Prudent Corporate Advisory Services IPO (Prudent Corporate IPO) Details
Prudent Corporate Advisory Services is coming up with IPO, which would open for subscription on 10th May, 2022. It provides retail wealth management services in India. Company generated strong revenue growth in the last 3 years and 9 months. Its margins improved from 9.3% to 17.5% during a similar period. Should you subscribe to Prudent Corporate Advisory Services IPO? What are the risk factors in this IPO? Considering the growth rate, is Prudent Corporate IPO Valuation justified? Let me do this IPO review and provide complete analysis.
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About Prudent Corporate Advisory Services Limited
Incorporated in 2003, It is an independent retail wealth management services group in India. It is the top mutual fund distributor in terms of average AUM and commission received.
Company offers a technology enabled, comprehensive investment and financial services platform with end to end solutions critical for financial products distribution and presence across both online and offline channels.
Company grew faster among distributors in terms of commission and average AUM with a CAGR of 34.4% and 32.5% respectively for the 5 year period ending Mar-21.
Key Metrics of its business are:
1) Mutual Funds – Fundzbazar platform that offers a variety of investment products. Currently it has 1.35 Mn investors and the company manages over Rs 4,841 Crores of their portfolio. Under MF business, the company also offers a PrudentConnect technology platform which is like Virtual Office for mutual fund distributors (MFDs) registered with them. Currently it handles 23,262 MFDs and manages AUM of 2 Crores AUM per MFD.
2) Insurance Services – Its Policyworld online platform offers a variety of insurance solutions. Currently it has managed over 74,000 policies with over 11 insurance companies with a premium collection of Rs 161 Crores.
3) Broking – It offers two platforms.
- WiseBasket – This offers online model stock portfolios and
- PruBazar – It offers an online platform for trading in equities.
Under this business services, it offers cash delivery, cash intraday, equity derivatives etc., Currently it has 20,000 investors and managing turnover of Rs 3,715 Crores in cash delivery segment and Rs 6,134 Crores in cash Intraday segment and Rs 10,557 Crores in equity derivates.
Prudent Corporate Advisory Services IPO – Dates, issue details, Size and Price Band
| IPO Opening Date | 10-May-22 |
| IPO Closing Date | 12-May-22 |
| Issue Type | Book Built Issue IPO |
| Face Value | Rs 5 per equity share |
| IPO Price band | Rs 595 to Rs 630 per equity share |
| Lot Size | 23 Shares |
| Listing at | BSE and NSE |
| Total Issue Size | Rs. 538.61 Crores |
| Fresh issue | Nil |
| OFS | Rs. 538.61 Crores |
What are the competitive strengths of Prudent Corporate Advisory Services Limited?
1) Company operates in an underpenetrated Indian asset management industry, that has grown at a CAGR of more than 20%.
2) It is a growing independent financial product distribution platform.
3) They have a granular retail AUM with a mix skewed towards high-yield equity AUM.
4) Its value proposition has led to increased participation and long-standing relationship with MFDs.
5) They have a track record of innovation and use of technology to improve investor and partner experience.
6) They have a pan-India diversified distribution network with the ability to expand into underpenetrated B-30 markets.
7) They have demonstrated a consistent track record of profitable growth due to a highly scalable, asset-light and cash generative business model.
8) They have an experienced management team and are backed by a global investor.
What are the Objects of the IPO Offer?
Prudent Corporate Advisory Services IPO Size is Rs 538.61 Crores which is only for Offer for Sale (OFS).
Under OFS, selling shareholders would get entire money and the company would not get any funds.
Who are the promoters of Prudent Corporate Advisory Services Limited?
Sanjay Shah is the promote of Prudent Corporate Advisory Services Limited.
How is the company financial track record?
Here are the total assets, revenues and profits of the company in the last 3 years and 9 months.
| Financial Year ending / Period ending (Amt in Mns) | ||||
| Particulars | FY19 | FY20 | FY21 | Dec-21 |
|---|---|---|---|---|
| Total Assets | 1,932 | 1,961 | 2,849 | 3,873 |
| Revenues | 2,250.6 | 2,362.2 | 2,949.0 | 3,280.0 |
| Profit After Tax | 210.2 | 278.5 | 453.0 | 576.3 |
| Profit % | 9.34% | 11.79% | 15.36% | 17.57% |
Positive Factors in Prudent Corporate Advisory Services IPO
Here are the key reasons to invest in this IPO.
1) Prudent Corporate provides a full range of retail wealth management services. It has diversified business into mutual funds distribution, insurance services and stock broking services.
2) The company operates in under penetrated Indian asset management industry, which grown at CAGR of 20%. If you observe, the company has grown among distributors in terms of commission and average AUM with a CAGR of 34.4% and 32.5% respectively for the 5 year period ending Mar-21.
3) Company has generated strong revenue growth in the last 3 years and 9 months.
4) Company margins improved significantly from 9.3% (FY19) to 17.5% (9 months ended Dec-21).
Risk Factors of investing in Prudent Corporate Advisory Services IPO
1) Company IPO issue is only for Offer for Sale. The IPO Proceeds would go to selling shareholders and company would not get any proceeds of the offer.
2) Company operates in a highly regulated environment which is subject to changes in laws, regulations and government policies. This can affect the sectors in which they operate.
3) Company needs to comply with regulatory guidelines. Any direction or observations during inspection by a regulatory organization may have a material adverse effect on its business.
4) There is an outstanding criminal case in which Economic Offences wing has issued notices to Prudent Comder Pvt Ltd (merged with its subsidiary, Prudent Broking Services Pvt Ltd), its promoter and director of a subsidiary and there is outstanding SEBI matter. In case it is determined in an adverse manner, may result in a loss of license and consequently may adversely impact its future operations.
5) Company recommendations, suggestions and advice provided by mutual fund distributors using its platform to their clients may be subject to errors or fraudulent behavior and its beyond company control. Resultant adverse impact can affect the company.
6) Investors should read complete risk factors indicated in the RHP before investing in this IPO.
Prudent Corporate Advisory Valuation
Prudent Corporate Advisory Services IPO price band is Rs 595 to 630 per share.
1) If we consider last 3 years weighted average EPS of Rs 8.56 and the upper price band of Rs 630, P/E works out to 74x.
3) Similarly, if we consider FY2021 EPS of Rs 10.94 and the upper price band of Rs 630, P/E works out to be 57x.
4) If we take 9 months ended Dec-21 EPS and annualize it, the P/E works out to be 34x.
5) Means company is asking IPO price of Rs 630 in the P/E ratio of 34x to 74x.
As per the RHP, there are listed peers like CDSL trading at P/E 74x (Highest) and ICICI Securities trading at P/E 18x (Lowest) and the industry average P/E is 40x. Hence Prudent Corporate Advisory Services Ltd share price issued at 34x to 74x is fully priced.
Prudent Corporate IPO Dates – Subscription, Allotment and Listing Dates
| Offer Open | 10-May-22 |
| Offer close | 12-May-22 |
| Finalization of Allotment | 18-May-22 |
| Initiation of Refunds | 19-May-22 |
| Credit to Demat Account | 20-May-22 |
| IPO Shares Listing Date | 23-May-22 |
How to buy Prudent Corporate Advisory Services IPO online through Zerodha?
You can login to your demat account, visit the IPO section and apply for this IPO during the subscription dates.
You can also apply this IPO on Zerodha. If you do not have Zerodha account, sign-up here and proceed to the next step.
Zerodha customers can apply in this IPO by login into Zerodha Console submitting an IPO application form.
Follow below steps to apply this IPO in Zerodha platform:
1) Visit the Zerodha portal and login to Console.
2) Go to Portfolio and click the IPOs link.
3) Visit ‘Prudent Corporate Advisory Services Limited IPO’ row and click the ‘Bid’ button.
4) Enter your UPI ID, Qty and the Price which you want to bid.
5) Click on ‘Submit’ IPO application form.
6) Visit the UPI App (net banking or BHIM) to approve the mandate.
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Prudent Corporate IPO – Should you Subscribe?
Prudent Corporate Advisory Services Limited provides retail wealth management services in India.
Company has diversified portfolio into mutual funds distributors’ business, insurance services and stock broking services.
Company generated strong revenue growth in the last 3 years and 9 months.
Company margins shown significant improvement in the last 3 years and 9 months.
Its issue price is fully priced.
Currently stock market is undergoing massive correction, hence we do not know how investors would react to this IPO now.
High risk investors can invest in this IPO for medium to long term perspective. One may or may not get listing gains considering the bearish market now.
Source: Prudent Corporate Advisory IPO Prospectus (RHP)
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