Adani Wilmar - IPO - A Fortune of Edible Oil

Adani Wilmar - IPO - A Fortune of Edible Oil

 About the Company   

Adani Wilmar (AWL) is a JV between Adani Enterprises and Wilmar International, which offers most of the essential kitchen commodities for Indian consumers, including edible oil, wheat flour, rice, pulses, and sugar. The company’s business is categorized into 1) Edible Oil (82% of revenue): AWL is the largest player in branded edible oil, with 25% of India’s refining capacity, and has 2x market share of the next competitor. 2) Packaged Food and FMCG (5%): It ranks among the top 3 players in foods in India. 3) Industry Essentials (13%): It ranks first and is the world’s largest castor oil player, most of which is exported to Europe, the US and China. AWL produces 32% of the country’s stearic acid requirement, 23% of glycerine requirement and 9% of soap noodles requirement. It operates in 28 states and 8 UTs with 10 crushing units and 19 refineries, and the business spans to 1.6mn retail outlets. The company’s “Fortune” flagship brand is the largest-selling edible oil brand in India. Rural population contributes to 30%-35% of the edible oil share. Recently, AWL has focused on value-added products and has launched edible oil products, rice bran health oil, fortified foods, khichdi etc. The company has strong raw material sourcing capabilities and was India’s largest importer of crude edible oil as of FY21. AWL’s edible oil refinery in Mundra is one of the largest single-location refineries in India with a capacity of 5,000MT per day. In addition to the 22 plants, the company also used 36 leased tolling units as of Sept’21 for additional manufacturing capacities. The IPO’s price band is fixed at Rs218-230 per share, raising Rs36bn (at a higher band) with the fresh issue. The objective of the issue is to fund the capex of existing manufacturing facilities and develop new manufacturing facilities. The company also plans to repay its borrowings and fund strategic acquisitions.   

Financials in Brief  

AWL has been mostly resilient to the fallouts from the Covid pandemic. Despite a dip in the EBITDA margin from 4.4% in FY20 to 3.6% in FY21, the company reported a 62% YoY jump in PAT at Rs6.6bn, led by the saving in interest cost, which also helped to improve the net margin to 1.8% in FY21, from 1.4% in FY20. Debt-to-equity improved from 0.9x in FY20 to 0.6x in FY21. For 1HFY22, its revenue jumped by 54% YoY to Rs248bn, with an EBITDA of Rs8bn (up 23% YoY) and PAT of Rs3.3bn (up 36% YoY). 

Our View: SUBSCRIBE  

On FY22 annualized financials, the IPO is valued at 19x EV/EBITDA, 0.6x EV/sales and 44.6x P/E. On FY22 annualized financials, the IPO is valued at 19x EV/EBITDA, 0.6x EV/sales and 44.6x P/E. The IPO is available at ~53x TTM PE vs. the industry average of 67x TTM PE, which is a discount of ~21%. AWL is the largest player in branded edible oil, with 25% of India’s refining capacity, and has 2x market share of the next competitor. The company’s market share increased from 17% in FY20 to 18.3% in FY21, and it believes that there is great opportunity to increase it further on the back of a strong brand equity and fragmented nature of the branded market. AWL ranks #1 in large categories of soya oil & mustard oil. The company believes that a player has to be present in all types of oils that the country consumes and offer multiple SKUs across the price spectrum. Currently, its export business comprises of 3 portfolios namely food (~Rs4bn revenue), oleochemicals (~Rs15bn) and castor oil (~Rs25bn), and it looks to add more products to exports, going ahead. India would consume more value-added functional products as people are becoming aware of health issues. AWL continues to focus on sustainability and with a professional and experienced board, it looks to grow over the years. In view of the differentiated product portfolio, leading market position and extensive distribution network, decent financials, likely margin improvement from current level and valuation comfort compared to peers, we recommend SUBSCRIBE to the issue. 

CAMS IPO

What is CAMS?

Incorporated in 1988, CAMS provides services to both mutual fund companies and investors. It provides services for verification, processing and receipt of non-financial and financial transactions for the BFSI sector, more prominently for the mutual fund industry. It also provides services to investors like consolidated account statement (CAS) generation, changing mandate and more.

The company is currently headquartered in Chennai. 

Few of its subsidiaries include:

• CAMS KRA
• CAMS Insurance Repository Services Ltd.
• Sterling Software Pvt. Ltd.
• CAMS Financial Information Services Pvt. Ltd.

IPO DETAILS

Particulars	Description
IPO Subscription Dates	September 21-23
Listing Date	On or about October 1, 2020
IPO Price Band	Rs 1,229-1,230 per share
Number of shares on offer	1,82,46,600
Face Value	Rs 10 per share
Minimum Bid Quantity	12
Leading Book Managers of the Issue	1) Kotak Mahindra Capital Company Ltd. 2) HDFC Bank Ltd. 3) ICICI Securities Ltd. 4) Nomura Financial Advisory and Securities (India) Private Ltd.

Share Portions Reserved For Different Investor Categories

There are different kinds of investors: retail, institutional, non-institutional who can participate in the IPO. There is some portion reserved for the employees as well.

Employee Reserve Portion	Up to 182,500 Equity Shares
Anchor Investor Portion	Up to 5,419,230 Equity Shares
Net QIB Portion	3,612,820 Equity Shares
Of the net QIB Portion: Mutual Fund Portion	Up to 1,806,410 Equity Shares
Non-institutional Portion	Not less than 2,709,615 Equity Shares
Retail Portion	Not less than 6,322,435 Equity Shares
Equity Shares outstanding prior to and after the IPO	48,786,800 Equity Shares

What is an RTA?

RTA’s aid asset management companies in record maintenance. They also provide services to mutual fund investors as a single-window reference point for all their mutual fund investment-related information.

CAMS IPO Employees Reservation

A discount of ₹122 per Equity Share is being offered Eligible Employee Bidding in the Employee Reservation Portion. up to 182,500 Equity Shares are reserved for employees. Note:

When using UPI as a payment method, the primary account holder in the bank and demat should be the same person. Use of 3rd party UPI ID or 3rd party bank account is not allowed.

When using ASBA, up to 5 CAMS IPO applications can be applied from the same bank that offers the 3rd Party ASBA IPO application.

HUF and Minors can only apply using ASBA from the banks that offer the 3rd Party ASBA IPO application. i.e. SBI, Axis bank. 

IIFL: Subscribe
The brokerage said at the upper limit of the price band, the issue is priced at 35 times FY20 EPS, which is a 10-15 per cent discount to listed AMCs, exchanges and depositories. It expects the stock to trade in-line with other comparables and further re-rate.

YES Securities: Subscribe

YES Securities values the issue at 26 times FY22 P/E and believes it is reasonable.

The brokerage said that the given CAMS would be a direct beneficiary of low MF penetration, but the growth would be lower given that fees are generally tiered in nature.

Choice Broking: Subscribe with caution

Based on its conservative estimate, Choice is expecting a 2.7 per cent CAGR rise in the topline growth for the company over FY20-23 to Rs 757.91 crore in FY23. 

It sees Ebitda and PAT to grow at 1.5 per cent and 6.4 per cent, respectively.

Risks to Investors

The 4 Lead Managers associated with the Offer have handled 17 public issues in the past three years out of which 6 issues closed below the issue price on the listing date.

The PE ratio based on diluted EPS for FY 2020 for the Issuer at the upper end of the Price Band is as high as 34.61.

Average cost of acquisition of Equity Shares for the Selling Shareholder namely NSE Investments Limited is Rs 187.86 per Equity Share and the Offer Price at the upper end of the Price Band is Rs 1,230 per Equity Share.

Weighted Average Return on Net Worth for Fiscals 2020, 2019, and 2018 is 31.40%

Next Story : Six Months performance of the survey stocks

SBI Card IPO and its effect on SBI

SBI Cards files ₹9500 crores IPO papers with SEBI. SBI to divest up to 4% stake in their subsidiary SBI Cards. The SBI Cards IPO date is not announced yet. SBI Cards and Payment Services Pvt Ltd (SBICPS) is the credit card unit of the State Bank of India. The company to raise between ₹8,500 crores and ₹9,500 crores. The value of the company is estimated at around ₹60,000 crores It will be one of the largest stock market listings in the country.

Incorporated in 1998, SBI Cards and Payment Services Limited is a subsidiary of SBI, India's largest commercial bank in terms of deposits, advances and the number of branches. SBI currently holds (along with its nominees) 689,927,363 Equity Shares, constituting to 74.00 % of the pre-Offer issued, subscribed and paid-up Equity Share capital of the Company.

The company the 2nd largest credit card issuer in the country, with a 17.6% and 18.0% market share of the Indian credit card market (number of credit cards) as of March 31, 2019, and September 30, 2019, respectively, and a 17.1% and 17.9% market share of the Indian credit card market ( total credit card spends) in fiscal 2019 and in the six months ended September 30, 2019.

SBI Cards offers a wide range of credit cards to individual and corporate clients including lifestyle, rewards, shopping, travel, fuel, banking partnership cards, and corporate cards, etc.

SBI Cards has partnered with several leading names across industries, including Air India, Apollo Hospitals, BPCL, Etihad Guest, Fbb, IRCTC, OLA Money and Yatra, amongst others.

As a subsidiary of SBI, the company has access to SBI's extensive network of 22,007 branches across India. The partnership enables it to market its cards to a huge customer base of 436.4 million customers.

Headquartered in New Delhi, as of September 30, 2019, the company has a sales force of 33,086 outsourced sales personnel operating out of 133 Indian cities.

The company's total income increased at a CAGR of 44.9% and the revenues from operations have increased at a CAGR of 44.6% between fiscal 2017 to 2019. The net profit grew at a CAGR of 52.1% during the period.

According to a report by Macquarie, the IPO is expected to be around Rs 9,000-9,600 crore in size. The IPO is likely to hit the markets early next year.

SBI, which holds a 74 percent stake in the unit, along with private equity firm Carlyle Group, which holds the rest 26 percent through its subsidiary CA Rover Holdings, will together sell 13 crore shares or 14 percent of the company through the IPO. While Carlyle is looking to sell a 10 percent stake via the IPO, SBI would sell a 4 percent stake in the company.

How the IPO will impact the valuation of parent SBI

SBI holds a 74 percent stake in SBI Cards, which Macquarie currently values at Rs 27,500 crore in its model. However, the brokerage, citing media reports, said SBI expects a valuation of Rs 60,000 crore (2.2 times Macquarie's valuation of Rs 27,500 crore) for its share in SBI Cards, which translates to Rs 47 per share of SBI.

The brokerage notes that if value unlocking happens at this price, it would add Rs 16 or 5 percent to their current target price of Rs 320.

Could SBI Cards IPO make it the most expensive financial services company in India?

As per Macquarie, in case SBI Cards gets listed at a market cap of Rs 60,000 crore, it could be the most expensive financial services company in India at 11 times the book value (P/BV).

"As such there are enormous growth prospects for the credit card industry as it is significantly underpenetrated and economics of the business for successful players have significantly improved post-global financial crisis," the report quoted.

India's credit card industry

According to the global brokerage, India’s credit card industry offers vast room for growth, with less than 5 percent cards per capita, less than 1 percent of banking system loans and less than 7 percent of non-cash spends.

Business models have also become more sound with 50 percent of revenues coming from stable fee income thereby significantly boosting RoE in credit cards business at over 30 percent, said the brokerage.

Credit card issuances remain strong at 25% year-on-year (y-o-y) in the three months till June this year– a trend that we have broadly maintained since demonetisation. The three frontline private banks (HDFC Bank, Axis Bank and ICICI Bank) along with SBI Cards and Payments dominate this business with 70% share between them. RBL Bank is a relatively new player but is emerging strongly on the back of its partnership with Bajaj Finance. Despite strong growth in issuances, penetration is quite low at 4% as compared to 60% of population using cards.

Notwithstanding the cyclicality that is inherent to this business, Market experts believe that the Indian banks would continue to show solid growth in issuances given the demographic advantage and strong investments in payment infrastructure.

SBI Cards is the second-largest credit card issuer in the country with 9.46 million credit cards and has an 18 percent share of the Indian credit card market as of September 30, 2019. Meanwhile, HDFC Bank has the largest credit card business in the country with 13.3 million cards issued, while ICICI Bank stood third with 7.9 million credit cards, as of September 30, 2019, according to data from the Reserve Bank of India.

The share sale is poised to become the fifth-largest IPO in the country after Coal India, Reliance Power, GIC Re, and Oil and Natural Gas Corp and will help the parent, SBI, raise funds to boost credit growth. For FY19-20, it will be the largest IPO.

SBI Cards IPO Dates & Price Band: (Tentative)

IPO Open:	20-January-2020
IPO Close:	22-January-2020
IPO Size:	Approx ₹9500 Crore (Approx)
Face Value:	₹10 Per Equity Share
Price Band:	₹615 - ₹618 Per Share
Listing on:	BSE & NSE
Retail Portion:	35%
Equity:	130,526,798 Shares
Discount:	₹18 Per Shares

SBI Cards IPO Market Lot:(Tentative)

Lot Size:	Minimum 24 Shares & Maximum 312 Shares
Minimum Amount:	₹14832
Maximum Amount:	₹192816

SBI Cards IPO Allotment & Listing:(Tentative)

Basis of Allotment:	27-January-2020
Refunds:	28-January-2020
Credit to Demat Account:	29-January-2020
Listing Date:	30-January-2020

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Thomas Cook India is it a hidden gem ?

IRCON International - IPO - Healthy Prospects & Attractive Valuation

Ircon International Limited, formerly Indian Railway Construction Company Limited (IRCON), is an engineering and construction, specialized in transport infrastructure. Incorporated in 1976, IRCON International Limited (IRCON) is four-decade old government company (under the ministry of railways). It is engaged in the business of engineering and construction mainly specializing in major projects including railways, highways, bridges, flyovers, tunnels, aircraft maintenance hangars, runways, EHV substations, electrical and mechanical works, commercial and residential properties, development of industrial areas and other infrastructure activities. IRCON provides EPC services on a fixed-sum turnkey basis as well as on an item-rate basis for various infrastructure projects. In 2016, IRCON was ranked 248 in the list of the top 250 international contractors by Engineering News Record (ENR) of the United States. Presently it has 26 project offices and five regional offices to support and manage its business operations throughout India and five overseas project offices in Sri Lanka, Bangladesh, Malaysia, South Africa, and Algeria to provide onsite support overseas.

IRCON International (IRCON) – a Mini Ratna company incorporated by the Ministry of Railways – operates in the entire spectrum of infra services including railways, highways, electrical, metro and buildings etc. It provides EPC services on a fixed-sum turnkey basis as well as on an item-rate basis for various infrastructure projects and also undertakes projects on BOT model. It has been demonstrating superb execution over last four decades and current order book at Rs224bn provides healthy visibility, going forward.

As per the Govts divestment target of Rs800bn in FY19, IRCON is divesting ~10% stake by offering 9.9mn shares via Offer for Sale (OFS) at a price band of Rs470-475 to raise Rs44.7bn at the upper end of the band. Consolidated PAT of Rs4.1bn for FY18 translates into an attractive PE of 10.9x.
There has been a steep price correction in listed infrastructure companies over last 3-4 months on the back of prevailing concerns over the reversal of interest rates, persistent delay in land acquisition despite higher compensation and funding constraints. We believe price offering by IRCON factors in all. Further, IRCON appears to be insulated with a higher interest rate scenario with no leverage.

Key Investment Arguments

•    Superior Execution & Diversification  Advantage
•     Healthy Growth Visibility on Robust Order Book
•     Light Working Capital Entails Healthy Cash Generation
•     Likely Expansion in RoE

    Key Risks

•    Adverse Change in Policies relating to Railways Investment
•    Execution Delay
•    Substantial Rise in Input Cost & Other Overheads

Outlook & Valuation
IRCON's earnings (Rs4.1bn PAT in FY18 vs. Rs5.6bn in FY15) have not witnessed any growth in last 3 years despite witnessing consistent growth in order book mainly led by margin contraction and shrinkage in overseas revenue.

However, it has maintained a healthy dividend payout ratio (>45%) over the years, as it pays out either 30% of PAT or 5% of Net Worth (whichever is higher) as dividend.

Further, considering healthy returns generated by NBCC and RITES (which are broadly infrastructure space being government companies), we feel IRCON's valuation at 10.9x FY18 earnings looks attractive and may not disappoint the investors.

Hence, we recommend SUBSCRIBE to the Issue.

Next read : If HPCL Is A Good Stock To Bet On?

Fine Organic Industries IPO Review

Fine Organics is coming up with an IPO. The company is based in Mumbai and incorporated in 2002. Fine Organics is a manufacturer of oleochemical-based additives. They are leading producers of specialty additives for foods, plastics, rubbers, paints, inks, cosmetics, coatings, textile auxiliaries, lubes and several other specialty applications. They have products facilities at Ambernath, Badlapur and Dombivli in Maharashtra. They are 64300 tonnes production capacity as per 2017 reports. They have over 500 full time employees on payroll. They have strong R&D capability and developed over 46 new products since 2014.

Fine Organic Industries, a chemicals firm has fixed a price band of Rs 780 to Rs 783 per equity share to raise around Rs 600 crore through an initial public offering (IPO). The offer for sale will see divestment of 25 per cent of stake of 76,64,994 equity shares by the existing shareholders. The issue will open on June 20 and closes on June 22. The 48-year old company held entirely by the promoters family had filed draft papers with markets regulator Sebi to float the IPO in February. 

It has three manufacturing facilities in the suburbs of the megapolis, including Ambernath, Dombivli and Badlapur, with a total installed capacity of about 64,300 tonnes per annum (tpa). "The company has drawn up capital expenditure of Rs 270 crore to expand capacities over the next 2 years and has already invested Rs 70 crore towards equity portion," Fine Organics CFO and director Tushar Shah told reporters at the IPO roadshow here. 

The company is expanding its Ambernath facility by adding a capacity of 32,000 tpa at a cost of Rs 130 crore, and it plans to fund 30 per cent from equity and 70 per cent from debt, he said. It is also looking at investing Rs 55 crore in setting up Fine Zeelandia facility in Mumbai in association with Dutch family-owned Zeelandia International, a part of the Royal Zeelandia group, he said.

The company clocked net revenue of Rs 581 crore for the nine-months period ended December 2018. It has launched 387 products and exports accounts for 65 per cent of the total revenue, Shah added. Meanwhile, as part of the global expansion plans, it is also setting up a joint venture firm named FineAdd with the German partner Adcotec, to own and operate a 10,000 tpa facility in in Leipzig, Germany, which will be operational by Q3 FY20, according to the offer document. Fine Organic will own 50 per cent and Adcotec will own the other 50 per cent, it added. 

Highlights of the Company:

a. Consistent market leadership position in the Indian mutual fund industry;
b. Trusted brand and strong parentage;
c. Strong investment performance supported by comprehensive investment philosophy and risk management;
d. Superior and diversified product mix distributed through a multi-channel distribution network;
e. Focus on individual customers and customer centric approach;
f. Consistent profitable growth; and
g. Experienced and stable management and investment teams.

Main object of the issue is:
The objects of the Offer for the Company are to achieve the benefit of listing the Equity Shares on the Stock Exchanges and for the sale of Equity Shares by the Promoter Selling Shareholder. Further, the Company expects that the listing of Equity Shares will enhance its visibility and brand image and provide liquidity to its existing shareholders.

Positives For the Company:

Largest Producer of Oleochemical-based Additives in India.

Company is the largest manufacturer of oleochemical-based additives in India and one of the few large players in global oleochemical-based additives industry.They are one of six global players in the food additives industry and one of five global players in the plastic additives industry.Company has a huge first-mover advantage in India, alongside various other competitive advantages over other global players. This gives Company an advantage in pricing products competitively and allows them to provide stiff competition to new players. Hence, no major domestic or global player has set up a manufacturing facility in India.

Specialised Business Model with High Entry Barriers.

There are multiple entry barriers for a new entrant in the global oleochemical-based additives industry, such as product formulations, process technology and customer stickiness to established players. As a result, they are one of the few large global players in this industry.Because of high Entry barriers, Company is able to obtain higher EBITDA and profit margins for their products compared to other manufacturing industries where barriers to entry are lower.Company’s EBITDA margins were 18.54%, 22.11%, 18.43% and 17.78% for Fiscals 2015, 2016, 2017 and the nine months ended December 31, 2017, respectively.

Diversified Customer Base with Long Term Relationships with Marquee Customers.

Company has 603 direct customers and 127 distributors (who sold than more than 5,000 customers). Company’s direct customers are multinational, regional and local players manufacturing consumer products, such as Hindustan Unilever and Parle Products, and petrochemical companies and polymer producers globally.Company has an extensive distribution network in India and worldwide, enabling their products to be sold in 67 countries.

Diversified Product Portfolio Catering to a Variety of High Growth Industries.

As at December 31, 2017, they had a range of 387 products sold under the ‘Fine Organics’ brand, used in the (a) plastic industry and (b) food industry and others (cosmetics, printing inks, coated papers, lube additives, wires and cables, coatings and other specialty applications) industries.

IPO Particulars:

IPO Opens on : 20 June 2018
IPO Closes on : 22 June 2018
Issue Type: Book Built Issue IPO
Issue Size: 7,664,994 Equity Shares of Rs 5 aggregating up to Rs [.] Cr
Face Value: INR 5 per share
Price Band: INR 780-783 Per Equity Share
Minimum Order Quantity: 19 shares
Listing will at: BSE,NSE
Shares offered to
Anchor – 22,99,497 Shares = 180.05Crore
QIB – 15,32,999 Shares = 120.03Crore
NII – 11,49,750 Shares = 90.03 Crore
RII – 26,82,748 Shares = 210.06Crore (Lot size: 19 = 1,41,197 Forms)
Total Issue – 76,64,994 Equity Shares = 600.17 Crore

Financials: Consolidated Figures

EPS for 2016-17 : INR25.56
EPS for 9M of 2017-18 INR 26.38
PE Ratio on EPS of 2016-17 : 30.63
RONW for 2016-17 : 24.65%
RONW for 2017-18 9M  : 17.34 %
NAV as on 31.12.2017 :INR 114.65
Upper PBV : 6.83

Fine Organics Financial:

Rs. in Crore
	Revenue	Expense	PAT
2013	497.5	466.6	20.9
2014	574.2	479.6	61.7
2015	616.5	530.9	57.1
2016	667.7	550.8	76.2
2017	792.7	671.8	77.7
2018 (9M)	594.7	500.2	58.5

Company Promoters:

• Prakash Damodar Kamat
• Mukesh Maganlal Shah
• Jyotsna Ramesh Shah
• Jayen Ramesh Shah
• Tushar Ramesh Shah
• Bimal Mukesh Shah

Peer Company Comparison :Galaxy Surfactants :
Face Value : INR 10
Price : Rs. 1299 on 13 June 18
Total Income :  INR 2171.70 Crore
PE  : 34.7x
NAV  :INR 161.51
P/NAV:  8.05

Main Global Competitors for the Company: 

Quick Links:DRHP Draft Prospectus

Fine Organics IPO Market Lot:

• Shares: Apply for 19 Shares (Minimum Lot Size)
• Amount: Rs.14,877

Fine Organics IPO Allotment & Listing:

• Basis of Allotment: 28-June-2018
• Refunds: 29-June-2018
• Credit to demat accounts: 02-July-2018
• Listing: 03-July-2018

Tentative timeTable:
13 June 18– Price Band announced
19 June 18 – Anchor List
27 June 18– Finalisation of Basis of Allotment
28 June 18– Unblocking of ASBA
29 June 18– Credit to Demat Accounts
2 July 18– Listing on NSE & BSE

Fine Organics IPO Lead Managers:

• Edelweiss Capital Limited
• JM Financial Consultants Private Limited

Company Address:Fine Organic Industries Limited
Fine House,
Anandji Lane
Ghatkopar (East), Mumbai 400 077
Phone: (91 22) 2102 5000
Fax: (91 22) 2102 8899
Email: investors@fineorganics.com

Website: http://www.fineorganics.com

Fine Organics IPO Review:

• Apply for Short Term and Long Term.

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