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Anand Rathi Wealth IPO entails to raise Rs 660 crore at the upper price band of Rs. 550/-The Anand Rathi Wealth IPO is entirely an offer for sale for 1.2 crore equity shares. Anand Rathi Wealth (ARW), incorporated in 1995, is one of the leading non-bank wealth solutions firms in India and has been ranked amongst the top three non-bank mutual fund distributors in the country.

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Anand Rathi Wealth IPO Details:

Updates :

• ANCHOR ISSUE:
• Anand Rathi Wealth IPO garnered ₹194 crore from 12 anchor investors.
• SBI Mutual Fund, ICICI Pru Mutual Fund, Franklin Templeton Mutual Fund, DSP Mutual Fund, Kotak Mutual Fund, Invesco Mutual Fund, Canara Robeco Mutual Fund, Nippon Mutual Fund, Abakkus, Quant Mutual Fund, MK Cohesion, Rajasthan Global are among the investors that participated in the anchor book.

Anand Rathi Wealth IPO Review: Video Presentation

About Anand Rathi Wealth (India)

• ARWL is one of the leading non-bank wealth solutions firms in India and has been ranked amongst the Top-3 non-bank mutual fund distributors in India by gross commission earned in Fiscal 2019, 2020 and 2021
• In its flagship Private Wealth (“PW”) vertical it manages 295 billion in Asset under Management (“AuM”) as on August 31, 2021.
• The company distributes mutual fund schemes and earns distribution commissions. It also purchases non-convertible market linked debentures (“MLDs”) and offers them to its clients and earns income from these sales.
• The AUM comprises mutual fund schemes and other financial products such as bonds, MLDs and other securities held by clients in their own demat accounts.
• PW vertical caters to 6,564 active client families, serviced by a 233 RMs.  
• Present in 11 cities in India; namely, Mumbai, Bengaluru, Delhi, Gurugram, Hyderabad, Kolkata, Chennai, Pune, Chandigarh, Jodhpur and Noida and a representative office in Dubai.

Anand Rathi Wealth IPO: Financials

Salient Points

• Withdrew its proposed IPO in September 2018
• Company targets HNI segment of clients with net worth between ₹ 5 – 50 cr
• This segment is less price sensitive, wants quality & personalized services.
• The company has three subsidiaries
  • AR Digital Wealth (75.51% shareholding) is engaged in business of distribution and sale of financial products
  • Freedom Wealth Solutions (95%) engaged in providing consultancy of wealth management services, wealth, financial, retirement and investment planning, property management, will writing, property valuation.
  • Freedom Intermediary Infrastructure (100%) is tech platform for Mutual Fund Distributors and provides a technology platform for Independent Financial Advisors and mutual fund distributors (MFDs

Cons

• IPO is entirely offer for sale (OFS) by promoters. 75% stake to drop to 49%.
• Industry is gripped with high completion and regulatory risks.
• Changes in regulatory environment may impact business and margins
• Increase in direct investment in MFs by clients
• Competition from existing and new market participants
• Pandemics, like Covid-19, could impact materially.
• Slowdown in economy or performance in securities market

Anand Rathi Wealth IPO: Assessment

• Prospects of Wealth management industry in the country are good.
• AUM serviced grew at 20% CAGR between FY19 to FY21 and stood at Rs. 30,200 cr. on 31.8.21.
• Number of clients also grew at 20% during this period to 6,564.
• Wealth management business is asset-light, with higher operating leverage
• This may be getting reflected in results for 5 month period ended Aug 2021.
• Company clocked PAT of Rs. 51 cr for these five months on revenue of Rs. 167 cr, translating  into 31% net margin.
• ARWL follows process driven approach in providing wealth solutions &aims to achieve consistent client outcomes through standardized investment strategy.
• Their model portfolio consists of an optimal combination of mutual funds & structured products making it relatively simpler for clients to understand.
• Stickiness: 55% Clients > 3 years, representing 73.55% of total PW AUM.
• At higher price band of Rs550, issue is valued at P/E of 51x on FY21 EPS basis.
• If 5 month earnings (Apr-Aug’21 ) are annualized, PE demanded is < 20.
• Anand Rathi Wealth IPO GMP last reported was about Rs. 100/-
• Peers include IIFL Wealth Management which trades at about 31x its earnings. Edelweiss, Motial oswal, Angel one and host of banks like Axis, Kotak etc.
• I may apply for the Anand Rathi Wealth IPO on last day subject to good QIB response knowing well that it is only suitable for risk taking investors.
• Despite high price demanded, I am inclined to keep this IPO under my radar due to favorable sector tailwinds & good CAGR track record and future possibilities.

Standard disclaimer:  I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . Also Certified in some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2)  Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors.  I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or  leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.