Article

Upcoming IPOs - All You Need to Know

20 Feb 2020

The IPO process happens to be fairly prolonged and elaborate. Even in terms of filing of documents, there are various levels. The Draft Offer documents are first filed with SEBI and subsequently, the final offer documents after incorporating changes and corrections are filed with the Registrar of Companies (ROC). Before the opening of the issue, the company is also required to file the final documents with ROC.

How to go about applying for an IPO?

The IPO application has to be preceded with the opening of your demat cum trading account. IPO allotments are only done in demat form. While trading account is not mandatory for an IPO, it is required if you want to sell the IPO. IPO applications can be made offline using physical forms or online through your internet trading account.

An important aspect of the IPO application process that you need to understand is the ASBA process. Applications Supported by Blocked Amounts (ASBA), authorises the bank to block money in your bank account. When ASBA application is made for the IPO, the amount is not debited but only blocked. That means, it continues to earn interest. On the date of allotment only the amount to the extent of the allotment is debited to your account the balance freeze removed. That is how simple ASBA is and you must make the best of it.

Major IPOs expected in the coming months

Here is a list of forthcoming IPOs during the year 2020 with a quick rundown on how they stack up in terms of business model.

SBI Cards and Payment Services Ltd.

About the Issuer: SBI Cards is the second largest credit card issuer in India (after HDFC Bank) with an 18% market share in terms of number of cards outstanding. It is a subsidiary of SBI and is 76% owned by SBI. The balance 24% is owned by Carlyle Group. When SBI Cards lists, it will be the first credit card company to be listed in India.

Company Financials: For FY19, SBI Cards had net revenues of Rs.7287 crore and net profit of Rs.827 crore, implying a net margin of about 12%. The company has return on net worth (RONW) of 17% and net asset value per share of Rs.46.99.

The most awaited SBI Cards IPO is expected in first week of March and could entail 4% stake dilution by SBI and 10% stake dilution by the Carlyle group.

National Commodity and Derivatives Exchange (NCDEX) Ltd.

About the Issuer: NCDEX has recently filed for an IPO with SEBI and is expected to hit the market very soon. NCDEX is one of the two premier commodity exchanges in the country, with the other MCX already being listed for over 7 years now. NCDEX has been a principal commodities platform and is the market leader in facilitating commodity futures transactions in the agricultural commodity derivatives.

Stove Kraft Ltd. (Pigeon Appliances)

About the Issuer: Stove Kraft is a market leader in kitchen appliances and is a dominant player in pressure cookers in India. It sells under the Pigeon and Gilma brands; both of which are quite popular across India. The Pigeon brand accounts for nearly 82% of sales and is a market leader in hobs, cook tops, non-stick cookware, induction stoves etc. Apart from being present pan-India, Stove Kraft is also present in 12 other countries. The company will use the proceeds of the issue to repay some of its loans and for general corporate purposes.

Company Financials: The company has been in losses over the last five years, although the extent of the losses has been reducing.

ESAF Small Finance Bank Ltd.

Issuer Details: ESAF SFB is a leading microfinance company in the southern state of Kerala in India. Its asset profile is largely consisting of micro loans while it raises monies through current and savings deposits. ESAF also distributes third party insurance products and government pension products and caters to over 37 lakh customers across 16 states through its network of 403 branches.

Company Financials: ESAF has a deposit corpus of Rs.4300 crore, which puts the bank fourth in the SFB league after AU, Equitas and Ujjivan. However, it has a cost of borrowing of 9%, which is high even by microfinance standards. The issue will be an offer for sale by the promoters so there will be no fresh funds coming into the company. The company is profit making and enjoys net margins of over 10%.

UTI Asset Management Ltd.

Issuer Details: UTI Asset Management is the seventh largest Indian AMC in terms of assets under management and will be the third listed AMC after HDFC AMC and Nippon AMC in the Indian market. UTI is the oldest AMC in India and has been existence since 1963 with its US-64 being the first mutual fund scheme in India. UTI has nearly 1.1 crore folios and has a 12% market share in terms of folios. Its channel sales are handled by 163 centres, 273 business development associates and over 51,000 IFAs.

Company Financials: For the fiscal year 2018-19, UTI AMC reported total revenues of Rs.1081 crore and net profits of Rs.348 crore giving a net margin of over 31%. The AMC enjoys RONW of 13.55%. In the IPO, UTI proposes to offer close to 3.90 crore shares and will be via offer for sale with domestic institutional shareholders and T Rowe Price putting part of their stake on the block.

Burger King India Ltd.

Issuer Details: It is the master franchisee of the international Burger King brand of the United States. It owns the exclusive rights to develop, establish, operate and franchise Burger King branded restaurants across India. Currently, Burger King India operates via 202 restaurants across 16 states and 47 cities across India and plans to expand the network to 325 restaurants by December 2020.

Company Financials: Currently, Burger King’s market share of revenues is about 4% which is smaller than names like Dominos, Subway, McDonalds and KFC. While the company has growth revenues nearly 3 fold between 2017 and 2019 to Rs.644 crore, it is still making net losses.

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Beginner's Corner

Upcoming IPOs - All You Need to Know

20 Feb 2020

The IPO process happens to be fairly prolonged and elaborate. Even in terms of filing of documents, there are various levels. The Draft Offer documents are first filed with SEBI and subsequently, the final offer documents after incorporating changes and corrections are filed with the Registrar of Companies (ROC). Before the opening of the issue, the company is also required to file the final documents with ROC.

How to go about applying for an IPO?

The IPO application has to be preceded with the opening of your demat cum trading account. IPO allotments are only done in demat form. While trading account is not mandatory for an IPO, it is required if you want to sell the IPO. IPO applications can be made offline using physical forms or online through your internet trading account.

An important aspect of the IPO application process that you need to understand is the ASBA process. Applications Supported by Blocked Amounts (ASBA), authorises the bank to block money in your bank account. When ASBA application is made for the IPO, the amount is not debited but only blocked. That means, it continues to earn interest. On the date of allotment only the amount to the extent of the allotment is debited to your account the balance freeze removed. That is how simple ASBA is and you must make the best of it.

Major IPOs expected in the coming months

Here is a list of forthcoming IPOs during the year 2020 with a quick rundown on how they stack up in terms of business model.

SBI Cards and Payment Services Ltd.

About the Issuer: SBI Cards is the second largest credit card issuer in India (after HDFC Bank) with an 18% market share in terms of number of cards outstanding. It is a subsidiary of SBI and is 76% owned by SBI. The balance 24% is owned by Carlyle Group. When SBI Cards lists, it will be the first credit card company to be listed in India.

Company Financials: For FY19, SBI Cards had net revenues of Rs.7287 crore and net profit of Rs.827 crore, implying a net margin of about 12%. The company has return on net worth (RONW) of 17% and net asset value per share of Rs.46.99.

The most awaited SBI Cards IPO is expected in first week of March and could entail 4% stake dilution by SBI and 10% stake dilution by the Carlyle group.

National Commodity and Derivatives Exchange (NCDEX) Ltd.

About the Issuer: NCDEX has recently filed for an IPO with SEBI and is expected to hit the market very soon. NCDEX is one of the two premier commodity exchanges in the country, with the other MCX already being listed for over 7 years now. NCDEX has been a principal commodities platform and is the market leader in facilitating commodity futures transactions in the agricultural commodity derivatives.

Stove Kraft Ltd. (Pigeon Appliances)

About the Issuer: Stove Kraft is a market leader in kitchen appliances and is a dominant player in pressure cookers in India. It sells under the Pigeon and Gilma brands; both of which are quite popular across India. The Pigeon brand accounts for nearly 82% of sales and is a market leader in hobs, cook tops, non-stick cookware, induction stoves etc. Apart from being present pan-India, Stove Kraft is also present in 12 other countries. The company will use the proceeds of the issue to repay some of its loans and for general corporate purposes.

Company Financials: The company has been in losses over the last five years, although the extent of the losses has been reducing.

ESAF Small Finance Bank Ltd.

Issuer Details: ESAF SFB is a leading microfinance company in the southern state of Kerala in India. Its asset profile is largely consisting of micro loans while it raises monies through current and savings deposits. ESAF also distributes third party insurance products and government pension products and caters to over 37 lakh customers across 16 states through its network of 403 branches.

Company Financials: ESAF has a deposit corpus of Rs.4300 crore, which puts the bank fourth in the SFB league after AU, Equitas and Ujjivan. However, it has a cost of borrowing of 9%, which is high even by microfinance standards. The issue will be an offer for sale by the promoters so there will be no fresh funds coming into the company. The company is profit making and enjoys net margins of over 10%.

UTI Asset Management Ltd.

Issuer Details: UTI Asset Management is the seventh largest Indian AMC in terms of assets under management and will be the third listed AMC after HDFC AMC and Nippon AMC in the Indian market. UTI is the oldest AMC in India and has been existence since 1963 with its US-64 being the first mutual fund scheme in India. UTI has nearly 1.1 crore folios and has a 12% market share in terms of folios. Its channel sales are handled by 163 centres, 273 business development associates and over 51,000 IFAs.

Company Financials: For the fiscal year 2018-19, UTI AMC reported total revenues of Rs.1081 crore and net profits of Rs.348 crore giving a net margin of over 31%. The AMC enjoys RONW of 13.55%. In the IPO, UTI proposes to offer close to 3.90 crore shares and will be via offer for sale with domestic institutional shareholders and T Rowe Price putting part of their stake on the block.

Burger King India Ltd.

Issuer Details: It is the master franchisee of the international Burger King brand of the United States. It owns the exclusive rights to develop, establish, operate and franchise Burger King branded restaurants across India. Currently, Burger King India operates via 202 restaurants across 16 states and 47 cities across India and plans to expand the network to 325 restaurants by December 2020.

Company Financials: Currently, Burger King’s market share of revenues is about 4% which is smaller than names like Dominos, Subway, McDonalds and KFC. While the company has growth revenues nearly 3 fold between 2017 and 2019 to Rs.644 crore, it is still making net losses.