An Initial Public Offering (IPO) is the first sale of shares that are issued by a company to the public. IPOs give investors an opportunity to subscribe to the shares and make a profit in most cases. There is also an option to hold the shares for a long-term investor. An Initial Public Offering allows investors to explore the opportunities in various sectors. But narrowing down on which IPO to invest in can be tedious and confusing for an investor.
The Equity Research Desk at Nirmal Bang provides fundamental analysis of capital market-related entities to aid wise investment decisions. The analysis also includes IPO news and updates. Nirmal Bang’s IPO Watch helps market participants to stay abreast of all the latest developments in this segment and make the right investment or trading pick.

Krystal Integrated Services Ltd.

14-Mar-24

Krystal is rightly placed in the Rs.981 bn Indian outsourced IFM industry growing at a CAGR of 15%. With its wide bouquet of services, Krystal successfully upsells and retains its existing customers as well as enjoys competitive advantage over its peers. With huge spending thrust coming up in the government sector in airports and Railways, Krystal is bound to gain good market share and maintain its growth momentum in the coming years as well. However, we believe valuations are fairly priced and recommend NEUTRAL to the IPO.

Gopal Snacks Ltd

06-Mar-24

We expect Gopal Snacks to grow its topline in low teens over the next 2-3 years in consistent with Indian savoury snacks industry which is forecasted to grow at 11.7% CAGR during FY23-27E. In FY23, ROE and ROCE stood at 38.6% and 41.0%, respectively. Company’s overall margins are higher when compared with key industry players mainly on account of lower advertising expenses in % of revenue. Currently, company spends less than 1% of revenue on advertising and promotional expenses which is expected to see gradual increase in the upcoming years. Major revenue from Gujarat and limited presence in other regions has provided it with great opportunity to penetrate further in existing as well as new regions. The issue is valued at P/E of 45x to FY23 EPS which is believed to be at reasonable valuation when compared with industry average. Thus, we recommend ‘SUBSCRIBE’ to the issue with a long-term investment view.

Exicom Tele-Systems Ltd.

26-Feb-24

Although Telecom is a mature industry, Government’s thrust on setting up telecom infra in rural and border areas could provide growth in the Critical Power Business. The EV Charging Business benefits from structural tailwinds in the EV charging industry which is estimated to grow from Rs. 1300 Cr in FY24E to Rs. 9000 Cr by FY28E thereby providing a huge tailwind for Exicom. Thus we are positive on Exicom’s listing prospects and recommend to Subscribe to the IPO.

GPT Healthcare Ltd

22-Feb-24

GPTHL is mainly focused on mid-sized hospitals to get the overall efficiency that result in improved Return on Capital. Announced Greenfield expansion in Raipur and Ranchi is expected to drive the overall business growth over the long term where company’s bed capacity is expected to increase from 561 as on Sep’23 to 853 by FY26. It will be a debt free company post reduction of overall borrowings by Rs. 30 cr through its funding from fresh issue. GPTHL’s topline has grown at a CAGR of 19% and EBITDA has grown at a CAGR of 28% between FY20-23. ROE and ROCE stood at healthy levels of 23.6% and 26.3% in FY23 which are broadly in line with average performance of listed peers. The issue is valued at 17.9x FY24 annualised EV/EBITDA which is at discount to industry average. Thus, we recommend ‘SUBSCRIBE for Long Term’ to the issue.

Jyoti CNC Automation Limited

09-Jan-24

Jyoti is the 3rd largest Indian and 12th largest global CNC machine manufacturer. Jyoti commands a market share of 10% in India which demonstrates its dominant position in India. Its global market share of just 0.4% suggests the company has huge scope for growth as it is positioning itself as a reliable vendor for global OEMs in aerospace, defence and EMS industries. Upon comparing the historical financials of other capital goods companies, we observe that Jyoti’s revenue growth and margins have been sub-par owing to higher historical contribution from low margin and low growth industries such as auto and engineering as well as sub-optimal utilization of its capacity. However the company has been focusing on increasing its revenue from the high margin segment of aerospace and defence whose contribution has increased from 20% in FY22 to 37% in H1FY24. This has led to an increase in EBITDA margin from 9.7% in FY22 to 14.6% in H1FY24. With a substantial order book (3.6x FY23 revenue) executable over next 2 years and favourable market positioning we recommend subscribing to the IPO for long-term prospects, anticipating a premium valuation compared to peers.

Azad Engineering Ltd.

19-Dec-23

Having done the hard-work for development and registration (qualification gained for 1400 components already) with global OEMs over last 15 years, Azad is now ripe for scaling up its revenue. Since the industry has high entry barriers in terms of gestation period as well as manufacturing capabilities, competitive intensity is low which is evident from the company’s Gross and EBITDA margins. Upon comparing with other similar Cap Goods players, we observe that Azad has delivered superior growth with similar return ratios while its valuation is broadly at par with the peer group. Based on stronger track record and superior outlook on growth, we expect Azad to trade at a premium to peers and thus we recommend to Subscribe to the IPO.

Credo Brands Marketing Ltd. - IPO Note

19-Dec-23

Credo Brands Marketing has delivered a lower topline growth of 3.5% between FY20-23 when compared with its peers. However, it has delivered a healthy profits with a growth at ~70% during the same period led by expansion in operating margins from ~10% in FY20 to 33% in FY23. Company has witnessed muted performance in Q1FY24 due to seasonality; however, one can expect healthy growth in FY24. The issue is valued at 11x to FY23 EV/EBITDA which is at discount when compared to its peers. Thus, we recommend SUBSCRIBE to the issue.

Happy Forgings Limited - IPO Note

19-Dec-23

Happy Forgings has differentiated itself by (i) focusing on developing heavier, high precision, critical and value added products; (ii) for multiple end-use industries, which typically have extremely closed tolerances. This has translated to the company commanding substantially higher margins and return ratios compared to peers. The company’s valuation at 38.4x FY23 P/E appears attractive compared to peers and thus we recommend to Subscribe to the IPO.

Inox India Limited

14-Dec-23

Inox is amongst the top 10 companies globally and the largest in India in the business of manufacturing complex cryogenic solutions which are highly critical for the user industries. This is reflected in the company’s superior EBITDA margins at over 21%, much higher than average of listed capital goods players. Combined with strong asset turns of 1.4-1.8x historically, Inox has consistently delivered ROCE of over 30% in recent years. Increasing importance of green fuels like liquid hydrogen and preference for LNG over diesel is leading to robust topline growth for Inox. Revenue grew by 14% CAGR over FY20-23 and by 16% in H1FY24. This growth is broadly in line with listed Capital Gods players. Inox is valued at 29x H1FY24 annualised EPS which we believe leaves some scope for listing gains. Thus, we recommend SUBSCRIBE to the issue.

India Shelter Finance Corporation Limited (ISFCL) - IPO Note

13-Dec-23

ISFCL loan book stands at just Rs. 4359 Cr as on FY23, the runway for accelerated growth is huge. It has grown its AUM at a CAGR of 41% over FY21-23. Further it has delivered respectable ROA in FY23 at 4.1%. It’s valuation on P/B basis is at discount compared to peers, at 2.6x FY23 post issue BVPS. Therefore we recommend ‘Subscribe’ rating for the issue.

DOMS Industries Ltd - IPO Note

12-Dec-23

DOMS Industries Ltd is one of the leading players in branded stationery and art products where it focuses on R&D, product engineering, backward integrated manufacturing with its presence in Pan India. Further, its strategic partnership with FILA group has enabled them to strengthen its business across international market. Company’s financial performance has been strong over the years with revenue / PAT growth at 23% / 42% CAGR between FY20-23, respectively. The issue is valued at 46x to FY23 EPS and 33x to annualised H1FY24 EPS which we believe to be fairly valued. Thus, we recommend SUBSCRIBE to the issue with a long term investment view.

Flair Writing Instruments Ltd

22-Nov-23

Flair Writing Instruments Ltd is one of the leading company in the industry it operates with a domestic market share of 9%. The company has outperformed industry with a revenue growth at 14% CAGR between FY17-23 (industry growth at 5.5%). Flair has delivered a healthy performance in FY23 with 19.5% of operating margin which is best in the industry. Also, ROE and ROCE stood at 27.1% and 30.5% in FY23 which is well above peer performance. The issue is valued at 27x to FY23 EPS which is at discount to its peers. Thus, we recommend SUBSCRIBE to the issue.

Tata Technologies

21-Nov-23

Over FY20-23 Sales grew by 15.7% and came at Rs 4414 cr in FY23. H1FY24 sales came at Rs 2526.7cr (+33.8% YoY). EBit margins have also improved from 13% in FY20 to 16.5% in FY23. Going ahead The automotive outsourced ER&D market is pegged at $18-20 billion and is expected to grow at a CAGR of 11 % and reaching USD 27- 29 bn By 2026E.The company being a pure-play manufacturing focused ER&D company, primarily focused on the automotive industry , will be benefit from the growth in the industry .The company plans to strengthen relationships with existing clients, target new high potential accounts with large annual ER&D spends and new energy vehicle companies, to drive the growth. ROE and ROCE also improved and stood at 20.9% and 24.3% respectively for FY23 With this, at the given upper price band of issue of Rs 500, Tata Technologies is offered at annualized H1FY24 PE of 28.8x which we feel is attractive. We recommend subscribing to the issue

Fedbank Financial Services

21-Nov-23

FFS has grown its AUM at a CAGR of 37% over FY21-23. However upon comparing FFS with companies focused on LAP and Gold loans, we observe that FFS derives a higher share of loan book from competitive segments like Gold (33% mix), Medium ticket LAP (25% mix) and Unsecured Business Loans (16% mix). Further FFS has delivered lower ROA in FY23 at 2.3% compared to peer average of 3.4% and thus deserves to trade at a discount. Therefore we recommend ‘Neutral’ rating for the issue.

IREDA (Indian Renewable Energy Development Agency)

17-Nov-23

IREDA’s positioning as the largest pure-play green financing NBFC in India places it among the very few players who are well placed to capitalise on the rapid growth in the RE sector. Over FY21-23, the company’s loan book has grown at a CAGR of 30% to Rs. 47,076 Cr, much faster than traditional power financing companies like PFC & REC. Diversification and expansion in emerging green technologies like green hydrogen, pumped hydro storage power plants, battery storage value chain and green energy corridor provides scope for longer term sustainability of high growth of its loan book. On the back of low base, demonstrated track record of high growth, improvement in asset quality and cheap valuations at 1.1x trailing P/B (post issue), we rate the issue as ‘Subscribe’.

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RISK DISCLOSURES ON DERIVATIVES

  • 9 out of 10 individual traders in equity Futures and Options Segment, incurred net losses.
  • On an average, loss makers registered net trading loss close to ₹ 50,000.
  • Over and above the net trading losses incurred, loss makers expended an additional 28% of net trading losses as transaction costs.
  • Those making net trading profits, incurred between 15% to 50% of such profits as transaction cost.

Source:

1. SEBI study dated January 25, 2023 on “Analysis of Profit and Loss of Individual Traders dealing in equity Futures and Options (F&O) Segment”, wherein Aggregate Level findings are based on annual Profit/Loss incurred by individual traders in equity F&O during FY 2021-22.