Catch the plans of Dharmesh Mehta, the man behind India's first IPO by a pure-play boutique i-bank

Dharmesh Mehta, MD & CEO of DAM Capital

Veteran capital markets dealmaker Dharmesh Mehta is all set to launch the deal of his lifetime - the initial public offer of his firm DAM Capital, the first such deal in India by a pure-play boutique investment bank.

The price band of the upcoming public issue has been set at Rs 269-283 per share, and it will open for subscription on December 19 and close on December 23.

The issue, solely consisting of an OFS or offer for sale will see Mehta and four investors — Multiples Alternate Asset Management, Narotam Satyanarayan Sekhsaria, RBL Bank and Easyaccess Financial Services as the selling shareholders.

In the last four years, DAM Capital has worked on deals like the IPOs of JSW Infra, IRFC and Mazagon Dock Shipbuilders, QIPs of DMart, Sterling Wilson & Solar and Ujjivan SFB as well as the big-bang Rs 5,650-crore Nirma-Glenmark Lifesciences buyout.

In a one-on-one interview with Moneycontrol's Ashwin Mohan, Mehta, the MD & CEO of DAM Capital, says the i-banking space is exploding right now with a substantial fee pool opportunity.

He expects more i-banks and advisory firms to go public and adds if a private equity suitor comes later and brings value, he will look at the opportunity.

Edited excerpts:

The year 2024 has been super active across sectors in terms of ECM (equity capital market) deal activity - be it IPOs, QIPs or block deals. Is the overall market buoyancy the primary reason you choose this year for a public float for DAM Capital? You did not want to wait for greater scale and higher profits?

So, I strongly believe that the India growth story is intact. And it's looking very good over the next five to ten years. So, it is not a call of whether it (IPO) is looking good for this year or next year. Nobody knows how the markets behave in the long run.

The fee pool opportunity, I would say, is very large now. It's substantial. So, in that sense, we are in the right space. And this space is just exploding as we speak. Also, when capital markets grow, ancillary businesses have to grow, which we have seen globally. Globally, you see asset management firms getting listed, which has happened in India as well, around five to seven years back. At that time, people were questioning asset management businesses in terms of timing and valuations. And you see the kind of returns people have made in some cases and I was a banker to those deals. So, I remember clearly, people citing cyclicality or peak of the market back then too. And markets have proven them wrong.

Additionally, I didn't want to come (to markets) after a stage when everything is built and the valuation upside has gone for the new set of investors. I had a great set of earlier investors who supported me strongly and it's my duty to give them an exit.

But on the other hand, I am also confident that the incoming investors are also going to make money and will eventually see good returns. And they should be part of the journey much earlier than later. And more importantly, the key reason to list is to attract talent. Our business requires talent. And this platform will now offer greater motivation to people to come to work as there will be an ESOP policy. They can see the growth. So, there is opportunity to make money.

ALSO READ: IPO gives new investors opportunity to participate in growth story from beginning: DAM Capital's Dharmesh Mehta

DAM Capital's net profit rose over 8-fold to Rs 70.5 crore compared to the previous fiscal and revenue increased by 112 percent to Rs 180 crore from Rs 84.9 crore during the same period. What were the factors behind this impressive growth and what is your outlook for the future?

So, Ashwin, as you know, we are just four years old and were building our business. Capital markets have taken off in the last 2-3 years. If you look at it, FY23 was a bad year for capital markets during which, for almost 8 months of the year, there were no IPOs. And then the IPO market revived. And we were part of that revival. So, if you look at it that way, it's not comparable.

The fundraising activity has picked up in the last two years and that is why you are seeing this high growth. The future also looks good. The kind of money which has come into the capital markets, especially from savings to equities is here to stay for the long term. You will have some short corrections. But eventually this money is going to stay here. And we will be chasing deals and chasing ideas.

The IPO is a pure OFS or offer for sale to give an exit to your multiple investors. Why is the fresh issue component missing? Would you not want to use primary issue proceeds to branch into other business verticals like your bigger i-banking peers?

If you look at our starting point, when we started this business, our capital was around 86 crores plus we paid what we had to pay to IDFC. So, we were running a very tight ship and that allows you to be much more efficient. Secondly, I don't require capital to build businesses. I am not in a cash burn business. This business is throwing up a lot of cash. If you look at my balance sheet, last year we had 150 crores cash and as per the RHP (red herring prospectus), you can see the cash balance has only moved to 196 crores. And you will add some profit of the next six months also. So, in that sense, we have sufficient cash balance and there was no requirement of primary at all.

What is the targeted IPO valuation you are aiming for DAM Capital?

If you look at the upper end of the price band, it works up to 2000 crore.

Post the OFS, what will be the shareholding split between the promoter group entities led by you and the other shareholders? Will any of the investors make a complete exit?

There are few (investors) who are going to make a complete exit. I believe it will be 40-41 percent left with me and the balance with minority investors. Also do note, none of them are promoters. I am the only promoter in this company.

Avendus Capital had roped in private equity firm KKR in 2015. Are you open to the PE route to scale up operations in future?

It's too late in the day. We are already getting listed in the next few weeks. So, we don't require any private equity capital for that. But, never say never. If at all we believe a private equity fund will come and give value to the label, we can look at it. But as you are aware, we have already launched the IPO and there is no scope of getting it done.

Taking a cue from DAM Capital, do you expect other boutique i-banks and advisory firms to go public as well?

I'm sure they will and I hope they will. So, we can run their mandates and make some fees from them also. I've missed out on my own mandate. So, I'm hoping I'll get the other investment banking mandates!