Prudent Corporate IPO open from today: Here’s what brokerages say

At the upper range of the price band, the retail wealth management services player is eyeing to raise Rs 538.61 crore through its initial stake sale, valuing the issue at a P/E of 33.9x based on FY22 annualized earnings.

Prudent is one of the leading independent retail wealth management services groups (excluding banks) in India and among the top mutual fund distributors in terms of average assets under management and commissions received.

The issue is entirely an offer for sale (OFS) by the existing shareholders of the company who will offload 85.49,340 shares with a face value of Rs 5 each. The company will not receive any proceeds from the issue.

Among the selling shareholders – Wagner Ltd, an entity of TA Associates, will offload 82,81,340 equity shares and Shirish Patel, Whole Time Director and Chief Executive Officer of Prudent, will sell up to 2,68,000 equity shares.

The company has allocated shares aggregating to Rs 6.5 crore for its eligible employees, who will get a discount of Rs 59 per equity shares during the bidding process.

Investors can bid for a minimum of 23 shares and in multiples thereafter. The issue will close for subscription on Thursday, May 12.

Ahead of its IPO, Prudent Corporate Advisory Services has raised Rs 159.43 crore from 24 anchor investors by allocating a total of 25,30,651 equity shares at Rs 630 apiece, as per the circular uploaded on BSE.

Societe Generale, Kuber India Fund, DSP Mutual Fund (MF),

MF, Axis MF, L&T MF, UTI MF, Canara Robeco MF, MF, Sun Life MF, MF and HSBC MF are among the anchor investors.

Apart from mutual funds, Prudent distributes financial products like insurance, portfolio management schemes, bonds, alternative investment funds, unlisted equities, stock broking solutions, loans against securities, NPS, among others.

As of December 31, 2021, the company’s assets under management from the mutual fund distribution business (AUM) stood at Rs 48,411.5 crore with 92.14 per cent of their total AUM being equity-oriented.

The company provided wealth management services to 1,351,274 unique retail investors through 23,262 mutual fund distributors on their business-to-business-to-consumer (B2B2C) platform and is spread across 110 locations in 20 states.

The company has reserved 50 per cent of the net offer for qualified institutional buyers (QIBs), whereas non institutional buyers (NIIs) will get 15 per cent allocation. Remaining 35 per cent shares will be given to retail bidders.

For the nine months ended December 31, 2021, Prudent Corporate Advisory Services reported a net profit of Rs 57.62 crore with a revenue of Rs 327.99 crore.

ICICI Securities,

and Equirus Capital are the book running lead managers to the issue, whereas Link Intime has been appointed as the registrar to the issue.

The issue has received mixed recommendations from brokerages, who are citing rich valuations, competitive industry and market volatility as the key threat to the company’s growth prospects.

Those who are bullish on the issue are hopeful over the long term growth of the company, thanks to its sound performance, solid balance sheet, wide experience and pan India network.

Let us have a look at what brokerages have to say about the IPO of Prudent Corporate Advisory Services:



Rating: Neutral

“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,” said Angel One.

However, valuations are on the higher side as compared to peers which will limit gains in the near term, it added with a ‘neutral’ recommendation on the IPO.

Broking
Rating: Not Rated

Despite healthy financial performance, Religare has highlighted the highly competitive industry, regulatory risks and capital markets volatility as the key risks to the business.

“At the upper price band of Rs 630, the company appears expensive,” it added. “Hence, we would recommend investors to wait for a better price point to enter the stock from a long term perspective.”

Hem Securities
Rating: Subscribe for long term

In the underpenetrated Indian asset management industry, it has grown at a CAGR of more than 20 per cent with ability to expand into underpenetrated markets, the brokerage said.

“The company has demonstrated a consistent track record of profitable growth due to a highly scalable, asset-light and cash generative business model,” it recommended with ‘Subscribe for long term’ rating on the issue.

Securities
Rating: Not Rated

“Though the company has a strong financial track record, innovative technology, massive pan-India distribution network, the IPO is aggressively priced and hardly leaves anything meaningful on the table for investors in the medium term,” it said.

Marwadi Financial Services
Rating: Avoid

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 2,608.6 crore whereas its peers namely

and are trading at PE of 27.3x and 12.6x.

“We assign ‘Avoid’ rating to this IPO as the company is available at an expensive valuation as compared to its peers. We believe valuations are not in favor of investors,” it added.