Prudent Corporate Advisory Services IPO entails an offer for sale of 8.54 million equity shares by investor Wagner Ltd, an affiliate of US-based private equity investor TA Associates, and another selling shareholder Shirish Patel. Wagner will offload majority of the shares i.e. 8.28 million shares through OFS. Prudent Corporate Advisory Services, the Retail wealth management firm is set to raise Rs 539 crore through this IPO. The company derives most of its revenues from MF distribution.
| Issue Opens | Tuesday, 10th May, 2022 |
| Issue Closes | Thursday, 12th May, 2022 |
| Issue Details | Offer for Sale of 8,549,340 Equity Shares |
| Face Value | ₹ 5/- |
| Issue Size (₹ Cr) | ₹ 508 – 538 Cr |
| Bid Lot | 23 shares |
| Price Band | ₹ 595 – 630 |
| Issue Structure : | |
| QIB | 50% of net offer |
| NIB | 15% of net offer ( 1,265,326^ Shares, 79.72^ Cr) |
| HNI-1 (2-10 L), 322 shrs, min appl. for 1x = 1327 | |
| HNI-2 (>10 L), 1610 shrs, min appl. for 1x = 2655 | |
| Retail | 35% of net offer (2,952,427 Shares, ₹186 Cr) |
| Appl. for 1x Retail | ~ 1.3 Lacs |
About Prudent Corporate Advisory Services
- Prudent Corporate Advisory Services Limited was Incorporated in 2003,
- (Prudent Corporate) provides retail wealth management services. More precisely it offers Mutual Fund products, Life and General Insurance solutions, Stock Broking services, SIP with Insurance, Gold Accumulation Plan, Asset Allocation, and Trading platforms.
- It offers digital wealth management solutions through platforms, namely, FundzBazar, PrudentConnect, Policyworld, WiseBasket and CreditBasket.
- Prudent Corporate Advisory Services is amongst the top 10 mutual fund distributors in terms of av. assets under management AAUM as of FY21.
- As of December 31, 2021, it provided wealth management services to 13,51,274 unique retail investors through 23,262 channel partners on the business-to-business-to consumer (B2B2C) network.
- It has 110 branches in 20 Indian states. company has a nationwide network, servicing 16,356 PIN codes.
- The company is associated as a distributor with 42 AMCs.
- Prudent Corporate Advisory Services Limited is one of India’s leading
- independent and fastest-growing financial services groups. The
- Prudent Corporate Advisory Services has 1,067 employees.
- It has 35.05 lakhs live folios and 15.25 lakhs live SIPs .
Financials
| Particulars / (₹ In Cr) | 2021(09) | Fy21 | FY20 | FY19 |
| Revenue from Operations | 321.22 | 286.51 | 234.83 | 221.98 |
| Revenue Growth (%) | – | 22.00% | 5.79% | – |
| EBITDA as stated | 81.5 | 61.91 | 46.67 | 38.21 |
| Net Profit for the period | 57.63 | 45.3 | 27.85 | 21.02 |
| Net Profit (% ) | 17.94% | 15.81% | 11.86% | 9.47% |
| EPS-Basic (₹ ) | 13.94 | 10.96 | 6.74 | 5.08 |
| RoNW (%) | 26.83% | 28.73% | 24.75% | 25.30% |
| NAV – Diluted (₹ ) | 51.95 | 38.07 | 27.17 | 20.07 |
| Equity Share Capital | 20.7 | 1.03 | 1.03 | 1.03 |
| FV | 5 | |||
| IPO Price | 630 | |||
| EPS ( FY21) | 10.94 | |||
| PE( FY21) | 57.58 | |||
| EPS 9m ann | 18.56 | |||
| PE (FY22) 9m ann | 33.94 | |||
| Market Cap | 2608 | |||
| Market Cap / Sales | 6.09 |
Salient Points
- MFD base is well-diversified, with top 50 MFDs (by AUM) contributing only 8.52% of total AUM. The retail focus has helped grow the number of systematic investment plans (SIPs) handled from 0.79 million end April 2018 to 1.53 million end December 2021 with equity AUM from SIPs rising from 29.08% of total equity AUMto42.48%. The monthly SIP flows were Rs 386.7 crore providing visibility of monthly inflows for MFDs as well as the company.
- The company offers end-to-end, process driven and standardized support to Mutual Fund Distributors.
- The company also distributes life and general insurance products in India through wholly owned subsidiary, Gennext.
Concerns:
- Operating in a highly competitive segment.
- MF sector is highly regulated and involves regulatory risk. Further subject to many compliances too.
- Competition from fintecs.
Peers
Prudent Corporate has shown IIFL Wealth, ICICI Securities, CDSL, CAMS, HDFC AMC, Nippon Life AMC and UTI AMC as its listed peers. Comparison with like of CDSL and even AMCs seem far fetched.
| Company | cmp | FV | Income Fy21 | P/E | RONW % | Makt cap rs. Cr |
| Prudent Corporate Advisory Services Ltd | 630 | 5 | 294.9 | 57.5 | 28.73% | 2608 |
| IIFL Wealth Management Ltd | 1,523 | 2 | 1,654.00 | 23.4 | 19.84% | 13,509 |
| Anand Rathi | 612 | 5 | 417.00 | 20.1 | 43.30% | 2,546.00 |
Prudent Corporate Advisory Services IPO: Assessment
- For the financial year 2020-21, the company clocked 63 percent growth in profit at Rs 45.3 crore and the revenue grew by 22 percent to Rs 286.5 crore compared to the previous year. Profit for nine months ended December 2021 stood at Rs 57.63 crore on revenue of Rs 321.22 crore.
- Company has a well diversified distributor network and technology driven platforms.
- Mutual fund under management (AUM) as percentage of GDP) is at 15 per cent for India which is many times lower than the global average of 75 per cent.
- Thus MF industry with ~₹37 lakh crore AUM as of now, has good growth prospects.
- Prudent Corporate Advisory Services (Prudent), derives most of its revenues from MF distribution.
- It has a revenue mix favoring higher yielding equity funds.
- With 85% of the business coming from Mutual fund distribution which could face disruption due to change in regulatory cap on commissions, dependence on cyclical equity market behavior, preference for direct funds and entry of lot of fintech players.
- Considering higher valuation being demanded and current market conditions, I do not intend to subscribe to Prudent Corporate Advisory Services IPO.