Pocketful

Category: Investing

  • Bharat Highways InvIT IPO: Business Model, Financials, Key Details, and SWOT Analysis

    Bharat Highways InvIT IPO: Business Model, Financials, Key Details, and SWOT Analysis

    The Indian infrastructure sector, particularly the road network, is rapidly growing. Bharat Highways InvIT, a novel investment opportunity in the Indian infrastructure sector is new to the scene but carries an ability to generate stable income and offers a chance to invest in a portfolio of operational toll roads across India.

    Today’s blog aims to provide a comprehensive overview of the Bharat Highways InvIT IPO, including its strengths, risks, and key considerations. 

    Business Model

    Bharat Highways InvIT is an infrastructure investment trust established in India to acquire, manage, and invest in a portfolio of infrastructure assets, majorly focusing on roads across the country. It operates under a Hybrid Annuity Model (HAM), where it receives fixed and variable payments depending on the performance of the project it holds.

    The HAM model is used by the Government of India to finance and execute infrastructure projects. It was introduced in January 2016 to encourage investment in road infrastructure projects.

    It combines elements of two other models.

    • EPC Model – The Engineering, Procurement, and Construction Model is the model in which the government pays the private developer for constructing the road but then owns and maintains it themselves.
    • BOT Model – The Build, Operate, and Transfer model is the model in which a private developer builds, operates and collects tolls on the road for a fixed period before transferring the ownership back to the government.

    Under the HAM Model, the government provides 40% of the project cost as construction spend in equidistant instalments, and the private developer arranges for 60% of the funding through a combination of equity and debt. 

    The company was registered with SEBI on August 3, 2022, and was settled through the Original Trust Deed by GRIL.

    GRIL or GR Infraprojects Limited is a private company and a flagship entity of GR group. It is involved in integrated road engineering, procurement, and construction with an experience over 25 years of in the design of several road/highway projects across 16 states in India.

    Did You Know?

    GRIL has executed more than 100 road construction projects since 2006.

    The portfolio assets consist of seven road assets, all operating on the HAM model, in the states of Punjab, Gujarat, Andhra Pradesh, Maharashtra, and Uttar Pradesh. These roads are maintained as per the rights granted by NHAI and are owned and operated by the Project SPVs, which GRIL wholly owns.

    The seven projects are as follows:

    1. GR Phagwara Expressway Limited
    2. Porbandar Dwarka Expressway Private Limited
    3. GR Gundugolanu Devarapalli Highway Private Limited
    4. GR Akkalkot Solapur Highway Private Limited
    5. Varanasi Sangam Expressway Private Limited
    6. GR Sangli Solapur Highway Private Limited
    7. GR Dwarka Devariya Highway Private Limited

    Additionally, the InvIT has also proposed to enter into a Right Of First Offer (ROFO) agreement with GRIL, which means that GRIL will grant a right of first offer to the InvIT to acquire certain assets owned and developed by GRIL.

    Highways

    Key IPO Details

    1. Bharat Highways InvIT is a book-built issue of INR 2500 crore. The issue is entirely a fresh issue of 25 crore shares.
    2. The IPO will open for subscription on February 28, 2024, and will close on March 1, 2024.
    3. The allotment for the same is expected to be finalised on March 4, 2024.
    4. The temporary listing date is fixed as Wednesday, March 6, 2024.
    5. The price band for the IPO is set at INR 98 to INR 100 per share.
    6. ICICI Securities Limited, Axis Bank Limited, HDFC Bank Limited and IIFL Securities are the book-running lead managers, while K-fin Technologies is the registrar for the IPO issue.

    Objectives of the Issue

    Providing loans to the Project SPVs for repayment/ prepayment, in part or in full, of their respective outstanding loans (including any accrued interest and prepayment penalty); and other general purposes.  

    IPO DateFebruary 28, 2024 to March 1, 2024
    Listing DateWednesday, March 6, 2024
    Price BandINR 98 to INR 100 per share
    Lot Size150 Shares
    Fresh Issue250,000,000 shares
    Issue TypeBook Built Issue InvIT
    IPO TypeMain-board InvIT
    Initiation of RefundTuesday, March 5, 2024
    Basis of AllotmentMonday, March 4, 2024

    Read Also: IPO Alert: Entero Healthcare Solutions Limited (EHSL)

    Financial Highlights

    Key MetricsFY 2023FY 2022FY 2021
    Total income1,537.471,600.182170.39
    Total expenses816.481,515.681,936.07
    Net profit527.0462.76139.44
    Total Assets6,056.275,536.394,943.94
    Total Liabilities4,939.024,946.194,416.61
    *(The figures above are in INR crore)

    Strengths

    1. Bharat Highways InvIT owns a portfolio of seven operational toll roads located across five states in India. These roads generate regular revenue in the form of toll collections, providing a stable income stream for the InvIT.
    2. The Indian government is committed to developing and expanding its highway network, which is expected to benefit toll road operators like Bharat Highways InvIT. The growing demand for road transportation in India is also a positive factor for the industry.
    3. Diversification of assets across different regions in India helps mitigate the risk of dependence on any single geographic location.

    Risks

    1. Due to the InvIT’s recent establishment, its future growth potential remains unclear, hindering accurate assessment and analysis.
    2. The success of the InvIT relies on finding new infrastructure assets that deliver similar financial performance. Failure to do so could harm the business, finances and ability to distribute returns.
    3. Early termination of InvIT assets could significantly impact the financial health due to non-receipt of payments.
    4. Failure to meet contractual road maintenance standards could lead to penalties, contract termination and harm the reputation, finances and business operations.

    Read Also: Popular Vehicle and Services IPO: Key Details, Financials, Strengths, and Weaknesses

    Conclusion

    Bharat Highways InvIT presents a new investment opportunity in the Indian infrastructure sector and is backed by India’s growing road network and government support. However, investors should carefully consider the challenges linked with its business before making any investment decision.

    Frequently Asked Questions (FAQs)

    1. What is the price band of the Bharat Highways InvIT IPO?

      The price band for the IPO is fixed at INR 98 to INR 100 per share.

    2. When will the allotment and listing of shares occur?

      Allotment of shares is expected to be finalised on March 4, 2024, and shares are expected to be listed on BSE and NSE on March 6, 2024

    3. What is the objective of the IPO?

      The objective of the IPO is to raise funds for further expansion.

    4. What risk can I face while investing in this IPO?

      The InvIT is new with a limited track record, uncertain future growth and contractual risks.

    5. Should I prefer investing in Bharat Highways InvIt IPO?

      We suggest you conduct thorough research and consider your risk tolerance before making any investment decision.

  • Mukka Protein IPO: Business Model, Key Details, Financial Statements, and SWOT Analysis

    Mukka Protein IPO: Business Model, Key Details, Financial Statements, and SWOT Analysis

    Embark on an exciting journey into the aqua-culture sector with the initial public offering (IPO) of Mukka Protein Limited, a leading player in the sustainable seafood industry. 

    In today’s blog, we’ll cover the company’s business model, key details, financial statements, and SWOT analysis. 

    Company Overview

    Established in 2003 as a partnership firm by K. Abdul Razak, the company was renamed Mukka Protein Limited and became a private limited company in 2010. 

    The company’s corporate headquarters is located in Mangalore, Karnataka, India.

    The company mainly focuses on producing fish meal, fish oil, and fish soluble paste, which are used to make aqua food for fish and shrimp, pet foods for dogs and cats, and poultry feed for broilers and layers.

    The company has established production facilities around India’s prominent coastlines, with ten global fishmeal factories — four in Karnataka, four in Gujarat, and two in Oman. Each of their units has a technician for quality control management and dedicated in-house laboratories.

    fish meal

    Awards and Accreditations

    1.  India’s growth champion award by Economic Times.

    2.  Star exporter awards, by Federation of Karnataka Chamber of Commerce and Industry.

    3.  State export excellence award by the commissioner for industrial development and director of industries and commerce.

    4.  Certificate of FT High–Growth Companies Asia Pacific 2023 by financial times and statista.

    Promoters

    The company’s promoters are Kalandan Mohammed Arif, Kalandan Mohammed Haris, and Kalandan Mohammed Althaf; they own 100% of the shares.

    Details of the Issue

    The company wants to issue 8 crore new shares to raise a total of 224 crore. With a market lot of 535 shares, the IPO’s lower price band is set at 26 INR, while the higher price band is set at 28 INR per share. 

    Major details

    Face Value of Share1 INR
    Price Band26 – 28 INR
    Market Lot535 Shares
    Total Fresh Issue Size224 Crore
    Total Number of Shares8 Crore

    Timeline of IPO

    IPO Open Date29th Feb 2024
    IPO Close Date4th March 2024
    Finalization of Allotment5th March 2024
    Initiation of Refund & Credit of shares into demat account6th March 2024
    Listing Date on NSE & BSE7th March

    IPO Allotment Size

    ApplicantMarket LotShareAmount (INR)
    Retailer (Min)153514980
    Retailer (Max)136955194740
    Small High Net Worth Individual (Min)147490209720
    Small High Net Worth Individual (Max)6635130988680
    Big High Net Worth Individual (Min)67358451003660

    Objective of the Issue

    The IPO proceeds will cover the working capital requirements of the company’s associate, Ento Protein Private Limited.

    Read Also: IXIGO IPO Case Study: Business Model, Key Details, and Financials

    Key Financials of the Company

    Balance Sheet

    Particulars31st March 202331st March 202231st March 2021
    Non-Current Asset111.122105.91197.415
    Current Asset464.042286.385256.513
    Total Asset575.164392.296353.928
    Equity155.845103.07869.058
    Long Term Liability16.52012.80617.737
    Current Liability402.800276.412267.134
    (All the above-mentioned figures are in crores, unless stated otherwise) 

    Income Statement

    Particulars31st March 202331st March 202231st March 2021
    Revenue from operations1177.122770.503603.834
    Total Revenue1183.804776.145609.952
    Total Expenses1119.322741.177598.317
    Profit after tax47.52525.81911.010
    (All the above-mentioned figures are in crores, unless stated otherwise) 

    Cash Flow Statement

    Particulars31st March 202331st March 202231st March 2021
    Net Cash flow from operating activities(54.395)4.8085.949
    Cash flow from investing activities(5.258)(12.284)(13.611)
    Cash flow from financing activities74.66415.8589.324
    (All the above-mentioned figures are in crores, unless stated otherwise) 

    KPIs

    Particulars31st March 202331st March 202231st March 2021
    EBITDA Margin8.01%7.04%5.27%
    Return on Equity36.71%30%17.37%
    Debt Equity Ratio1.641.682.31
    Profit after Tax Margin4.04%3.35%1.82%
    Return on Capital Employed17.62%13.86%5.86%

    Based on the company’s EPS, the PE ratio on the lower price band will be approximately 13x, and on the upper price band, it will be 14x.

    SWOT Analysis

    Strengths

    1.  The industry in which the company works has a high barrier to entry; no new businesses can easily establish themselves in this market.

    2.  The company has a long history with many of its customers.

    3.   The business is one of India’s top producers of fish protein products.

    4.   The company’s management team has extensive business operations expertise.

    Risks

    1.  In FY23, the company’s cash flow from operations was negative. This might come across as a red flag to many investors.

    2.  The company offers a non-diversified range of products. This exposes the company to the possibility of decreased profitability during unforeseen events. 

    3.  Since the corporation sells goods to multiple nations, it may be exposed to the risk of volatility in exchange rates.

    4.  Top 10 customers provide the company with 72% of the revenue. Thus, any changes in their contracts could significantly affect their profitability.

    Read Also: Rashi Peripherals Limited: IPO Analysis

    Conclusion

    We have covered nearly every pertinent aspect regarding Mukka Protein in this IPO blog, including its background and corporate finances. The corporation may see an increase in its market share in the upcoming years due to its expansion ambitions.

    If you intend to invest in this firm, please ensure that you have carefully reviewed all of the company’s parameters and considered your risk profile.

    S.NO.Check Out These Interesting Posts You Might Enjoy!
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    2Platinum Industries IPO: Business Model, Key Details, KPIs, and SWOT Analysis
    3IPO Alert: Entero Healthcare Solutions Limited (EHSL)
    4Bharat Highways InvIT IPO: Business Model, Financials, Key Details, and SWOT Analysis
    5Pune E-Stock Broking Limited IPO: Key Details, Business Model, Financials, Strengths, and Weaknesses

    Frequently Asked Questions (FAQs)

    1. When will the Mukka Proteins IPO be listed?

      The listing date of the IPO is March 7, 2024.

    2. Is Mukka Proteins a profitable company?

      Mukka Protein Ltd. is a profitable business that has consistently reported profits.

    3. Is revenue concentration a major risk for Mukka Protein?

      Yes, 72% of the revenue is derived from the top 10 customers. This exposes the company to the possibility of incurring losses if these customers alter their contracts. 

    4. How much did the revenue from operations grow for Mukka Proteins?

      Mukka Protein’s revenue from operations grew 95% in 2 years. This massive jump in top line figures indicates the company’s strive for growth. 

  • Platinum Industries IPO: Business Model, Key Details, KPIs, and SWOT Analysis

    Platinum Industries IPO: Business Model, Key Details, KPIs, and SWOT Analysis

    Platinum Industries is entering the IPO frenzy and is raising a total of INR 235.32 Crores. Today’s blog will cover the company’s business model, KPIs, and SWOT analysis.

    Company Overview

    Platinum Industries was founded in 2016 and initially adopted a limited liability partnership status and later transformed into a public limited company.

    The company operates in the speciality chemical business and produces lubricants, CPVC additives, and PVC stabilizers.

    According to a CRISIL assessment done in 2022–2023, the company boasts a 13% market share in the domestic PVC stabilizer industry. The company’s 21,000-square-foot production facility is located in Palghar, Maharashtra.

    As of December 31, 2023, it employed 97 people and served over 273 clients for the fiscal year 2023. 

    Company Promoters

    The company’s founders are Parul Krishna Rana, who holds the executive director position, and Krishna Dushyant Rana, who has the chairman and managing director positions. 

    Approximately 94.74% of the company is owned by the promoters.

    Details of the Issue

    Through a new share offering of 1.38 crore, the company hopes to raise INR 235.32 crore. With a market lot of 87 shares, the issue price’s lower price band is 162 INR, while the upper price band is 171 INR per share.

    Timeline of IPO

    Let’s have a look at the timeline of the IPO

    IPO Open Date27th Feb 2024
    IPO Close Date29th Feb 2024
    Finalization of Allotment1st March 2024
    Initiation of Refund4th March 2024
    The credit of Shares into a Demat Account4th March 2024
    Listing Date on NSE & BSE5th March 2024

    Details of IPO

    Face Value of Share10 INR per share
    Price Band162 to 171 INR per share
    Market Lot87 Shares
    Total Fresh Issue Size235.32 Crore
    Total Number of Shares1,37,61,225 Shares

    IPO Allotment Size

    ApplicantMarket LotShareAmount
    Retailer (Min)18714,877
    Retailer (Max)1311311,93,401
    Small High Net Worth Individual (Min)1412182,08,278
    Small High Net Worth Individual (Max)6758299,96,759
    Big High Net Worth Individual (Min)68591610,11,636

    A retail consumer can invest a minimum of 14,877 INR and a maximum of 1,93,401 INR, as indicated by the above table.

    Objective of the Issue

    The business plans to use the proceeds from the issuance to finance the working capital requirements of its Indian units and establish Platinum Stabilizers Egypt LLP, a PVC stabilizer production plant in Egypt.

    Read Also: Rashi Peripherals Limited: IPO Analysis

    Key Financials of the Company

    Balance Sheet

    Particulars31st March 202331st March 202231st March 2021
    Non-Current Asset38.947.756.09
    Current Asset82.22176.72126.163
    Total Asset121.16884.47932.256
    Equity71.55922.3384.47
    Long Term Liability5.5242.5092.528
    Current Liability44.08659.63225.256

    The above financial statement shows that the company’s assets have expanded greatly in the last three years. Still, its current liabilities have dropped in the most recent year compared to the FY ending in 2022.

    Income Statement

    Particulars31st March 202331st March 202231st March 2021
    Revenue from operations231.481188.15689.269
    Total Income232.555189.23889.530
    Total Expenses181.619165.27882.835
    Profit before tax50.93623.9606.695
    Profit after tax37.58417.7484.815
    (In crores)

    The revenue statement shows that the company’s profit after taxes increased nearly seven times, from 4.8 crores in 2021 to 37.58 crores at the end of the fiscal year 2023. This increase is also evident in the company’s revenue.

    Increasing profitability

    KPIs

    Particulars31st March 202331st March 202231st March 2021
    Current Ratio1.871.291.04
    Return on Equity90.02%132.39%138.63%
    Inventory Turnover Ratio10.8817.5315.33
    Net Profit Ratio16.24%9.43%5.39%
    Return on Capital Employed56.85%52.51%74.28%

    The company’s major metrics are listed above, and they show that, in contrast to 2021, net profit increased significantly in 2023. The return on capital employed also increased during the previous two years, while the return on equity decreased.

    Cash Flow Analysis

    Particulars31st March 202331st March 202231st March 2021
    Net Cash Flow from Operating activities38.35514.8933.276
    Cash Flow from Investing activities(36.731)(4.954)(1.309)
    Cash Flow from Financing activities0.47419.001(1.173)
    (In crores) 

    Based on the company’s EPS from the previous year, the P/E ratio is calculated to be 17.19x on the lower price band of 161 INR and 18x on the upper price band of 171 INR. 

    SWOT analysis

    Strengths

    1.  According to a CRISIL report, the speciality chemical sector in the Indian economy is predicted to increase by 8.3% C.A.G.R.

    2.  The company ranked third in India in domestic sales of PVC stabilizers.

    4.  Due to the substantial entry barriers in this industry, the risk associated with competition is minimal.

    5.  The company has more than 400 grades of products specifically designed for PVC applications, which indicates that the company is aiming for a massive increase in the market share. 

    Risks

    1.  The company presently operates a single manufacturing facility in Palghar, Maharashtra, and any disruption there will affect its profitability.

    3.  Their ability to obtain raw materials or pay more for them will affect their profitability in the future.

    4.  Sales will be impacted by the difficulties a firm faces while expanding into a new area.

    5.  Few clients account for a sizable amount of the company’s revenue; disagreements among them could cause revenue volatility.

    Read Also: IndusInd Bank Case Study: Business Model, Product Portfolio, and SWOT Analysis

    Conclusion

    While the company has a strong financial history and plans to expand into other nations strategically, its clientele is relatively small which may worry some investors. Since establishing itself in 2016 and emerging as a major force in India’s stabilizer manufacturing sector, the company has had a lengthy growth narrative.

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    5D Mart Case Study

    Frequently Asked Questions (FAQs)

    1. What is the minimum amount required to participate in the IPO of Platinum Industries?

      The minimum investment for the Platinum Industries IPO will be 14877 INR, with a minimum market lot size of 87 shares in the upper price range of 171 INR.

    2. What is the reason behind the Platinum Industries’ IPO?

      The company intends to build a manufacturing facility in Egypt. Thus, they want to obtain money through an initial public offering (IPO) to expand its operations.

    3. What is the Platinum Industries IPO pricing range?

      The price band of the company ranges from 162 on the lower side to 171 on the upper side.

    4. Is Platinum Industries a profit-making company?

      Yes, Platinum Industries has made a substantial profit over the last three years, thus making it a profitable business.

    5. What does the cash flow statement indicate about the company’s operations?

      The company’s cash flow statement shows that the management can maintain consistent efficiency while investing the proceeds to expand further.

  • Exicom Tele-Systems IPO: Business Model, KPIs, SWOT Analysis, and FAQs

    Exicom Tele-Systems IPO: Business Model, KPIs, SWOT Analysis, and FAQs

    A pioneer in the EV charging space is leaping forward with its IPO. This marks a pivotal moment for the company and India’s existing and evolving EV landscape.

    Today’s blog will explore Exicom’s journey toward clean and sustainable transportation.

    Exicom Tele-Systems IPO Company Overview

    Exicom was founded in 1994 as Himachal Exicom Communications Limited for manufacturing DC Power Systems, and since then, it has carved out a niche for itself in the Indian market.

    Exicom Tele-Systems Limited is a company based in India that provides solutions for powering digital communication infrastructure. The company is headquartered in Gurgaon, India and has a presence in over 50 countries. They are a leading provider of power solutions for the telecom industry.

    The company faces tough competition from Amaraja Raja Batteries, Exide Industries, HBL Power Systems, Coslight India, and many others. 

    Exicom Tele-Systems IPO Business Model

    Exicom Tele-systems functions under two business verticals

    Electric Vehicle Charger Business 

    In this segment, the company offers smart charging systems with innovative technology in India for residential, business and public charging use.

    The EV Charger Business started in 2019 and provides slow, fast, and Automatic Original Equipment Manufacturer (OEM) solutions. All these products fulfil the Indian certification requirements and global standards.

    Additionally, the company aims to accelerate India’s transition to electric mobility by designing and building EV chargers for homes and businesses and laying the groundwork for widespread EV ownership.

    The customers of EV Charger Business include Reliance BP Mobility Limited and Fortum Charge & Drive India Private Limited, fleet aggregators such as BluSmart Mobility and Lithium Urban Technologies, and established automotive OEMs like Mahindra & Mahindra Limited, MG Motors Limited, and JBM Limited.

    EV (Electric Vehicle) Charger

    Did You Know?

    Exicom has deployed over 35,000 EV chargers across 400 locations in India.

    Critical Power Solutions Business

    The company designs, manufactures, and services critical digital infrastructure technology in this segment to deliver overall energy management at telecommunications sites and enterprise environments in India and foreign countries. Exicom holds a market share of 16% in the DC Power Systems under Critical Power business and is identified as a leading player in the Li-ion Batteries market.

    Furthermore, under this segment, the company offers a diversified portfolio of DC power conversion systems and Li-on-based energy storage solutions to provide backup power during grid interruptions. In this regard, Exicom is deployed in India, Southeast Asia, and Africa. These DC power systems are specially designed and customised according to customers’ preferences for use at telecommunications sites like large offices, renewable hybrid sites, base station sites, and wi-fi sites.

    Apart from the business verticals discussed above, Exicom has also established three subsidiaries outside India to capture a share of the global market.

    1. Exicom Tele-Systems Pte. Ltd. in Singapore
    2. Horizon Power Solutions DMCC in U.A.E
    3. Horizon Tele-System SDN BHD in Malaysia

    The company holds two dedicated research and development centres and three manufacturing facilities in India with a capacity to manufacture 12,000 DC Power Systems, 44,000 AC Chargers and DC fast chargers.

    The business is supported by an employee base of 1,124 in India and 43 employees at the company’s subsidiaries.

    Did you Know?

    Exicom has deployed 450,000 Li-ion batteries for use in the telecommunications sector.

    Telecom Power Supplier

    IPO Details

    1. Exicom Tele-Systems IPO is a book-built issue of INR 429 crores. The issue is a fresh issue of INR 329 crore and an OFS of 100 crore.
    2. The IPO will open for subscription on February 27, 2024, and will close on February 29, 2024.
    3. The allotment date for the IPO is fixed on Friday, March 1, 2024.
    4. The tentative listing date of the company on the stock exchange is Tuesday, March 5, 2024.
    5. The price band for the IPO is fixed at INR 135 to INR 142 per share. The minimum lot size for the application of the IPO is 100 shares.
    6. The minimum amount of investment for retail investors is INR 14,200.
    7. Monarch Networth Capital Limited, Unistone Capital Private Limited, and Systematix Corporate Services Limited are the book-running lead managers.

    Objective of the Issue 

    • Repay/prepay the borrowings either in part or in full.
    • Investment in research & development and general corporate purposes.
    • Partial funding for the needs of working capital.
    IPO DateFebruary 27, 2024 to February 29, 2024
    Price BandINR 135 to INR 142 per share
    Lot Size100 Shares
    Fresh Issue23,169,014 shares
    OFS7,042,200 shares 
    Issue TypeBook Built Issue IPO
    IPO TypeMain-Board IPO
    Allotment DateFriday, March 1, 2024
    Initiation of RefundsMonday, March 4, 2024
    Listing DateTuesday, March 5, 2024

    Financial Summary & KPIs

    Financial statement highlights of the company (Y-o-Y basis)

    ParticularsFY 2023FY 2022FY 2021
    Revenue From Operations707.9842.8512.9
    Total Expenses690.9809.2511.5
    Net Profit6.45.13.4
    Borrowings117.9107.7101.7
    Total Current Assets574.5433.2528.1
    Total Current Liabilities369.1277.4368.4
    EBIT Margin (in %)5.1%6.2%3%
    Basic EPS (in INR)0.690.56 0.38
    *(Above-mentioned figures in INR crores, except EPS and EBIT Margin)

    Read Also: Enfuse Solutions Limited: IPO, Business Model, And SWOT Analysis

    Key Performance Indicators (KPIs)

    KPIsFY 2023FY 2022FY 2021
    Gross profit (in INR crore)175.22179.11116.24
    Gross profit margin (%)24.75%21.25%22.66%
    EBITDA (in INR crore)52.4367.4229.51
    EBITDA Margin (%)7.41%8.00%5.75%
    Profit after Tax from continuing operations31.0230.3912.67
    PAT Margin (%)4.38%3.61%2.47%
    ROCE (in %)10.92%17.66%5.33%

    Strengths

    1. Exicom is a market leader with an early-mover advantage in the Indian EV market, with a market share of 60% and 25% in the residential and public charging domains.
    2. Exicom’s in-house R&D facilities and manufacturing units allow them to control the entire product development process, ensuring quality, efficiency and customisation capabilities.
    3. With over two decades of experience in the power solutions sector, Exicom enjoys established relationships with institutional and corporate clients, showcasing their expertise in timely delivering projects.
    4. The company has a strong track record of financials, and its recent IPO aims to raise capital for further expansion and development, indicating a positive outlook for the company.
    5. As the EV market in India continues to increase, Exicom’s diverse product portfolio catering to the diverse needs of customers positions them to capitalise on the growing demand.

    Weaknesses

    Besides its strengths, Exicom Tele-Systems also faces several risks that investors should consider before making investment decisions.

    1. The Indian EV charging market is rapidly increasing and becoming increasingly competitive, with established players from the power and automotive industries entering the segment. New startups are also eyeing for market share, thus forcing Exicom to maintain its competitive edge.
    2. The EV technology is consistently evolving with new standards and functionalities emerging. Exicom needs to continuously invest in R&D to ensure its products remain relevant and competitive in the long run.
    3. The company’s recent revenue decline and relatively low-profit margins can be points of concern. However, the company’s ability to manage debt will be crucial for future growth.
    4. The Indian government plays a significant role in shaping the EV Industry through policy decisions and subsidies. Any substantial regulation change could impact Exicom’s business model and profit margins.

    Read Also: Apply in IPO Through ASBA- IPO Application Method

    Conclusion

    Exicom possesses a firm foundation with an early mover advantage, vertical integration, and domain expertise. In the future, their diversified product portfolio and recent IPO position will help them to capitalise on the growing EV market in India. 

    Exicom Tele-Systems can be a good option for investors interested in the future of the Indian EV landscape. The company’s ability to mitigate risks and capitalise on its strengths will decide its success in the coming years.

    Frequently Asked Questions (FAQs)

    1. What does Exicom Tele-Systems do?

      The company provides power solutions and EV charging to a diversified customer base.

    2. Exicom witnessed a decline in revenue in FY23; is this a red flag in the IPO?

      The company saw a decline in revenue in FY23;. At the same time, this may seem like a major weakness of the management, the decision to invest should be taken after a thorough analysis of the company. 

    3. Why is the company going public?

      Exicom is going public to raise funds to expand its business operations and repay the borrowings.

    4. What makes the company special?

      Exicom got a head start in the EV race. They design and build their chargers through an in-house manufacturing facility and have a proven track record of being a market leader.

    5. Is Exicom Tele Systems a main-board IPO?

      Yes, Exicom Tele-systems IPO is raising INR 429 Crores, thus making it a mainboard IPO.

  • Detailed Guide on Bond Investing: Characteristics, Types, and Factors Explained

    Detailed Guide on Bond Investing: Characteristics, Types, and Factors Explained

    We all must save some money, but if our risk-taking capacity does not allow us to take exposure in equity, then the option of bonds seems viable. 

    Today, we’ll explain what bonds are, how they function, and their kinds.

    Introduction of bonds

    Bonds fall within the category of fixed-income securities. Bonds are debt securities offered by private institutions and federal and state governments to raise funds to cover their costs. An entity issues bonds to investors to raise funds and, in turn, pays “coupon” payments. The payments are based on fixed interest rates, decided at the start of the tenure.

    Investing in bonds

    Characteristics of Bonds

    1. Issuer – Bonds may be issued by both private and public institutions, including business houses, state and federal governments, and municipalities. 
    2. Face Value – Also referred to as the par value or redemption value. It represents the nominal value of security in the eyes of the issuer. This value, along with the interest component, is returned to the investor on the maturity date of the bond. 
    3. Coupon Rate – It is the interest (on face value) paid out periodically to the investor.
    4. Tenure – It relates to the duration of bond issuance; for example, if a bond is issued on January 1, 2020, for a tenure of five years, its maturity date will be January 1, 2025. 
    5. Issuance of Bonds – Bonds are initially issued on the primary market and subsequently traded on the secondary market. 
    6. Ratings – The task of rating the bond based on the company’s creditworthiness is carried out by several credit rating firms that perform a thorough analysis of both the issuer and the bond itself. 
    7. Yield to Maturity (YTM) – YTM is the bond’s internal rate of return (IRR) if the investor holds the bond till maturity.

    Bond issuance process

    1. The borrowing entity prepares a bond indenture that contains all the relevant details, such as the par value, coupon rate, maturity date, tenure, and credit rating.
    2. The bond indenture is then circulated in the primary market to accept applications from investors.
    3. The borrower then regularly pays the coupon amount to the bondholder, and the borrower can default only in case of financial turmoil.
    4. The unallocated applications are returned to the investors, and allocated investors are sent the bond confirmation that acts as proof of lending to the issuer.
    5. The borrower then regularly pays the coupon amount to the bondholder, and only in case of financial turmoil can the borrower default.
    6. At the end of the tenure, the borrower pays the face value of the bond and any accumulated interest.

    Types of Bonds

    Bonds are divided into various groups according to their characteristics. 

    Treasury Bonds

    The central government issues bonds of this kind, with maturities ranging from ten to thirty years. With little to no credit risk, it is considered the safest bond.

    Municipal Bonds

    The municipal or state governments issue these bonds to generate money for the state’s welfare projects. 

    Corporate Bonds

    Corporate entities issue these bonds to generate money for various operational needs. While they often offer greater yields than government bonds, these bonds also carry a higher risk. 

    Zero-Coupon Bonds

    As the name suggests, Zero-coupon bonds do not make periodic coupon payments but pay the entire interest component at the end of the tenure. These bonds are redeemed at face value and are issued at a discount. Thus turning the discount into the interest component of the bond.

    Junk Bonds

    The bonds allocated below BBB rating by credit rating agencies are called Junk bonds. These bonds often provide the highest yield but carry the highest risk. These are generally issued by organizations that are prone to default. 

    Convertible Bonds

    This bond has an option to convert the bonds into stocks. These bonds allow the investor to earn greater returns when the company’s shares increase.

    Callable Bond

    The bond allows the issuer to redeem the callable bonds at a predetermined date before maturity. These bonds protect the borrowers if the interest rate decreases as it allows for refinancing the borrowing at the decreased rates.

    Putable Bond

    This bond allows the bearer to redeem it at a predetermined date before its maturity. This bond protects the holder from an interest rate increase as it allows the holder to sell the bond back to the issuer at a predetermined price.

    Floating Rate Bonds

    These bonds’ interest rates fluctuate in line with the repo rates set by the Reserve Bank of India. 

    Inflation Linked Bonds

    The coupon rates on these bonds are typically higher than the overall economic inflation rates. The coupon payments of these bonds are adjusted to preserve their real worth after adjustment of the inflation rate.

    Perpetual Bonds

    These bonds don’t have a maturity date because the bond’s issuer is not required to pay the par value to the bondholder. As long as they own the bond, the bondholder will continue to receive interest.

    CAT Bonds

    Insurance companies issue CAT bonds, also known as catastrophe bonds, to investors to help them assume the risk of certain calamities like earthquakes and floods. These bonds typically have a high yield as they come with higher risk.

    Capital Gain Bonds

    A select few institutions issue these bonds, allowing them to benefit from capital gains made on selling real estate, including buildings and land, under section 54EC. 

    Advantages of investing in bonds

    1. Regular Income – Bond investments provide consistent income because the bond issuer is expected to make coupon payments regularly. 
    2. Less volatile – Bonds are well-liked by investors with low-risk tolerance since they are relatively less volatile than equity investments but offer greater returns than normal bank FDs.
    3. Diversification – Allocating a portion of the portfolio to fixed-income securities lowers the overall risk. Bonds will continue to yield returns even in an equity market decline.
    4. Capital Preservation – If the company becomes insolvent, bondholders have a higher probability of receiving their principal amount than equity shareholders.
    research on bond investing

    Disadvantages of investing in bonds

    1. Credit Risk – The bondholder must bear the risk of not receiving their payment obligations in the case of default.
    2. Lower Return – Historically, in comparison to equity investing, bonds offer a lower rate of return. 
    3. Reinvestment Risk – Reinvestment risk arises when an investor cannot reinvest the interest at the same YTM rate as when the bond was first issued. Failure to reinvest the coupon at YTM rate would result in a decreased rate of return over the tenure of the bond.
    4. Inflation Risk – Rising inflation over time may cause the purchasing power of bonds, other than inflation-linked bonds, to decline more than equity shares.

    Factors that affect bond prices

    1. Interest Rate – Interest rates and bond prices are inversely correlated. This implies that bond prices may decrease when interest rates rise, and vice versa. 
    2. Maturity Date – When investing in bonds, investors must consider their investment duration. Bonds with longer maturity dates are more sensitive to interest rates, whereas bonds with shorter maturity dates are less sensitive. 
    3. Credit Quality – The price of high credit-rated bonds will rise due to investor demand outpacing that of lower-rated bonds.
    4. Supply and Demand – Bond price will be impacted by supply and demand; if supply is high and demand is low, bond price will be lower, and vice versa.

    Additional factors to be considered

    1. Credit Risk – Risks of issuer not paying the instalments is called Credit Risk. It is advisable to opt for credit-worthy issuers when shortlisting borrowers in order to limit the risk of default. 
    2. Liquidity of Bonds – An investor should consider bonds that provide greater liquidity, which generally exists in credit worthy issues. 
    3. Investment Goal – When choosing which bond to invest in, you should consider your investment horizon, risk tolerance, and investing goal.
    4. Maturity of Bonds – Bonds with shorter maturities are less susceptible to fluctuations in interest rates; conversely, the prices of bonds with longer maturities are more unstable. 
    5. Taxation – Since the interest on bonds is taxable according to the income tax bracket, an investor should think about the tax consequences before investing.

    Conclusion 

    Bonds are typically a good option for risk-averse investors who prefer steady returns on their capital rather than portfolio volatility. It is advisable to do your research to find the right kind of bond to buy because each type has a different risk-reward profile.

    Frequently Asked Questions (FAQs)

    Q1. What is the primary risk affecting corporate bonds?

    Ans. The primary risk connected to corporate bonds is default risk, often known as credit risk.

    Q2. What kind of bond is the safest?

    Ans. Bonds issued by the Government of India are regarded as the safest kind of bonds available in the Indian market.

    Q3. What is the primary distinction between YTM and coupon rate?

    Ans. The Yield To Maturity (YTM) is a bond’s internal rate of return (IRR) if the investor holds the bond till maturity, and the coupon rate is the set interest paid by the bond’s issuer on its face value.

    Q4. Are bond interest payments taxable?
    Ans. Yes, bond interest receipts are taxable according to the investor’s income tax bracket.

    Q5. Is it possible to sell the bond before it matures?
    Ans. Yes, you can sell the bonds on the secondary market before they mature.

    Disclaimer: The securities, funds, and strategies mentioned in this blog are purely for informational purposes and are not recommendations.

  • Sectoral Funds Decoded: Riding the Investment Roller-Coaster

    Sectoral Funds Decoded: Riding the Investment Roller-Coaster

    Imagine sitting on a steep roller-coaster ride, coupled with the fear of a crash. That is the world of sectoral funds!

    If you do not want to end up stranded in the financial cosmos, read today’s blog, in which we will uncover the secrets of sectoral funds and whether they deserve a place in your investment portfolio.

    Overview of Sectoral Funds Decoded

    Sectoral Funds are a type of equity mutual fund that only invests in companies operating within a specific sector or industry of the economy.

    These funds allow the investor to gain concentrated exposure to a particular sector and amplify their returns if that sector outperforms the broader index. However, sectoral funds have increased risks due to a lack of diversification.

    These funds focus on various sectors and industries such as technology, healthcare, consumer staples, financial services, energy, and infrastructure.

    Benefits of Sectoral Funds Decoded

    Sectoral funds can offer tempting advantages to investors. Let us have a look at the benefits of sectoral funds:

    1. When a chosen sector experiences a boom, sectoral funds can outperform diversified funds. Imagine the tech boom of the late 90s; any technology-focused fund would have given incredible returns to investors.
    2. Investing in such a fund offers the investor an opportunity to gain exposure to the sector without analysing each stock within the industry. 
    3. Sectoral funds can be used for tactical portfolio diversification, allowing you to capitalise on short-term trends and sector rotation.

    Risks

    1. Sectoral funds come with a high probability of losses. If the chosen sector underperforms, sectoral funds will suffer as fund managers will not have room for diversification and protecting the capital. 
    2. These funds are inherently more volatile than diversified funds. Therefore, sharp swings in prices/NAVs are more likely to occur.
    3. Understanding the sector dynamics and prospects is essential and complex at the same time before investing. Failure to interpret the sector’s trajectory during the investment horizon could lead to significant losses in the short term. 
    4. In the race to earn benchmark-beating returns, choosing the right sectoral fund, after considering the political, economic, and technological landscape, is highly crucial because making the wrong choice might lead to inadequate returns or even losses in the short and medium term.
    Different sectors

    Performance

    The Covid-19 pandemic sent shockwaves throughout the global economy, and many sectors were impacted differently. Sectoral funds felt the heat too.

    The Sunny Side

    Pharma Funds – As the pandemic raged, demand for healthcare products soared and pharma funds were riding the wave since they delivered consistent returns.

    Technology Funds – With the world shifting online, technology companies thrived. Tech-focused funds witnessed exponential growth because of increased dependence on remote work, communication and entertainment platforms.

    The Dark Side

    If you invested in these sectoral funds, you must have witnessed their consolidation in the past couple of years.

    Technology Funds – The initial sector boom, fuelled by the growth of online platforms and digital transformation, faded away when the economies reopened, and offline activities resumed.

    Compared to their respective benchmark, some top-performing sectoral funds that doubled their returns during the Covid-19 pandemic were not even at par post-Covid.

    As of 23rd February 2024, the broader Nifty 50 index has risen over 91% since November 2020, while the Nifty IT index has risen 82%.

    Pharma Funds – Something similar happened with pharma stocks. During the height of the pandemic, these stocks surged due to increased demand for vaccines, diagnostics, and other medical equipment, eventually leading to better pharma funds’ performance. The demand for medical products flattened once the initial panic subsided and vaccine rollouts progressed. This led to a massive correction in the stock prices of the pharma sector.

    As of 23 February 2024, the broader Nifty 50 index has risen 91% since November 2020, while Nifty Pharma has only given 64% returns.

    Read Also: Decoding Credit Risk Funds In India

    Returns Comparison

    The table below shows the performance of different sectoral funds in the past 4 years relative to their benchmark.

    Technology Sector

    Scheme2023202220212020
    ABSL Digital India Regular35.75-21.6470.4759.03
    SBI Technology Opportunities Regular24.82-15.4666.4347.45
    ICICI Prudential Technology Fund Regular27.45-23.2275.7470.59
    S&P BSE IT TRI28.28-22.7058.4560.05
    (S&P BSE IT TRI is the benchmark index for technology funds)

    Pharma Sector

    Scheme2023202220212020
    Nippon India Pharma Fund Regular39.15-9.923.9366.44
    SBI HEALTHCARE Opportunities Regular38.24-6.0220.1565.83
    ABSL Pharma and Healthcare Regular37.67-12.6819.5453.84
    S&P BSE Healthcare TRI37.97-11.521.5462.61
    (S&P BSE Healthcare TRI is the benchmark index for pharma funds) 

    Example

    Let us understand the cycle of sectoral funds with the help of the table.

    Suppose investor A invested in technology and pharma funds during Covid 19. Some of the top-performing funds gave massive returns and significantly outperformed their respective benchmark indices, affirming the beliefs of the investor. The table shows that S&P BSE IT TRI & S&P BSE Healthcare TRI gave a return of 58.45% and 21.54% respectively in the year 2021. 

    However, investor A stayed invested in these funds with the hope of getting more profits. But after the COVID wave subsided, the market witnessed a stark contrast in the performance of both the technology and pharma sector funds, and these funds gave returns of -22.7% & -11.5%, respectively. Thus leading to catastrophic losses.

    This example indicates that sectoral funds concentrate their investments in specific sectors. This concentration leads to their performance moving in tandem with the cyclical nature of the underlying sector. Therefore, the exposure of unsystematic (diversifiable) risk increases substantially.  

    Read Also: History of Mutual Funds in India

    Conclusion

    After analysing the pros and cons and the recent performance of sectoral funds, the million-dollar question remains: Should you invest? As with most investment decisions, the answer is not a simple ‘yes’ or ‘no’. It depends on your risk tolerance and investment goals. Consider sectoral funds if you are a long-term investor, have a high-risk tolerance, and have a firm conviction in a particular sector. Avoid sectoral funds if you are a short-term and risk-averse investor lacking sector expertise.

    Ultimately, the decision is yours. Sectoral funds can be a powerful tool to maximise wealth, but they also need a deep understanding of the sector-specific risks.

    S.NO.Check Out These Interesting Posts You Might Enjoy!
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    Frequently Asked Questions (FAQs)

    1. Why should I invest in sectoral funds?

      Sectoral funds offer investors the potential for higher returns (with increased risk). Thus making them a lucrative investment vehicle for those who can take the risk. 

    2. Are sectoral funds right for me?

      The answer depends on your risk tolerance, investment goals, and knowledge of the chosen sector.

    3. Is there a magic formula for picking the right sectoral fund?

      No, there is no guaranteed recipe for success. So, one should evaluate all factors before investing.

    4. Can I time the market with sectoral funds?

      Predicting market trends can be tricky. Therefore, performing self analysis is of utmost importance. 

    5. Can sectoral funds help me get rich quickly?

      Sectoral funds do carry the potential to offer high returns but simultaneously come with amplified risks and volatility. Do not invest in these funds with a get-rich-quick objective!

  • The Art of Value Investing: Meaning and Strategies

    The Art of Value Investing: Meaning and Strategies

    In the hustling world of finance, where trends shift and fortunes change quicker than ever, one strategy stands the test of time and is known as value investing.

    This approach has guided investors to discover gems in the rough for decades. But is value investing still relevant in an age of instant satisfaction and flashy IPOs?

    In today’s blog, we will be analysing the concept of value investing and how to assess a company’s true worth.

    Concept 

    Value investing is an investment philosophy based on buying stocks that are trading below their intrinsic value. Intrinsic value represents the true worth of the company estimated by analysing its fundamentals, such as financial statements, business models, and industry trends.

    The concept of value investing functions on the following principles,

    Undervaluation: 

    Value investors generally look for stocks that are trading less than their intrinsic value and offering a discount.

    Margin of Safety: 

    MoS is when an investor buys below intrinsic value, providing a buffer against unforeseen events and protecting against overpaying.

    Contrarian Approach:

    Value Investors are predisposed to buy stocks out of favour with the market, betting the market will eventually recognise the true value.

    Long-term Investing:

    Focusing on holding stocks for an extended period and waiting for the market to catch up with their intrinsic value.

    Read Also: Intrinsic Value vs Book Value

    Benefits

    1. The core advantage of value investing lies in its ability to control market inefficiencies. Recognising and buying undervalued stocks with a margin of safety can help investors achieve returns that exceed the market average over the long term.
    2. Value investing inherently emphasizes on buying stocks trading below their intrinsic value. This helps create a buffer against downturns, which means that even if the market price falls, it is less likely to fall below the intrinsic value.
    3. Value investors generally prefer companies with strong financial health, stable business models and consistent cash flows. This focus on fundamental strength helps preserve capital by investing in companies with a higher chance of fighting market storms and keeping themselves financially sound.
    4. Value investing encourages a disciplined and research-driven approach to investment in the market. The focus is on fundamental analysis, and emotional decisions based on market sentiments are avoided, eventually preventing investors from getting into impulsive trades.
    5. Additionally, value investors often adopt a contrarian approach, which can lead to significant gains if markets correct their mispricing.
    6. Value investing also offers emotional benefits. Investors can avoid the anxiety and stress linked with reactive trading decisions and short-term market noise by focusing on research and analysis.

    Risks 

    1. The success of value investing hinges on finding market inefficiencies. If the market is truly efficient, recognising undervalued stocks might be difficult.
    2. Value investing demands patience and discipline from the investors. It might take a long time for the market to identify a company’s true value.
    3. Going against the market sentiment and buying unpopular stocks can be emotionally challenging, and investors need to stick to their convictions.
    4. Not every cheap stock is a good investment. Some companies appear undervalued but may have legitimate reasons for low prices, such as poor management, structural decline or hidden liabilities. These value traps can lead to losses and destroy the investor’s confidence if not identified correctly.
    5. Broader economic trends such as regulatory shifts, recession or any industry-specific changes can also impact even the fundamentally strong companies.

    Key Metrics

    Some of the key metrics that an investor needs to look for are as follows.

    Price-to-Earnings Ratio (P/E Ratio)

    This ratio tells us how much an investor would have to pay to own a piece of a company based on how much profit the company makes. A lower P/E ratio indicates that a stock is undervalued as we would have to pay less to gain the profit. However, it is essential to analyse and compare the P/E to the company’s industry average and historical P/E ratios.

    For example, Consider two companies

    Company A

    Stock price – INR 50

    EPS – 5

    PE Ratio – INR 50/5 = 10

    Company B

    Stock Price – INR 100

    EPS – 20

    PE Ratio – INR 100/20 = 5

    Company A is trading at a higher multiple of their earnings. Thus, Company B is undervalued when compared to A. 

    Debt-to-Equity Ratio

    This ratio compares the company’s total debt to its equity. A lower debt-to-equity ratio shows that a company is less risky in financial terms as they don’t have to worry much during reduced margins. 

    For example, consider two companies

    Company A

    Debt – INR 1 lakhs

    Equity – INR 2 lakhs

    Debt-to-Equity Ratio – INR 1 lakhs/ INR 2 lakhs = 0.5

    Company B

    Debt – INR 3 lakhs

    Equity – INR 1 lakhs

    Debt-to-Equity Ratio – INR 3 lakh/INR 1 lakh = 3

    With a Debt-to-Equity ratio of 0.5, Company A has less debt relative to its equity, indicating a more conservative financial structure and low financial risk.

    On the other hand, Company B has a debt-to-equity ratio of 3, reflecting more debt than its equity, indicating a higher financial risk.

    Price-to-Book Ratio (P/B Ratio)

    This ratio compares a company’s stock price to its book value per share. A low P/B ratio indicates that the stock is undervalued.

    For example, consider two companies

    Company A

    Stock Price – INR 20

    Book Value per share – INR 10

    P/B ratio – 20/10 = 2

    Company B

    Stock price – INR 40

    Book value per share – INR 20

    P/B Ratio – 40/20 = 2

    While Company A trades at INR 20, Company B trades at INR 40. B is expensive and overvalued at a superficial level, but after calculating the P/B ratios, they both seem equally valued in the market. 

    Return on Equity (ROE)

    This metric measures a company’s ability to generate profit from the equity of shareholders. Higher ROE indicates a well-organized use of capital.

    Consider a company named ABC Technologies with an income of INR 10 Lakhs and shareholder equity of INR 50 Lakhs.

    ROE – Income/shareholder’s Equity = INR 10 lakhs/INR 50 lakhs = 0.2

    This shows that for every rupee provided by the shareholders, ABC Technologies generates 20% of profit.

    Discounted Cash Flow (DCF)

    This model helps estimate the present value of the company’s future cash flow, allowing investors to analyse the stock’s intrinsic value.

    For example, to estimate a company’s intrinsic value using a DCF model, an investor needs to forecast the future cash flows, which is the core part of the model, and to forecast the future cash flow, an investor first needs to.

    • Project financial statements by analysing historical track records.
    • Use applicable assumptions to predict Cash Flows for coming years and estimate the terminal value of the company using different methods.
    • Then, determine the appropriate discount rate to reflect the risk linked with the company and the projected cash flows.
    • Now, the investor can use the chosen discount rate to bring each year’s forecasted Cash Flows back to its present value (PV) and then add the PV of all the future cash flows to arrive at the present value of all future cash flows.
    • Add the present value of the terminal value to the present value of free cash flows to get the estimated intrinsic value.

    *(Remember that real-world DCF models involve complex adjustments and calculations).

    PEG Ratio

    This ratio compares the company’s P/E ratio to its expected earnings growth rate. A lower PEG ratio indicates that a stock is undervalued relative to its growth potential.

    For example, Consider 2 companies

    Company A

    P/E Ratio – 20

    Expected EPS growth rate – 10 %

    PEG Ratio – 20/10 = 2

    Company B

    P/E Ratio – 15

    Expected EPS growth rate – 5%

    PEG Ratio – 15/5 = 3

    A PEG ratio closer to 1 indicates undervaluation relative to the company’s growth potential (like company A).

    Additional Tips for Value Investing

    1. Do not choose cheap stocks, look for quality companies with strong financials that are trading at a discount.
    2. Understand and analyse the company’s business model and competitive landscape before investing.
    3. It may take time for the market to identify the worth of an undervalued company. So, patience and confidence in our choices are extremely important.

    Value Investing v.s. Growth Investing

    1. Value investing seeks stocks currently trading below their intrinsic value, whereas growth investing seeks stocks with high growth potential, irrespective of the current valuation.
    2. Value investing uses fundamental analysis, including metrics like P/E ratio, P/B ratio, etc., while growth investing uses growth metrics like revenue and sales growth, market share, etc.
    3. The former is used for longer time-frames and needs patience, while the latter can be used in medium timeframes.
    4. Features of value investing include reduced downside risk and capital preservation, whereas features of growth investing include the potential for significant returns with comparatively higher risk.

    Value Investing for Beginners

    1. Grasp the core principles and understand the philosophy of value investing along with the metrics used to identify them.
    2. Make financial statements a friend and analyse the industry trends carefully.
    3. Beginners should avoid making impulsive decisions and should stick to their investment goals.

    Read Also: Explainer on Cigar Butt Investing: Features, Advantages, Limitations, and Suitability Explained

    Conclusion

    To wrap it up, only invest money you can afford to lose because past returns do not guarantee future success, and not every cheap stock is a good investment. Value investing isn’t a get-rich-quick scheme fuelled by speculation. Instead, it is a research-driven approach built on patience and deep fundamental analysis.

    Frequently Asked Questions (FAQs)

    1. Why should I consider value investing?

      Value investing focuses on strong fundamentals and protects from market downtrends.

    2. Isn’t the concept of value investing outdated in the fast-paced market?

      No, because value investing helps you discover undervalued gems.

    3. Is value investing risky?

      Remember that every investment comes with a risk. Every investor needs to focus on thorough research and diversification of their portfolio.

    4. How do I get started with value investing?

      Practice fundamental analysis and gradually add individual stocks to your portfolio while analysing their trends.

    5. Is value investing right for me?

      It depends on your specific risk tolerance and investment goals.

  • IPO Alert: Entero Healthcare Solutions Limited (EHSL)

    IPO Alert: Entero Healthcare Solutions Limited (EHSL)

    The Indian healthcare industry is booming, and in this dynamic landscape, EHSL has emerged as a major player in healthcare product distribution. The ongoing IPO subscription has drawn significant attention from investors and has sparked questions about their growth potential in the highly competitive market.

    In today’s blog, we will explore the company and dive deep into the business model and the key IPO details. 

    Company Overview

    The company was incorporated on January 10, 2018, as Entero Healthcare Solutions Private Limited by Prabhat Agarwal and Prem Sethi to create an organised, technology-driven, pan-India distribution platform for integrated healthcare products.

    Entero is one of India’s largest and fastest-growing healthcare distribution platforms, with an operational presence across 495 districts through physical warehouses in 37 cities in 19 states and union territories.

    Over the Financial Years 2021 to 2023, the company saw consistent growth, initially serving 39,500 retail and 1,600 hospital customers. By 2022, these numbers rose to 64,200 and 2,500, respectively. Furthermore, in 2023, they expanded their reach to 81,400 retail and 3,400 hospital customers, illustrating a steady increase in customer engagement.

    Currently, the company operates in cities like Amritsar, Dehradun, Lucknow, Gurgaon, Jaipur, Guwahati, Hyderabad, Bombay etc. 

    IPO Details

    1. Entero Healthcare Solutions is a book-built issue of INR 1600 crore. 
    2. The issue is a combination of a fresh issue of 1000 crore shares and an Offer For Sale (OFS) of 600 crore.
    3. The bidding for the IPO opened for subscription on February 9, 2024, and will close on February 13, 2024.
    4. The allotment is expected to be finalised on Wednesday, February 14, 2024.
    5. The temporary listed date is fixed as Friday, February 16, 2024, with a price band of INR 1195 to INR 1258 per share.
    6. The minimum lot size for an application is 11 shares with a minimum investment amount for retail investors standing at INR 13,838.
    7. The issue includes a reservation of up to 70,625 shares for employees offered at a discount of Rs 119 to the issue price.
    8. The company will utilise the IPO proceeds from the fresh issue.
    • To partially or fully repay or prepay the borrowed amount.
    • Fulfill the working capital requirements.
    • General corporate purposes.
    1. ICICI Securities, JM Financial, and Jefferies India Private Limited are the book-running lead managers.
    IPO DateFebruary 9, 2024 to February 13, 2024
    Expected Listing Date16th February, 2024
    Price BandINR 1195 to INR 1258
    Total Issue Size1,27,18,600 shares
    Employee DiscountINR 119 per share
    Listing atBSE and NSE
    IPO TypeMainboard IPO
    Issue TypeBook-Built Issue
    Initiation of refundsThursday, February 15, 2024

    Business Model

    The company operates under the two lines of business. 

    1. Primary Business

    It involves distribution of healthcare products to retail pharmacies, hospitals, and healthcare clinics in India.

    The company periodically buys the products in bulk from product manufacturers and then curates and offers a diverse product portfolio to retail pharmacies, hospitals, and healthcare clinics based on their requirements through its distribution network.

    Healthcare Product Distribution – provide distribution and logistics services for healthcare products to retail pharmacies, hospitals and healthcare clinics in India. Such products are sourced from healthcare product manufacturers and sold to pharmacies, hospitals and clinics at margins over the cost of the products. The product range offered includes pharmaceutical products, medical devices, surgical consumables, OTC, nutraceuticals and vaccines.

    Furthermore, the healthcare products distribution channel consists of retail distribution and hospital distribution. 

    Retail Distribution – the company’s retail distribution channel involves distributing healthcare products to pharmacies, who then sell these products to end customers. Supply a wide range of healthcare products, including pharmaceutical, nutraceutical OTC products, and medical devices, to pharmacies through a distribution network. 

    Hospital Distribution – EHSL distributes healthcare products to hospitals and healthcare clinics across India through the hospital distribution channel . The prices of the products are pre-determined in the contract between the hospitals and the suppliers.

    Entero also supplies healthcare products to customers based on their orders, which are placed through the Entero Direct application or other order-taking applications or which have been communicated through salespeople or call centre representatives.

    2. Ancillary Business

    The segment can be broadly categorised into 2 further classifications.

    1. The provision of complete and integrated commercial solutions, including sales, marketing and supply chain solutions to pharmaceutical companies and healthcare product manufacturers.
    2. The sale of private label products and medical devices under their private label, Entero Surgicals.

    Private Label Products 

    Entero Surgical comprises brands such as Carent, Entros, Entair, Safent and Glovent. The product categories under the private label products business entail homecare medical devices, surgical consumables, and rehabilitation products and devices. Furthermore, key private-label products include nebulizers, hygiene and surgical consumable products, homecare medical devices, gloves and mobility equipment.

    Future Outlook

    The Indian healthcare market is expected to grow significantly in the coming years, driven by several factors like rising disposable income, increasing awareness about healthcare and an ageing population. Entero is well-positioned to capitalise on this growth with its strong business model, vast network and technology focus. 

    As of FY23, Entero Healthcare had a market share of 1.24% while making a revenue of 3,300.2 Crores. This indicates that the potential for growth is huge, and the company is poised for success if it continues to provide value to the end consumer.

    Financial Highlights

    ParticularsAs of March 31, 2023 (FY23)As of March 31, 2022 (FY22)As of March 31, 2021 (FY21)
    Total Assets1,308.731,125.98833.79 
    Total Liabilities711.07562.77346.73 
    Total Borrowings342.45247.90141.70 
    Revenue3,305.722,526.551,783.67
    Net Profit/(Loss)-11.10-29.44-15.35 
    Revenue from Operations3,300.212,522.071,779.74 
    Expenses3,309.412,546.361,794.51 
    EBITDA21.5524.4464.01 
    EBITDA Margin1.21%0.97%    1.94%
    ROCE1.88%1.49%6.05%
    Note – In Crores, unless stated otherwise

    EHSL has shown impressive revenue growth, which indicates a healthy financial track record, and its turnaround from losses, which have narrowed over the past three years, highlights improvement. The debt level might be a concern, but the company seems to be managing it effectively.

    Strengths

    1. Benefit of consolidation – The company operates in a large and highly fragmented Indian healthcare products distribution market. This could prove beneficial for EHSL if they can consolidate such a fragmented industry.
    2. Growth – Entero is one of India’s largest and fastest-growing healthcare product distribution platforms with a major focus on network expansion and cost efficiency, catering to the needs of a wide range of customers.
    3. Large reach – In a matter of just 4 years, EHSL has reached 37 cities and employs 3040+ people. This indicates that it is no longer a small player. 
    4. Industry growth – The healthcare market in India is expected to grow at 11% p.a. in the next 5 years. This opens up a long list of opportunities for EHSL to grow. 

    Risks

    1. High short-term borrowing – The majority of EHSL’s borrowing exists for the short term. This may not be a good sign, as failure to meet these payments could be catastrophic for the company. 
    2. Competition –  There are many players in the industry, and any of the behemoths can enter the industry and cause substantial damage to the bottom line figures. 
    3. Negative Cash Flows – Historically, the company has had negative cash flows, and this trend could continue for some more years. 

    Awards & Recognitions

    • ‘Best Healthcare Brand of 2021’ – Economic Times
    • ‘Outstanding Performance’ Award for FY 2022-23 – Mankind Ltd.
    • ‘Outstanding Performance’ – JB Chemicals Ltd.
    • Recognised as ‘Maximiser 2022’ by Pfizer for improving access to quality medicine.
    • Received ‘Outstanding Contribution’ Award – Alkem Laboratories Ltd.

    Read Also: Rashi Peripherals Limited: IPO Analysis

    Conclusion

    Entero Healthcare Solutions boasts rapid growth, a sizable customer base and a well-established distribution network. The company’s turnaround from losses to profitability (11.6 Crores in 2Q24) highlights financial improvement over the years. 

    It is important to consider the risks and uncertainties before drawing any definite conclusions. The performance of the stock after listing will depend on various factors, including the overall market conditions and Entero’s competitive landscape. It is important to conduct your research and analysis before investing in any IPO.

    S.NO.Check Out These Interesting Posts You Might Enjoy!
    1What are the Different Types of IPO in India?
    2What is the Book-Building Process in an IPO?
    3Why Does a Company Go Public & Launch IPO?
    4Performance Of IPOs Launched
    5OFS vs IPO: Key Differences and Benefits
    6Apply in IPO Through ASBA- IPO Application Method
    7What Is An IPO Mutual Fund? Should You Invest?
    8What is IPO Listing Time?
    9Strategies To Boost Your IPO Allotment Chances
    10From Private to Public: Decoding the IPO Journey
    11Why Invest in an IPO and its Benefits?
    12Top 10 Largest IPOs in India
    13Anchor Investors in IPOs – Meaning, Role & Benefits
    14What is Grey Market, and How Are IPO Shares Traded?

    Frequently Answered Questions (FAQs)

    1. What is the expected use of proceeds from the IPO?

      The proceeds from the IPO will be used to repay the borrowings and fulfill the working capital requirements.

    2. Who are the major competitors of the EHSL?

      The company faces tough competition from Mankind Pharma, Max Healthcare, and Apollo Pharmacy.

    3. What is the minimum investment amount for the IPO?

      The minimum lot size is 11 shares, with an investment amount of INR 13,838.

    4. What are the risks of investing in EHSL?

      Some analysts consider the pricing aggressive, and the company has a relatively short track record compared to other established players.

    5. Should I invest in EHSL?

      This depends on your individual risk tolerance and investment goals, and do your research before investing.

  • IPO Alert – Capital Small Finance Bank

    IPO Alert – Capital Small Finance Bank

    India’s investor community has come a long way from investing in bank fixed deposits to participating in initial public offerings (IPOs), a relatively riskier alternative. Initially, people hesitated to invest even in a renowned company, but nowadays, they are actively interested in initial public offerings (IPOs).

    You would be surprised to hear that in 2022, the Indian stock market reported the third-highest number of initial public offerings (IPOs) globally. Additionally, India saw several fantastic initial public offerings (IPOs) in 2023, some of which allowed investors to earn over 90% in listing gains!

    In today’s blog, we will explore another IPO, Capital Small Finance Bank.

    If you haven’t read our blog on Jana Small Finance IPO, click here to check it out. 

    Overview of the company

    Initially founded as Capital Local Area Bank(CLAB), Capital Small Finance Bank mostly operated in Punjab. With RBI’s approval on April 24, 2016, it became India’s first small finance.

    In February 2017, it received the designation of a ‘scheduled bank’ (these banks get access to low-interest loans from RBI), which allowed it to increase its lending and borrowing capabilities.

    Capital Small Finance Bank started its business operations with 39 branches but currently operate around 1000 branches in the country. 

    Promoters

    The Samara Family is in charge of the Capital Small Finance Bank, and Mr Sarvjit Singh Samra serves as both the institution’s managing director and CEO. In the year 2000, he was instrumental in the founding of Capital Local Area Bank.

    Dinesh Gupta, Amarjit Singh Samara, Navneet Kaur Samara, and Surinder Singh Samara are other family members who are regarded as promoters.

    The promoters group holds approximately 24% of Capital Small Finance Bank Shares.

    Details of the issue

    Capital Small Finance Bank is proposing an IPO of Rs. 523.07 crore. The IPO consists of an offer for sale of 73.07 crore and a fresh issue of Rs. 450 crore.

    The Capital Small Finance Bank IPO is open to the public from February 7 to February 9, 2024. The shares will be allotted in full on February 12th, 2024, with a listing date of February 14th on the NSE and BSE.

    Timeline of the IPO

    IPO Open Date7th Feb 2024
    IPO Close Date9th Feb 2024
    Finalization of Allotment12th Feb 2024
    Initiation of Refund13th Feb 2024
    Credit of Shares into a Demat Account13th Feb 2024
    Listing Date on NSE & BSE14th Feb 2024

    Details of the IPO

    Face Value of ShareRs. 10
    Price BandRs. 445 – 468 per share
    Market Lot32 Shares
    Total Issue SizeRs. 523.07 Crores
    Total Number of Shares1,11,76,713 shares
    Fresh Issue SizeRs. 450 Crore
    Offer for SaleRs. 73.07 Crore
    Listing ExchangeNSE & BSE

    Objective of the Issue

    The main objective of Capital Small Finance Bank is to use the funds from the offering to meet the bank’s projected future capital needs, and the issue costs may also be covered using the money that was raised.

    IPO Allotment Size

    The table below displays the minimum and maximum number of shares that an investor is eligible to apply for.

    ApplicantMarket LotShareAmount
    Retailer (Min)13214,976
    Retailer (Max)134161,94,668
    Small High Net Worth Individual (Min)14448209,664
    Small High Net Worth Individual (Max)662,1129,88,416
    Ultra High Net Worth Individual (Min)672,14410,03,392

    The aforementioned figures showcase that a retail investor can invest a minimum of INR 14,976 rupees and a maximum of INR 1,94,668. 

    Lead Managers

    Equirus Capital Private Limited, DAM Capital Advisors Limited, and Navuma Wealth Management Limited are the firms in charge of managing the Capital Small Finance Bank IPO procedure.

    Read Also: IPO Alert: Jana Small Finance Bank

    Financial Highlights of Capital Small Finance Bank (In crores, unless stated otherwise)

    Particulars31 Mar 202331 Mar 202231 Mar 2021
    Assets7,990.777,153.926,371.24
    Revenue725.48632.40557.27
    Profit After Tax93.6062.5740.78
    Reserve & Surplus576.36481.74416.88
    Total Borrowings721.38498.43616.72
    Capital Adequacy Ratio – Total Capital (CRAR) (%)18.87%18.63%19.8%
    Net NPA (NNPA) (%)1.36%1.36&1.13%
    Net Interest Margin (NIM) (%)4.19%3.74%3.36%
    CASA Ratio (%)41.88%42.16%40.08%

    Both the revenue and the assets have significantly improved which suggests that the bank is operating profitably. Additionally, not only did the bank’s clients increase, but the profit after tax also rose by almost 50% y-o-y in FY23.

    The CASA ratio indicates that the bank has access to a stable and consistent source of cheap money as interest rates on Savings and Current account holdings are much lower than traditional borrowings. 

    The Net NPA ratio showcases the bank’s efficiency in providing loans only to credit-worthy individuals and institutions. A consistent rate of 1.3% is much lower than the industry average of 3-4%.

    A healthy NIM of around 4% indicates stability even in an environment where all major banks saw a decrease in NIM.

    Additional Key Performance Indicators (KPIs) 

    ROE – Capital Small Finance Bank’s return on equity ratio rose to 16.62% in FY23 from 12.95% in FY22.

    RoE is the ratio of profit after tax to average net worth.

    EPS – Capital Small Finance Bank’s earnings per share rose to 27.35 in FY23 and 18.41 in FY22. 

    This crucial financial ratio establishes the company’s profitability. It is computed by dividing net income by the total number of outstanding shares of the corporation.

    P/E Ratio – Currently, the price-to-earnings ratio stands in the range of 16.27 to 17.11, based on the lower and upper end of the price band. 

    The amount an investor is willing to pay for a single share of a company for one rupee of its earnings is referred to as the PE ratio.

    Risks

    1. Competition – The small finance banking industry is extremely competitive, with many players entering the market and even getting into the public domain via launching IPOs. This may cause some serious issues as fierce competition leads to decreased margins and market share.
    2. Negative Cash Flow – The bank has a history of having negative cash flow from operating activities. In FY23, CFO stood at -107.44 Crores, and in FY22, CFO was -210.74 Crores. The bank’s inability to generate positive cash flow from a money-making business like banking could be indicative of deeper inefficiencies that are more qualitative than quantitative. 
    3. High attrition rate – In FY23, the bank faced an attrition rate of 19.82%. This is extremely high and showcases the dissatisfaction among the workforce. This could translate into decreased margins in the coming years. 
    4. RBI Crackdown impending – As of now, the small finance banking industry has been allowed many relaxed requirements that other banks have to face. If RBI decides to take some of those relaxations away, then it could dramatically affect the margins of these banks. 
    5. Geographical concentration – As of FY23, 87% of the branches were in Punjab and 96.44% of deposits came from the region. This could be indicative of the bank’s unwillingness to expand beyond Punjab, to other regions of the country. 

    Read Also: Small Finance Bank Share List in India 2025

    Conclusion

    Investors have a fantastic opportunity to access a bank with a strong and profitable track record in the market through the initial public offering (IPO). Currently, the bank offers a varied loan portfolio with robust growth in both revenue and margin over the years.

    Investing in initial public offerings (IPOs) involves conducting extensive research on the regularities that the companies must meet. 

    The suitability of investment in an IPO depends on an individual’s risk horizon and financial objective. So, you must do your research before investing! 

    Frequently Asked Questions (FAQs)

    1. How can I participate in the Capital Small Finance Bank IPO?

      You can participate in Capital Small Finance Bank IPO through your demat account via ASBA (Application Supported by Blocked Amount) or UPI (through the broker).

    2. What will happen after I subscribe for the IPO?

      Shares are listed on the exchange after you subscribe for the initial public offering (IPO), at which point you can purchase and/or sell shares.

    3. Does the bank have enough capital to support its deposits/liabilities in case of emergency?

      The Capital Adequacy ratio, as prescribed by RBI, has to be above 15% for Small finance banks, and the Capital Small finance bank has consistently beaten this requirement by at least 3%. 

    4. What is the issue price of the Capital Small Finance Bank IPO?

      The price band of Capital Small Finance Bank IPO is 445 to 468 INR.

    5. Why is Capital Small Finance Bank going public?

      Capital Small Finance is going public to meet capital requirements.

  • Apeejay Surendra Park Hotels Limited: IPO Analysis

    Apeejay Surendra Park Hotels Limited: IPO Analysis

    Imagine a hotel experience that perfectly blends modern luxury with timeless heritage! Apeejay Surrendra Park Hotels (ASPHL), an Indian hospitality player, is ready to debut on the Indian Stock Exchanges with its upcoming IPO. But is it an investment opportunity worth exploring?

    Buckle up! In today’s blog, we will examine the company’s financials, business model, and key IPO details along with the risks and opportunities that await investors.

    Key Details

    1. Apeejay Surrendra Park Hotels IPO is a main-board IPO, which means that the post-issue paid-up capital will be a minimum of 10 crores.
    2. The IPO is a book-built issue of INR 920 crore. It is a combination of a fresh issue of INR 600 crore and an Offer For Sale (OFS) of INR 320 crore.
    3. The IPO will open for subscription on February 5, 2024, and close on February 7, 2024.
    4. The company has set the price band for shares at INR 147 to INR 155, and the minimum lot size is 96 shares.
    5. JM Financial, ICICI Securities and Axis Capital Limited are the book-running lead managers of the IPO and Link Intime India Private Limited is the registrar for the issue.
    6. The minimum amount of investment required by retail investors is INR 14,880.
    7. The initiation process for the IPO is scheduled for February 9, 2024.
    8. The IPO will be listed on Stock Exchanges, NSE and BSE on February 12, 2024.
    9. The promoters of the company are Karan Paul, Priya Paul, Apeejay Surrendra Trust, and Great Eastern Stores Private Limited.
    10. The company has allocated the IPO proceeds to repay the loan amount and address general corporate purposes.

    Opportunities linked with the IPO

    1. Apeejay Surrendra boasts a strong record of consistently growing brand portfolios that fulfil the needs of various segments.
    2. The company enjoys healthy financials with an almost 96% growth in Total income and also turned profitable in FY23 with a strong net profit of 48 Crores while exceeding 90% occupancy rates in owned hotels.
    3. Established brands of the hotel, which include ‘The Park’ and the ‘Zone by The Park’, have gained recognition and loyalty and significant competitive advantage over the years.
    4. An uptrend in Debt Service Coverage Ratio (DSCR) and Interest Service Coverage Ratio (ISCR) is visible with the DSCR reaching 1.63 in FY23 from 0.4 in FY22 and ISCR reaching 2.05 in FY23 from 0.3 in FY22.     

    Risks Linked with the IPO

    Risk in IPO
    1. The Indian hospitality sector is fiercely competitive, with strong and established players like ITC Hotels and Marriott Hotels competing for the market share. This could lead to big changes in topline figures if Apeejay Surrendra Park loses its market share.
    2. Economic uncertainties and fluctuations in tourism can expose the hotel industry to seasonality, impacting both occupancy rates and profitability.
    3. Almost 75% of the total income is realised from top 5 owned hotels, with the PARK Kolkata contributing a staggering 21.75% to the total income alone. This exposes Apeejay Surrendra Park hotels to the risk of Revenue concentration.
    4. Almost 49% of total bookings come from Online Travel Agents. While this is a growing industry, in an effort to increase their profits, these online travel agents could increase their convenience fees and other charges. This could substantially affect Park Hotels’ topline figures.
    5. A significant portion of the IPO involves selling existing shares (OFS), which means the company is not raising fresh capital. This might not directly fuel growth.

    Read Also: Rashi Peripherals Limited: IPO Analysis

    Apeejay Surendra Company Overview

    Apeejay Surrendra Park Hotels Limited is an India-based hospitality company. It holds the position of the eighth-largest hotel chain in India in terms of chain-affiliated hotel rooms with asset ownership. It is also renowned for its distinctive and personalized approach to hospitality, providing modern and stylish hotels tailored to both business and leisure travellers. ASPHL operates under 5 brands, namely:

    1. The Park is positioned as an upscale brand with luxury offerings with a philosophy that focuses on design, style and service.
    2. The Park Collection encompasses small luxury properties located at the selected travel destinations.
    3. Zone by the Park brand is positioned at the upper midscale level and is designed for price-conscious and design-conscious customers.
    4. Zone Connect by the Park is an upper midscale brand that networks its essence and design philosophy from Zone by The Park.
    5. Stop by the Zone is an economy motel brand that aims to provide convenient accommodation with easy access to parking, free Wi-Fi, and food services.

    All the brands are located in the prime locations of Bangalore, Chennai, Goa, Hyderabad, Indore, Kolkata, Mumbai, Navi Mumbai, New Delhi, and Vizag. The group will soon open hotels in other areas such as Chettinad, Patiala, Pune, and Kolkata.

    The hotels built by the group carry contemporary designs with luxurious interiors, furniture, paintings and accessories. Apart from this, the company focuses on relevant social issues and promotes art and culture in each region.

    Apeejay operates 27 hotels across luxury boutiques, upscale, and upper-midscale categories, with a pan-India presence in metro cities and aims to build upon existing brands, create an expanded group of upscale and upper-mid-scale hotels in strategic locations in India and abroad, leverage the cooperation between hospitality, food and beverage business while achieving strong profitability.

    Did you Know?

    The Park opened its first hotel in Kolkata in 1967, featuring 149 rooms on Park Street, which led to the company’s name.

    Apeejay Surendra Business Model

    Business Model of Apeejay

    Apeejay operates hotels by directly owning hotel properties, securing long-term leases for land and buildings, and entering into operation and management agreements on a contractual basis. The brand names are used on hotels constructed by third parties.

    Hotels operated under the ownership model are located on freehold and leasehold land that belongs to the company.

    Government authorities or private institutions lease some of the hotels, with lease terms ranging from five to fifty years, and renewals are possible upon expiration.

    Apeejay brand operates some hotels through operating and management contracts. Typically, the term of such contracts ranges from 8 to 25 years, with termination options available to either party.

    The fundamental hotel operations departments are front office, housekeeping, food and beverage service, food production and spa services while focusing on customer experience and comfort through quality service offerings.

    The Apeejay Park Hotel’s business model includes three different store formats:

    • A kiosk format comprising a store size of about 80 to 100 square feet.
    • A cafe format comprising a store size of about 350 to 400 square feet.
    • A restaurant format comprising a store size of about 800 to 1000 square feet.

    Awards & Recognitions

    Below mentioned are some of the accolades for ASPHL:

    • TripAdvisor Travelers Choice Awards in the year 2022-23
    • World Luxury Hotel Awards in the year 2023.
    • EEF Excellence Awards in the year 2022 for excellence in sustainable tourism.
    • CNBC TV18 Hotelier Awards in the year 2021

    Financial Statements – A Snapshot

    ParticularsFY 2021 (in millions)FY 2022 (in millions)FY 2023 (in millions)
    Revenue/Total Income1,902.902,678.305,244.30
    EBITDA228.46582.931,770.95
    Profit(758.84)*(282.02) *480.62
    Profit Margin(39.88%)*(10.53%)*9.16%
    Debt5,834.005,500.106,137.59
    Total assets12,803.3913,617.9012,751.76
    Debt-to-Equity Ratio1.091.210.99
    *(The figures in bracket shows the company incurred net loss for the particular FY)

    Read Also: Strategies To Boost Your IPO Allotment Chances

    Conclusion

    ASPHL’s IPO and planned expansion projects show its ambitious growth plans. Apeejay’s diverse brand portfolio and emphasis on innovation have helped them well to capture the opportunities in the Indian hospitality market.

    However, navigating industry competition and economic uncertainties will be important for Apeejay’s success. Do not forget to conduct proper research and analyse your risk tolerance before investing in IPO.

    Frequently Asked Questions (FAQs)

    1. What is the price band for the ASPHL IPO?

      The IPO price band for ASPHL is set at INR 147 to INR 155 per share.

    2. What will the IPO proceeds be used for?

      The IPO proceeds will be used for debt repayment and general corporate purposes.

    3. What makes ASPHL unique?

      ASPHL offers a set of diverse services that cater to different segments, from budget-friendly options to luxury stays.

    4. Who are the major competitors of ASPHL?

      ASPHL competes with major hotel chains like ITC Hotels and Marriott etc.

    5. Is investment in ASPHL IPO a good option for investment?

      Investing in ASPHL IPO should only be done after careful consideration of your financial objectives and risk tolerance. However, you should perform your own analysis before investing.

    Disclaimer: The securities, funds, and strategies mentioned in this blog are purely for informational purposes and are not recommendations.

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