sale of products of which domestic pharma chemical sales make up a large chunk. In the post pandemic world, analysts do expect Indian speciality chemical companies to tap into more share of the global supply chain.
Should you subscribe?
“Considering healthy business performance, regular capacity expansions, strong customer base, expanding margin profile and improving outlook for the sector, we have a ‘SUBSCRIBE’ rating on this IPO,” said Geojit Financial Services. According to brokerage firm Choice Broking, at the higher price band of Rs 340 per share, Chemcon’s share is valued at a P/E multiple of 25.5x, which is at a discount to the peer average of 40x. However, it noted that it is cautious owing to the promoter group’s corporate governance issue. The brokerage firm highlighted that one of Chemcon’s promoter group members is convicted for a criminal case by the CBI Special court and also that RBI has initiated proceedings against one of the promoter group entities for failing to carry out its operations from the registered office.
The brokerage firm will see its IPO open for subscription on Tuesday as it looks to raise Rs 600 crore from the issue. The IPO will include a fresh issue of Rs 300 crore, and an offer for sale (OFS) of Rs 300 crore from existing investors of the firm. The Rs 300 crore OFS will include sale of equity shares worth Rs 120 crore from International Finance Corporation (IFC). Pre issue the promoter & promoter group holds 55.20% stake in the company, this will come down to 47.67% post issue.
50% of the equity shares on offer will be offered to Qualified Institutional Buyers (QIB), while Non-institutional investors will get 15% of the issue and Retail investors will have 35% of the issue available for subscription. The bid lot for retail investors will be of 49 equity shares and in multiples thereafter. The technology-driven brokerage is one of the largest retail broking businesses in the country with a significant market share in the cash and commodity segment. Over the past two fiscal years, Angel Broking has managed to generate over Rs 500 crore in revenue from the broking business.
Being among the five of the largest broking houses in the country, Angel Broking is also well placed to tap into the new customers. The company has been gaining share in tier-2 and tier-3 cities. The company has an average daily turnover of Rs 61,900 crore in the first quarter of the fiscal year.