Apply for Edelweiss Capital IPO: India Infoline

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India Infoline has come out with report on Edelweiss Capital IPO. The firm has recommended to subscribe to the issue.

Edelweiss Capital, a diversified financial services company, has opened for subscription with its initial public offering (IPO) of 8,386,147 equity shares of Rs 5 each for cash, at a price to be decided through a 100% book building process.

The issue will close close on November 20, 2007. The price band is between Rs 725 and Rs 825 per equity share of face value Rs 5.

India Infoline report on Edelweiss Capital IPO

Edelweiss Capital (ECL) is a diversified financial service provider in India, mainly in two segments viz, agency and capital. Services range from investment banking, institutional equities, asset management and investment advisory, private client broking, wealth management to insurance broking and wholesale financing services catering to its corporate, institutional and High Networth Individual (HNI) clients. ECL covers 19 cities through 43 offices across India.

Investment summary

• Well diversified financial product portfolio catering to institutional clients
• Enjoys superior margins from investment banking and institutional broking segments
• One of the leading players in institutional and HNI segments
• Proficient risk management committee

Risks and concerns

• ECL institutional broking and investment banking business comprise 58% of revenue followed by 38% from treasury activities. Thus, there is higher dependence on the revenue flow from the capital market in general and these segments in particular.
• ECL subsidiaries have incurred losses in the past. In FY07, its subsidiaries like ECAL Advisors Ltd, Edelweiss Capital USA LLC and EC Global Ltd, Mauritius have posted losses of Rs 42 million, Rs 2 million and Rs 24 million respectively.
• Intense competition in financial services businesses may limit growth.

Strong foothold in high margin institutional segment

ECL has an established name in the institutional equities segment. Over last 4 years, the company recorded a CAGR of 91.6% in its bottom line. At the price band of Rs725-825, the stock would be trading at P/E of 49.8x-56.6x FY07 post diluted EPS of Rs 14.6 respectively. We recommend to Subscribe to the issue.