The IPO Market in a Busy Week; Should you invest in CAMS, Chemcon Chemicals, or Angel Broking?

The initial public offering (IPO) market is in for an exciting week with three new numbers open for subscription and a listing as well. This week, markets saw Happiest Minds Technologies’ excellent listing, which rose 111%, above the upper end of the price band, to make its debut on the market. Now, in the coming week, investors will witness the listing of Route Mobile shares alongside the IPOs of CAMS, Chemcon Specialty Chemicals Ltd and Angel Broking opening for subscription. Together, the opening of the three IPOs will seek to increase Rs 3,160 crore in the coming week.

Information Age Management Services (CAMS)

CAMS IPO will open on Monday for subscription. The issue consists of an Offer to Sell (OFS) of 1.82 million shares of NSE Investments and will not see a new issue. Therefore, none of the capital obtained through the issue will go to the company. While NSE Investment is selling its entire 37.48% stake in the company through the issuance to increase Rs 2,244 crore, Great Terrain, the promoter will also cut its stake to 31% from 43.5% pre-issue , but this will not be part of the IPO. At the offer price of Rs 1,229-1,230 per share, investors can bid for equity shares in an offering lot of 12 equity shares.

The issue will reserve 90 lakh of shares for Qualified Institutional Buyers (QIB), 27 lakh of shares will be offered to Non-Institutional Investors (NII) and a retail portion consisting of 63 lakh of shares. The employee’s share has 1.82 lakh of reserved shares. CAMS, a Chennai-based mutual fund transfer agency, has a 70% market share. It serves four of the five largest MFs in India as well as nine of the 15 largest AAUM-based MFs as of July 2020.

Research and brokerage firm Motilal Oswal said that during fiscal year 2017-2020, CAMS revenue / EBITDA / PAT grew at a CAGR of 14% / 13% / 12%. “The balance sheet is low with zero debt and negative working capital, resulting in healthy rates of return.” He said. IIFL Securities said that CAMS is a game in the Indian mutual fund industry. The mutual fund industry still has a large market to access. India’s AUM / GDP ratio is 12% while the global average is 63%.

Should you subscribe?

IIFL Securities values ​​CAMS at 35x FY20 EPS, discounted by 10-15% to listed AMCs, exchanges and depositories based on their upper price band and has an underwriting rating. Motilal Oswal likes the company for its leadership position, integrated business model, India-wide presence, and strong finances, as he recommends signing with a long-term vision. Geojit Financial Services also recommends underwriting the issue and also Yes Securities.

Chemcon Chemicals

The issue of Chemcon Specialty Chemicals Rs 318 crore is also opened for subscription together with CAMS. Chemcon’s initial public offering consists of an OFS of Rs 153 crore and a new issue of Rs 165 crore. The price band for the issue is set at Rs 338-340 per share and investors can bid on a batch of 44 shares. As a manufacturer of pharmaceutical chemicals, the company plans to use proceeds from the issuance to finance capacity expansion and the remainder for working capital requirements and general corporate purposes. After the issue, the promoter’s stake will be 74.47%.

The company is entering the market at a time when pharmaceuticals have had a decent rule and manufacturers of specialty chemicals are looking up. Along with pharmaceutical chemicals, Chemcon is also a leading manufacturer of oil well completion chemicals in India. 50% of the offering is reserved for QIBs, while NIIs get 15% and 35% of the issuance is reserved for retail investors. “Income and PAT CAGR for FY18-FY20 are 29% and 36% respectively. Based on fiscal 2020, it requires a 22.2x valuation. The ROE of the company is quite solid, it is 49.2%, 44.9% and 34.2%, for fiscal year 2018, fiscal year 2019 and fiscal year 2020, respectively, ”said Keshav Lahoti, analyst associated capital of Angel Broking.

Chemcon earns income primarily from the sale of labor products and services. In the previous fiscal year, more than 93% of revenues came from product sales, of which domestic sales of pharmaceutical chemicals make up a large part. In the post-pandemic world, analysts expect Indian specialty chemical companies to take advantage of increased participation in the global supply chain.

Should you subscribe?

“Considering healthy business performance, regular capacity expansions, a strong customer base, an expanding margin profile and an improved outlook for the sector, we have a ‘SUBSCRIBE’ rating on this IPO,” said Geojit Financial Services. According to brokerage firm Choice Broking, in the higher price band of Rs 340 per share, Chemcon’s stock is valued at a P / E multiple of 25.5x, which is discounted from the average of its peers of 40x. . However, he said he is cautious due to the promoter group’s corporate governance problem. The brokerage firm highlighted that one of the members of the Chemcon promoter group is convicted of a criminal case by the CBI special court and also that RBI has initiated proceedings against one of the promoter group entities for not carrying out its operations since the registered office.

Angel Broking

The brokerage firm will see its IPO open for subscription on Tuesday next week as it expects to raise 600 million rupees from the issue. The IPO will include a new issue of Rs 300 crore and an Offer to Sell (OFS) of Rs 300 crore from the company’s existing investors. The Rs 300 million OFS will include the sale of Rs 120 million equity shares of the International Finance Corporation (IFC). Before the issuance, the promoter and promoter group has a 55.20% stake in the company, this will be reduced to 47.67% after the issuance.

50% of the equity shares on offer will be offered to Qualified Institutional Buyers (QIBs), while non-institutional investors will get 15% of the issue and retail investors will have 35% of the issue available for subscription. The offering lot for retail investors will be 49 shares and in multiples thereafter. Technology-driven brokerage is one of the largest retail brokerage businesses in the country with significant market share in the cash and commodities segment. Over the past two fiscal years, Angel Broking has managed to generate more than Rs 500 million in revenue from the brokerage business.

Being among the five largest brokerages in the country, Angel Broking is also well positioned to access new clients. The company has been gaining share in Tier 2 and Tier 3 cities. The company has an average daily turnover of Rs 61.9 billion in the first quarter of the fiscal year.