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CreditAccess Grameen Ltd- Information Note

CreditAccess Grameen Ltd- Information Note
by Nikita Bhoota 08/07/2018

This document summarizes a few key points related to the issue and should not be treated as a comprehensive summary. Investors are requested to refer the Red Herring Prospectus for further details regarding the issue, the issuer company and the risk factors before taking any investment decision. Please note that investment in securities is subject to risks including loss of principal amount and past performance is not indicative of future performance. Nothing herein constitutes an offer of securities for sale in any jurisdiction where it is unlawful to do so. This document is not intended to be an advertisement and does not constitute an invitation or form any part of any issue for sale or solicitation of an offer to subscribe for or purchase any securities and neither this document nor anything contained herein shall form the basis for any contract or commitment whatsoever.

Issue Opens: August 08, 2018
Issue Closes: August 10, 2018
Face Value: Rs 10
Price Band: Rs 418-422
Issue Size: ~Rs 1,131 cr
Public Offer: ~2.68 cr shares
Bid Lot: 35 Equity shares
Issue Type: 100% Book Building

% shareholding

Pre IPO

Post IPO

Promoter

98.88

80.28

Public

1.12

19.72

Source: RHP

Company Background

CreditAccess Grameen Ltd is a leading Indian micro-finance institution focused on providing micro-loans to women customers predominantly in Indian rural areas. Its focus customer segment is women having an annual household income of Rs160,000 or less in urban areas and Rs100,000 or less in rural areas. It provides loans primarily under the joint liability group ("JLG") model. Its primary focus is to provide income generation loans to its customers, which comprised 87.02% of its total JLG loan portfolio as of March 31, 2018. It also provides other categories of loans such as family welfare loans, home improvement loans and emergency loans to its existing customers. Its gross AUM as on March 31, 2018 stood at Rs4,974.66cr.

Objects of the Issue

The Offer comprises of Fresh Issue and the Offer for Sale. The company proposes to utilise the net proceeds from the Fresh Issue towards augmenting its capital base to meet future capital requirements

Financials

Consolidated Rs Cr

FY16

FY17

FY18

Total revenue

467

709

875

PPOP

144

233

321

PAT

83

80

125

EPS (Rs)

11.41

10.01

12.26

P/E*

37.0

45.0

43.5

P/BV*

6.7

5.2

3.8

RoNW (%)

18.13

11.63

8.73

Source: RHP, Company, 5paisa Research, *at upper price band and on undiluted bases

Key Points

  1. The company served over 1.85 million active customers out of a total customer base of 2.19 million. Its customer-centric business model allows it to retain a high proportion of its existing customers and to attract new customers. For the six months ended September 30, 2017, it had an active customer retention rate of 90% (annualised), as compared to the median active customer retention rate of 15 leading micro-finance players, which stood at 78% as of September 30, 2017. Its active customer retention rate for the year ended March 31, 2018 was 84%. It provides loans that are relevant for critical needs of their customers throughout their lifespan. Its customer-centric business model and helps in generating loyalty amongst their existing customers and in attracting new customers.

  2. It has varied funding sources, which coupled with a diversified debt profile ensures that it is not overly dependent on any one type or source for funding. As an NBFC-MFI, they have access to diverse sources of liquidity, such as term loans from banks, financial institutions and non-banking financial companies, proceeds from loan assets assigned and securitized, cash credit, subordinated debt and proceeds from the issuance of NCDs to meet their funding requirements. This enables them to optimize their cost of borrowings, funding and liquidity requirements, capital management and asset liability management.

Key Risk

As of March 31, 2018, 58.08% of its gross AUM originated in Karnataka and 26.73% of its gross AUM originated in Maharashtra. In the event of a regional slowdown in the economic activity in these states, or any other developments including political unrest or disruption the company may experience an adverse impact on company’s financial condition.

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Important tips to make the best of close-ended mutual funds

Important tips to make the best of close-ended mutual funds
18/07/2018

With prices soaring on the back of the ever-rising inflation, more and more people are considering mutual funds as a reliable source of extra income. Mutual funds not only give better returns but also do so while diversifying the risk involved. With the power of compounding and rupee cost averaging, mutual funds have very efficiently managed to give inflation-beating returns and drawn a lot of investors’ attention in the market.

With the high demand for mutual funds, some very efficient funds declare themselves as closed-ended mutual funds, meaning that they cater only to a limited set of investors. Due to this, close-ended mutual funds raise the capital only through the IPO (Initial Public Offering) route.

How are close-ended mutual funds advantageous?

Close-ended mutual funds are often preferred by a large number of investors due to the following advantages it holds:

  • Portfolio Management: Close-ended mutual funds are efficiently managed by professional fund managers. Since the volume is pre-planned, they are generally devoid of any unnecessary chaos and mismanagement.
  • Have stable securities in the portfolio: As closed-ended funds are planned well in advance, the number of shares and the securities which are to be invested in is pre-decided as well.
  • Dividend reinvestment plans: Close-funded mutual funds often have the option of dividend reinvestment, where the dividend earned on the investments is further reinvested to upscale the investment value.  This helps in compounding the investment and results in a much higher Net Asset Value (NAV) of the investment, especially in the long-term.
  • Close-ended funds are not affected by market panic: Investors don’t sell their shares in panic due to low liquidity and this remains a plus point especially when it comes to bringing stability. This does not let redemption pressure to come overhead.

Tips to make the best of close-ended mutual funds

If you too are looking forward to making investments in close-ended mutual funds and make the best of the above advantages, here are the tips which could help you out:

  • Thoroughly analyze the portfolio: There’s no past history or real-time analysis of the fund as it is declared and available only during the IPO. This means you have to completely rely on your analysis of the portfolio. Before making any decision, you need to ensure that the portfolio you have chosen has the right set of securities for a better return on investment.
  • Consider the low liquidity of the fund: Close-ended mutual funds offer low liquidity, i.e. unlike open-ended mutual funds, you do not have the option to exit anytime. The only way you can sell a close-ended mutual fund prior to maturity is on the stock exchange. This means you need to make sure that you can afford to fix your funds for a longer duration.

No SIP option available: If you do not have a large amount to invest in one go and are looking forward to a SIP (Systematic Investment Plan), then you need to consider this. Close-ended mutual funds do not offer the option of SIP, hence, you need to invest whatever amount you want to in one go during the IPO declaration.

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TCNS Clothing Co Ltd IPO Note- Not Rated

TCNS Clothing Co Ltd IPO Note- Not Rated
by Nikita Bhoota 18/07/2018

Issue Opens: July18, 2018
Issue Closes: July20, 2018
Face Value: Rs 2
Price Band:  Rs 714-716
Issue Size: ~Rs 1,122-1,125 cr
Public Issue: 157.1 lakh shares
Bid Lot: 20 Equity shares       
Issue Type: 100% Book Building

Shareholding (%)

Pre IPO

Post IPO

Promoter

43.69

32.42

Public

56.31

67.58

Source: RHP

Company Background

TCNS Clothing Co Ltd (TCNS) is India’s leading women’s branded apparel company. It has portfolio of brands including (a) ‘W’, a premium fusion wear brand, (b) Aurelia, a contemporary ethnic wear brand and (c) Wishful, a premium occasion wear brand. As of March 31, 2018, its store count stood at 465 exclusive brand outlets (EBO), 1,469 large format store outlets (LFS) and 1,522 multi-brand outlets (MBO), located in 31 states and union territories in India. Further, it has total 6 EBOs in Nepal, Mauritius and Sri Lanka as well.

Objective of the Offer

The object of the offer is to achieve benefits of listing and sale of up to 157.1 lakh shares (Rs1,125cr on upper end) offered by the promoter group and other shareholders. This is a 100% offer for sale issue.

Financials

Consolidated Rs Cr

FY15

FY16

FY17

FY18

Revenue from operations

301

485

701

838

EBITDA before ESOP exps

51

86

150

177

ESOP expenses

0

90

74

22

EBITDA

51

-4

76

155

EBITDA margin (%)

17.0

-0.8

10.9

18.5

Adj PAT

26

-41

16

98

EPS (Rs)

4.3

-6.8

2.6

16.0

P/E (x)*

167.1

-105.8

277.9

44.8

P/E(x) (Adjusted ESOP exps)*

167.1

90.8

49.1

36.7

P/B(x)*

39.8

90.9

15.6

10.2

ROE (%)

27.1

-52.3

9.6

27.5

 Source: RHP, 5Paisa Research; *Ratios at higher end of the price band.

Key Points

  1. It has a strong track record of developing home-grown brands and leveraging its deep understanding of Indian women’s fashion needs. Its product portfolio consists of top-wear, bottom-wear, drapes, combination-sets and accessories catering to a variety of women’s wardrobe requirements, including every day wear and casual/ work/occasion wear. Revenue from sales of products under W, Aurelia and Wishful grew at a CAGR of 23.43%, 47.80% and 39.73% respectively over FY16-18. Revenue from these three brands stood at Rs485.6cr, Rs283.7cr and Rs73.1cr respectively in FY18.

  2. It has established long-standing relationships with its vendors in order to ensure the delivery of quality products to its customers in an efficient and cost-effective manner. During FY18, it sourced raw materials, such as printed fabrics, unprocessed fabrics and trim materials from ~181 suppliers located across India. In addition, it manufactures its products through agreements with job workers, and a majority of them have been working with the company for over three years now.

Key Risk

  1. The brand ‘W’ contributed 57.65%, 61.06% and 65.58% to the company’s revenues during FY18, FY17 and FY16 respectively. Too much dependence on brand ‘W’ poses risk for the company. Any decline in the popularity of ‘W’ brand will lead to decline in the sales, which may affect its overall business growth and profitability.

  2. The company does not have any manufacturing facilities. It engages job workers for manufacturing all its products, including TCNS Limited, Group Company and Promoter Group entity. In FY18, it utilized ~78 entities as job workers, majority of them located in NCR. Expenditure related to job workers (fabrication charges) stood at 18.14%, 17.93% and 17.37% of its revenue in FY18, FY17 and FY16 respectively. Hence, consistency in quality is always a challenge for the company.

Research Disclaimer

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HDFC Asset Management Company Ltd - Information Note

HDFC Asset Management Company Ltd - Information Note
by Nikita Bhoota 24/07/2018

This document summarizes a few key points related to the issue and should not be treated as a comprehensive summary. Investors are requested to refer the Red Herring Prospectus for further details regarding the issue, the issuer company and the risk factors before taking any investment decision. Please note that investment in securities is subject to risks including loss of principal amount and past performance is not indicative of future performance. Nothing herein constitutes an offer of securities for sale in any jurisdiction where it is unlawful to do so. This document is not intended to be an advertisement and does not constitute an invitation or form any part of any issue for sale or solicitation of an offer to subscribe for or purchase any securities and neither this document nor anything contained herein shall form the basis for any contract or commitment whatsoever.

Issue Opens: July 25, 2018
Issue Closes: July 27, 2018
Face Value: Rs 5
Price Band: Rs 1,095-1,100
Issue Size: ~Rs 2,800 cr
Public Offer: ~2.55 cr shares

Reservation

  1. HDFC AMC Emp-3.2lakh shares
  2. HDFC Emp- 5.6 lakh shares
  3. HDFC Shareholder-24lakh shares

Net Offer-2.22cr shares

Bid Lot- 13 Equity shares              

Issue Type- 100% Book Building

% shareholding

Pre IPO

Post IPO

Promoter

94.95

82.94

Public

5.05

17.06

Source: RHP

Company Background

HDFC Asset Management Company Ltd (HDFC AMC) has been the most profitable asset management company in India in terms of net profit since FY13, according to CRISIL. It operates as a joint venture between HDFC Ltd. and Standard Life Investments Ltd. As of March 31, 2018, (a) equity-oriented AUM and non-equity-oriented AUM constituted Rs1,49,713cr and Rs1,42,273cr respectively of its total AUM; (b) its market share of total AUM was 13.7% among all asset management companies in India, according to CRISIL.

Objects of the Issue

The offer consists of an Offer for Sale of up to 2.55cr equity shares.

Financials

Consolidated Rs Cr

FY15

FY16

FY17

FY18

Revenue from operations

1,022

1,443

1,480

1,760

Growth (%) yoy

19.1

41.1

2.6

18.9

EBITDA

591

668

704

966

EBITDA margin (%)

57.8

46.3

47.6

54.9

Reported PAT

416

478

550

722

EPS-Diluted (`)

20.3

23.6

27.1

35.0

RoNW (%)*

41.1

42.1

42.8

40.3

Source: RHP, Company, 5paisa Research, (EBITDA = Revenue from operations – Employee benefit exps – Other exps)

Key Points

  1. It has been a leader in the Indian mutual fund industry as demonstrated by its leading position across key industry metrics. It has consistently been among the top two asset management companies in India in terms of total average AUM since August, 2008, according to CRISIL. Its proportion of equity-oriented AUM to total AUM was at 51.3%, which was higher than the industry average of 43.2%, as of March 31, 2018, according to CRISIL.

  2. It offers a wide range of investment schemes across asset classes catering to various risk return profiles, many of which have recorded strong and consistent performance compared to industry benchmarks. Its diversified product mix enables it to cater specific customer requirements and reduce concentration risk. As of March 31, 2018, it served customers in over 200 cities through Pan-India network of 209 branches (and a representative office in Dubai).

Key Risk

The performance of its scheme is important to retain existing customers as well as attract new customers. The performance of its scheme is dependent on general market conditions and existing competition in the market. Poor investment performance, either on an absolute or relative basis, could impair revenue.

Research Disclaimer
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What are the signs of a multi-bagger stock?

What are the signs of a multi-bagger stock?
25/07/2018

The idea behind investing in the stock markets is to earn a good profit. Imagine this, what if the stock you invest in turns out to be a multi-bagger? Multi-bagger stocks can exponentially increase your profits as compared to any other well-performing stocks and are, hence, considered as jackpots in the world of equities.

But then the question arises: how do you determine if the stock you are going to invest in is a multi-bagger or not? If every second stock were a multi-bagger, a lot of investors would have already claimed the jackpot. But as they say, “Only a few can differentiate between coal and a diamond.” Similarly, if you are to distinguish between an ordinary and a multi-bagger stock, all you need to do is pay attention to the details.

But before we get into the details of how to find a multi-bagger stock, let us first understand what it means.

What is a multi-bagger stock?

A multi-bagger stock is a stock that is currently undervalued but has the potential to earn more than 100% of its current value in the future. These stocks are not meant for instant reaps and one has to be patient enough to be able to see their bright side in the long-term.

The most important aspects of multi-bagger investments are the promising nature of the stocks and the timing; if you perceive both correctly, you could see the results making way towards your bank accounts in the form of bumper profits.

How to identify a multi-bagger?

Here are a few signs that could help you identify a multi-bagger stock:

  • Focus on the sector: Before zeroing in on the stock, it is important that you focus on the sector. Choosing the right sector helps you find the right stock by giving you more room for research and predictability. Knowing about the sector could tell you a lot of things about the stock’s growth prospects in respect to the country’s economy and markets, thus, helping you set towards a right direction.
  • Look at the fundamentals, closely: To identify a multi-bagger stock, you need to look at its fundamentals in detail. It is the fundamentals that lay the foundation for future growth prospects and thus, it is very important to ensure that this foundation is strong enough to bear the tall building of multi-bagging growth.

    Fundamentals include revenue plans, cash inflows, strategies, whether the management is reliable and growth-oriented or not, their vision, as well as the brand ethics. Together, these factors help build a strong foundation that ensures stable exponential growth in the future.

  • Current status and future plans: Though the current status of the company might not be good, it acts as the reference point to measure its future growth prospects. A good strategy with a clear vision can be a good sign to ensure if the stock is a multi-bagger or not.

With these factors, you can identify a multi-bagger stock and make long-term investments to claim your own jackpot from the stock markets

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How Do You Know You're Investing The Right Way?

How Do You Know You're Investing The Right Way?
30/07/2018

Every investor who invests or wishes to invest in the stock market aspires to get good returns and make good money. However, to achieve this, it is very important that you invest in the right shares at the right time. But, wait! how do you know if you’re investing the right way?

This is a very important question to answer, especially for those who are new to the stocks markets. If you too are facing a similar dilemma and want to know if you are investing the right way, here are some pointers that could help you figure it out.

  • Know your financial goals: Before you proceed with your investments, it is important that you know your financial goals and their duration. Once you have a clear idea about these, you need to work on the way to reach them.

    To ensure if your investment is on the right track, you just need to see if the expected outcome of your investment matches the set timeline of your financial goals. If they match, it means your investment is on the right track, and if not, then you need to alter your investment strategy.

  • If it fits your risk appetite: Are you taking the right amount of risk or are you getting greedy and taking risk beyond your limits? This is a question you need to ask yourself every time you look forward to making any new investment.

    If you find the risk calculative enough to fit in your capacity, then you are investing in the right way, at least in terms of your risk appetite. Otherwise, it is always better to back off, because earning less is always better than losing what you have.

  • Consider a diverse portfolio: Is your investment diverse enough to ensure that your entire corpus does not get wiped out if any sector sees a rough patch? If the answer is yes and you have most of your investments only in a particular sector or asset class, then you are taking the wrong route.

    Your portfolio should be well-diversified so that a crash in particular sector doesn’t wipe out all your investments.

  • Ensure that you have enough surplus funds even if you lose your investment: It is always considered wise to be prepared for the worst. In this scenario, the worst possibility is that you might end up losing your investment. So, to be prepared for the unforeseen is the right thing to do. Have an emergency corpus ready in case your lose out badly on an investment.

  • Research, analyze, and interpret: In case you are investing in stocks or bonds, make sure that you do so after thoroughly researching and analyzing the fundamentals and the prospects of the company.

It is the fundamentals of a company, such as its revenue model, financial history, cash inflow, business strategies, brand value, key people on board, and their vision, that pave the way for future growth. And only after you are sure about these being in the right place can you can breathe a sigh of relief as you are making a good long-term investment which will bear fruitful returns for you.

If you feel your investment meets these requirements, then you should know that you are investing the right way. Else, if even any one of them is not met, you need to think twice before taking the leap as it might not end up as you desire it to.