Prudent Corporate Advisory Services Ltd (PCASL), an integrated wealth management service provider, will float its initial public offering on May 10 and the issue will be open to subscription till May 12. The company has set a price band of Rs 595-630 a share.
Prudent Corporate Advisory's business primarily involves distribution of mutual funds. It also distributes other financial products such as insurance, portfolio management schemes, alternative investment funds, corporate fixed deposits, bonds, unlisted equities, stock broking solutions, loans against securities, NPS and various structured products. It earns commissions from third parties for distribution of their products, which may be in the form of recurring commissions.
The company offers digital wealth management solutions through FundzBazar, PrudentConnect, Policyworld, WiseBasket, Prubazar and CreditBasket.
Here's everything you need to know about Prudent Corporate Advisory Services IPO:
1. The issue comprises a pure offer-for-sale of up to 8.55 million shares by shareholders and promoters. The company will not get any proceeds from the issue. Wagner will sell up to 8.28 million shares or 50 percent of its stake and Shirish Patel will sell around 2.68 lakh shares. Wagner holds 40 percent stake, while Patel has 3.15 percent stake in the firm.
2. At the upper end of the price band, the firm will raise around Rs 538.61 crore through the IPO. Its grey market premium was trading at Rs 36-38 a share.
3. The anchor investment will open on May 9. The initiation of refunds will be on May 19 and credit of equity shares to demat accounts will be on May 20. The firm will list on exchanges on May 23.
4. As on December 31, 2021, the company's assets under management (AUM) from the mutual fund distribution business stood at Rs 48.41 trillion, with 92.14 percent of the AUM being equity-oriented. Its AUM has increased from Rs166.67 billion as on March 31, 2018 to Rs 484.11 billion as on December 31, 2021, at a CAGR of 32.83 percent with its equity-oriented AUM increasing from Rs 138.66 billion to Rs 446.01 billion during the same period at a CAGR of 36.49 percent.
5. The company distributes life and general insurance products in India through its wholly owned subsidiary, Gennext. As of December 31, 2021, it distributed 74,037 policies across life and non-life insurance segments, with an aggregate premium of Rs 1.61 billion, and total brokerage received amounting to Rs 232.22 million.
6. The firm's revenue, margins and profit has steady growth. For FY21, revenue stood at Rs 277.56 crore as against Rs 229.31 crore a year ago. Net profit for the period was at Rs 45.30 crore versus Rs 27.85 crore last year. EBITDA margin for the period stood at 21.61 percent from 19.87 percent a year ago. In FY19, EBITDA margin was 17.21 percent. Commissions and fee income from distribution of mutual fund products was at Rs 231.29 crore, up 18.3 percent from a year ago.
7. As at December 31, 2021, the firm had total outstanding borrowings of Rs 33 crore consisting of unsecured loans availed from promoter Sanjay Shah in PCASL and banks and financial institutions towards working capital requirements along with accrued interest thereon in Prudent Broking Services Private (PBSP). PBSP is an arm of PCASL.
8. The company's credit rating has been downgraded by sovereign rating firms. The firm's sovereign rating decreased from Baa2 with a “negative” outlook to Baa3 with a “negative” outlook by Moody’s and from BBB with a “stable” outlook to BBB with a “negative” outlook (Fitch) in June 2020. India’s sovereign ratings from S&P is BBB-with a “stable” outlook. " Any further adverse revisions to India’s credit ratings for domestic and international debt by international rating agencies may adversely impact our ability to raise additional financing," the company said in its DRHP.
9. The firm in its DRHP said it had in the past incurred losses from the sale of investments made in Prudent Fintrade Private Limited, amounting to Rs 10.16 million in fiscal 2019, pursuant to the order of the RBI dated June 11, 2019, directing the cancellation of the NBFC licence of Prudent Fintrade Private Limited, on account of being unable meet regulatorily mandated net owned funds requirements.
10. The company in September 2020 participated in the bidding process for the acquisition/ transfer of Karvy Stock Broking Limited (KSBL) and acquired the entire mutual fund folios/ AUM of KSBL (KSBL MF Folios) for an amount of Rs 151 crore.
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