Experts/Company

Poll Result

Experts view

R S Iyer

(KR Choksey)

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Edelweiss Capital is a good issue. The price band is a bit on higher side but no problem. It has good brand name in the market and has good asset base. After looking at objective of the issue, the company will do better in future. One can apply for the issue for good listing gains as well as long term.

Manish Bhatt

(Prabhudas Lilladher)

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The issue looks slightly high priced but no worries. People can subscribe to the issue.

SP Tulsian

(Investment Advisor)

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Edelweiss is a known name in the financial market. On analysis of results of FY 07, and results of five months ending August 07, employee costs have increased by about 100%, on an annualized basis, while finance cost increased by about 350%, on annualized basis. As against this, core income of the company, being fee brokerage and commission income improved by just 50%, on an annualized basis.

Even the debt component of the company rose sharply from Rs 386 crore as at 31st March 07 to Rs 976 crore as at 31st August 07. On gross basis, it has resulted in a yield of 13% for five months or about 2.5% per month. This kind of yield is given by arbitrage plays, even on a fund size of Rs.1,000 crores. So, the business model of the company is relying more on trading and arbitrage income which may not be perceived to be very healthy, on a sustainable basis, while valuing a company.

On an annualised basis, for FY 08, the company may have a bottomline of Rs 250 crore, which may result in an EPS of about Rs 33, translating into a PE multiple of about 25 times, at the upper band of Rs 825 per share. The market capitalization of the company, post issue, at the upper band of Rs 825 per share, works out at Rs 6,200 crore.

If we consider grey market premium of Rs 500 per share, market cap on listing would be about Rs 10,000 crore, which makes the issue definitely expensive when compared to its peer like Indiabulls Securities, India Infoline and Motilal Oswal.

The revenue model of the company does not give absolute comfort and looking at the grey market activity and quote, the subscription levels would be very high, resulting in poor allotment ratio. Still if somebody wishes to ride the momentum, one can go for it.