Prudent Corporate Advisory Services’ three-day initial public offering (IPO) opens on Tuesday (10 May) and will conclude on Thursday (12 May). The company has set a price band of Rs 595-630 per share for the Rs 538.6 crore IPO. The retail wealth management firm raised a little over Rs 159 crore from anchor investors ahead of the initial share sale. The issue is entirely an offer for sale (OFS) by existing investors of the company. Prudent Corporate offers mutual fund products, insurance products, stock broking services, fixed income products, gold accumulation plan and so on.
Prudent Corporate Advisory Services IPO details
Price band – Rs 595-630
IPO open date – May 10
IPO close date – May 12
Allotment date – May 18
IPO listing date – May 23
No of shares pre issue – 41406680 equity shares
Offer For Sale (OFS) – 8,549,340 equity shares
Lot Size – 23 shares
Employee discount – Rs 59 per share
QIBs (Including Anchor) portion – 50% of the offer
Non-Institutional portion– 15% of the offer
Retail – 35% of the offer
Prudent Corporate IPO grey market premium (GMP)
Prudent Corporate shares have been commanding a grey market premium (GMP) of Rs 30, according to IPO Watch. The IPO shares are trading at Rs 660 apiece in the grey market.
Should you subscribe to Prudent Corporate IPO?
Hem Securities: Subscribe for long-term
“Company is bringing the issue at price band of Rs 595-630 per share at p/e multiple of 45x on 9Months FY22 eps basis. Company being operative in an underpenetrated Indian asset management industry, that has grown at a CAGR of more than 20%, has a pan-India diversified distribution network with ability to expand into underpenetrated B-30 markets. Company has demonstrated a consistent track record of profitable growth due to a highly scalable, asset-light and cash generative business model. Hence we recommend “Subscribe” on issue for long term.”
Marwadi Financial Services: Avoid
Prudent Corporate Advisory Services provides wealth management services to 13,51,274 unique retail investors through 23,262 MFDs on business-to-business-to-consumer (B2B2C) platform and are spread across branches in 110 locations in 20 states in India, as on December 31, 2021. “Considering the FY21 / FY22 (Annualised) EPS of Rs.10.94/Rs.18.56 on a post issue basis, the company is going to list at a P/E of 57.59x/33.95x with a market cap of Rs 26,086 mn whereas its peers namely IIFL Wealth Management and ICICI Securities are trading at PE of 27.3x and 12.6x. We assign “Avoid” rating to this IPO as the company is available at expensive valuation as compared to its peers. We believe valuations are not in favor of the investors.”
Angel One: Neutral
Prudent Advisory has grown its AUM at a CAGR of 32.8% between March 2018 and December 2021. Moreover, the company has grown its revenues and profits at a CAGR of 13.6% and 46.8% between FY19 and FY21 despite the adverse impact of Covid-19. For 9MFY22, Prudent has reported revenues of Rs 321.2 crore while net profits at Rs 57.6 crore has already surpassed FY21PAT of Rs 45.3 crore.
“At the higher end of the price band Prudent will be trading at P/E multiple of 34.0x its annualized EPS for 9MFY2022 as compared to Anand Rathi which is trading at 20.5xFY2022 earnings. We believe that prudent has a very strong retail focused business model which provides them with a distinct competitive advantage and will be difficult to replicate. However, valuations are on the higher side as compared to peers which will limit gains in the near term and hence we have a NEUTRAL recommendation on the IPO.”
Anand Rathi Share and Stock Brokers: Subscribe for long term
“At the upper end of the IPO price band, Prudent Corporate Advisory Services Ltd. is offered at P/E of 33.9x its FY22 annualised earnings, with a market capitalization of Rs 26,086 million. The company has a scalable and asset-light model in a high growth underpenetrated Indian asset management industry with diversified distribution network. The company reported RoNW of 28.73% in FY21. However, the IPO is richly priced and the company will have to continue growing its business at a high growth rate, in order to justify the valuations – hence we give the IPO a “Subscribe (Long Term)” rating.”
Choice Broking: Subscribe with Caution
According to Choice Broking, since 85% of the business comes from MF distribution, “the business is highly cyclical to equity market behaviour.” The competitive intensity in financial product distribution has become more intense with the entry of fintech players. “The company might face challenges in maintaining its margins at ~25% going forward. The demanding valuation at Rs 2,608 crore is expensive, leaving no margin of safety for investors,” it said. Considering these parameters, it assigned a ‘subscribe with caution’ rating to the issue.
Note that upon successful listing, Prudent Corporate Advisory will join listed peers such as IIFL Wealth Management, ICICI Securities, CDSL, Computer Age Management Services, HDFC AMC, Nippon Life Indian Asset management, and UTI Asset Management. ICICI Securities, Axis Capital, and Equirius Capital are the book running lead managers to the issue.
(The recommendations in this story are by the respective research analysts and brokerage firms. Financial Express Online does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)