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One97 Communications (Paytm) IPO - Information Note

One97 Communications (Paytm) IPO - Information Note
by 5paisa Research Team 29/10/2021

Paytm is perhaps one of the most popular digital brands in India, which is why Kontor Brandz had valued the Paytm brand alone at $6.3 billion. That is nearly 35% of the value of Paytm as implied in the IPO. Paytm offers payment services, commerce, cloud services and financial services entirely on a digital mode.

Paytm is a virtual digital universe of its own with over 33.3 crore registered consumers, over 11.7 crore active users each year and over 2.18 crore merchants registered on its platform. Paytm is, in fact, a combination of a consumer and merchant ecosystem with virtual dominance in both. The next big thing for Paytm is the offering of intuitive digital products.
 

Key terms of the IPO issue of One97 Communications (Paytm)

Key IPO Details

Particulars

Key IPO Dates

Particulars

Nature of issue

Book Building

Issue Opens on

08-Nov-2021

Face value of share

Rs.1 per share

Issue Closes on

10-Nov-2021

IPO Price Band

Rs.2,080 - Rs.2,150

Basis of Allotment date

15-Nov-2021

Market Lot

6 shares

Refund Initiation date

16-Nov-2021

Retail Investment limit

15 Lots (90 shares)

Credit to Demat

17-Nov-2021

Retail limit - Value

Rs.193,500

IPO Listing date

18-Nov-2021

Fresh Issue Size

Rs.8,300 crore

Pre issue promoter stake

N.A.

Offer for Sale Size

Rs.10,000 crore

Post issue promoters

N.A.

Total IPO Size

Rs.18,300 crore

Indicative valuation

Rs.139,379 crore

Listing on

BSE, NSE

HNI Quota

15%

QIB Quota

75%

Retail Quota

10%

 

Data Source: IPO Filings
 

Here are some of the key merits of the One97 Communications (Paytm) business model


i) It has high brand recall, especially beyond the metro and large cities.

ii) It largely dominates the consumer and the merchant ecosystem.

iii) Paytm is the only payment company in India to own each layer of the stack.

iv) It is largely a professionally managed company with no identified promoter group.

v)  Paytm Bank has 6.5 crore accounts, Rs.5,800 crore in deposits and Rs.6,900 crore invested in wealth products. 

vi) For FY21, Paytm had gross market value (GMV) of Rs.400,000 crore with over 740 crore transactions across 12 crore transacting users.

vii) Cross selling across commerce, payments and wallets could be the next big thing to penetrate customer wallets deeper
 

How is the One97 Communications (Paytm) IPO structured?


The Paytm IPO will be a combination of a fresh issue and an offer for sale. Here is a gist of the IPO offer of the company.

a) The fresh issue component will entail the issue of 386.05 lakh shares and at the peak price band of Rs.2,150 per share, the fresh issue amount will be Rs.8,300 crore. 

 

b) The OFS component will comprise of the issue of 465.12 lakh shares and at the peak price band of Rs.2,150, the OFS value would be Rs.10,000 crore resulting in a total IPO issue size of Rs.18,300 crore.

c)  Vijay Sekhar Sharma will sell 18.73 lakh shares valued at approximately Rs.402.70 crore. However the four biggest sellers in the OFS will be Antfin Netherlands at Rs.4,704 crore, SAIF at Rs.1,891 crore, SVF Panther at Rs.1,689 crore and Alibaba.com at Rs.785 crore.

One97 Communications (Paytm) will be valued at Rs.139,379 crore or at current exchange rates approximately $18.6 billion. This is far lower than what the company was anticipating ahead of the IPO, wherein it was looking at a pricing range of $20-25 billion.
 

Financials of One97 Communications (Paytm)

Financial Parameters

Fiscal 2020-21

Fiscal 2019-20

Fiscal 2018-19

Sales Revenues

Rs.2,802.40 cr

Rs.3,280.80 cr

Rs.3,232.00 cr

EBITDA / Loss

Rs.-1,767.30 cr

Rs.-2,634.40 cr

Rs.-4,366.10 cr

Net Profit / Loss

Rs.-1,701.00 cr

Rs.-2,942.40 cr

Rs.-4,230.90 cr

 

Data Source: Company RHP

Considering the breadth of investments being made by Paytm in its current and future franchises, the losses are likely to continue. However, there has been a sharp narrowing of losses from Rs.2,942 crore to Rs.1,701 crore. A lot would predicate on how the new initiatives like Paytm Money are able to build on the franchise of the core Paytm.

Check - PayTm IPO - 7 Things to Know
 

Investment Perspective for One97 Communications (Paytm)


When Zomato was subscribed 39 times despite its size of Rs.9,375 crore, it had raised hopes among digital plays. The response to the Nykaa IPO and Policybazaar IPO will be crucial to the success of the Paytm. Here are few points to note.

A) The current IPO price implies a valuation of $18.6 billion and is just about 20% higher than its last placement. Most digital plays have seen their valuations grow nearly 100% in the last 2  years. That makes Paytm an interesting play on digital India.

B) Paytm has strong dominance over the consumer and the merchant ecosystem and that is likely to favour in its future initiatives. The expansion of ROI can have a multiplier effect on the revenues of Paytm in the coming years.

C) More than 75% of its fresh issue proceeds will go towards strengthening the Paytm ecosystem, inorganic growth, technology investments etc. All these are value accretive for the company.

D) Unique online transacting users are expected to grow from 25 crore to 75 crore in India by 2026. Paytm would be the best positioned to capitalize on this trend.

Above all, it is the penetration in non-urban India and the mindshare that could be the biggest assets for Paytm.

Also Read:- 

Upcoming IPOs in 2021

PB Fintech Policybazaar IPO - Information Note

Fino Payments Bank IPO - Information Note

 

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Dr. Reddy Laboratories and GAIL India Ltd Share Q2 Result

Dr. Reddy Laboratories and GAIL India Ltd Share Q2 Result
by 5paisa Research Team 29/10/2021

Dr. Reddy's Laboratories - Q2 Results


Dr. Reddy's Laboratories Ltd reported stellar numbers for the September 2021 quarter as its top line revenues grew by 17.7% at Rs.4,987 crore. Even on a quarter on quarter basis, the revenues were higher by 17.15%, showing even short term traction in the top line. Here is a gist of the key financials of Dr. Reddy Laboratories.

 

Rs in Crore

Sep-21

Sep-20

YOY

Jun-21

QOQ

Total Income (Rs cr)

₹ 5,763.20

₹ 4,896.70

17.70%

₹ 4,919.40

17.15%

Net Profit (Rs cr)

₹ 992.00

₹ 762.00

30.18%

₹ 571.00

73.73%

Diluted EPS (Rs)

₹ 59.65

₹ 45.83

 

₹ 34.34

 

Net Margins

17.21%

15.56%

 

11.61%

 


What were the triggers for the revenue growth. Let us look at specific verticals. Revenues from the pharma ingredients and the API segment were lower by 2.6% yoy at Rs.999 crore and that was due to supply chain constraints in the business. However, revenues from global generics were up 19% at Rs.4,743 crore and accounted for a bulk of the top line.

Net profits for the Sep-21 quarter were higher by 30.2% at Rs.992 crore. This was on the back of a spurt in the gross margins by 600 bps to 53.4%. Reddy Labs spent Rs.446 crore on  R&D which is 7.7% of sales, and well above the peer group median. EBITDA margins at 27% improved by 600 bps quarter on quarter. India and EM markets showed best growth.

Reddy Labs had a comfortable net debt to equity ratio of 0.015X. Free cash flows stood at Rs.83 crore, which can considered small for a company of that size and scale. Net margins for Reddy Labs at 17.21% was surely better than 15.56% in the Sep-20 year ago quarter and it was sharply better than NPM of 11.6% in Jun-21 quarter.
 

GAIL India Ltd - Q2 Results


India’s largest gas transportation company, GAIL India, reported 67.39% growth in total revenues for the Sep-21 quarter on consolidated basis at Rs21,782cr. The revenues were higher by 73% on a sequential basis compared to Rs17,589cr revenues in the Jun-21 quarter. There was a volume boost and also a price boost linked to crude oil prices.

 

Rs in Crore

Sep-21

Sep-20

YOY

Jun-21

QOQ

Total Income (Rs cr)

₹ 21,782

₹ 13,012

67.39%

₹ 17,589

23.84%

Net Profit (Rs cr)

₹ 2,883

₹ 1,112

159.34%

₹ 2,138

34.88%

Diluted EPS (Rs)

₹ 6.49

₹ 2.47

 

₹ 4.81

 

Net Margins

13.24%

8.54%

 

12.15%

 

 

In terms of verticals of GAIL, the major boost to revenues came from the natural gas marketing vertical which was up by 71% at Rs21,011cr. Two other verticals viz.  natural gas transmission and LPG transmission was almost flat on YoY basis. However petchem, liquid hydrocarbons and the CGD business saw good growth in revenues on YoY basis.

Net profits were up 159.34% for the Sep-21 quarter at Rs.2,883 crore. Profits were also higher by 35% on a quarter to quarter basis. The big boost to EBIT came from natural gas marketing which went from an EBIT loss of Rs-335 crore to an EBIT profit of Rs.1,029 crore. That actually triggered the boost to the overall profits to GAIL.

The EBIT contributions of CGD, liquid hydrocarbons and petchem also showed growth like in the case of the top line. However, this was on a much lower base. Net profit margins at 13.24% was substantially superior to 8.54% in the Sep-20 quarter and was also better than the net profit margins of 12.15% in Jun-21 quarter.

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Exide Industries Ltd and Voltas Ltd Share Q2 Result

Exide Industries Ltd and Voltas Ltd Share Q2 Result
by 5paisa Research Team 29/10/2021

Exide Industries Ltd - Q2 Results

Exide Industries Ltd has posted a healthy 18.62% growth in total revenues for the Sep-21 second quarter of the fiscal at Rs.4,758 crore. Even if you look at revenues on a sequential basis, the revenues were higher by 33.68% on a quarter on quarter basis. Here is a gist of the financials of Exide Industries.

 

Rs in Crore

Sep-21

Sep-20

YOY

Jun-21

QOQ

Total Income (Rs cr)

₹ 4,758

₹ 4,011

18.62%

₹ 3,559

33.68%

Net Profit (Rs cr)

₹ 196

₹ 257

-23.62%

₹ 33

497.60%

Diluted EPS (Rs)

₹ 2.31

₹ 3.03

 

₹ 0.39

 

Net Margins

4.13%

6.41%

 

0.92%

 

 

In terms of verticals of the company, revenues from storage batteries and allied product grew sharply by 19% at Rs.3,384 crore. The other insurance business, which has now been sold to HDFC Life, also saw its revenues surge by 17% at Rs.1,369 crore. The top line revenue growth in the quarter was led by both the verticals amidst favourable market conditions.

Net profits of Exide Industries for the Sep-21 quarter actually fell by -23.62% at Rs.196 crore although it would have jumped by nearly 500% compared to the profits in the sequential quarter of June 2021. In terms of yoy growth, the EBIT of the storage batteries vertical grew by 6% at Rs.317 crore which was lower than expected. 

The battery segment EBIT could have been much better had it not been for the 40% spike in input and raw material related costs. The insurance business actually made an EBIT loss due to a surge in COVID related claims and provisions. Net margins at 4.13% was lower than 6.41% in Sep-20 quarter but much better than a measly 0.92% in Jun-21 quarter.

Voltas Ltd - Q2 Results

Voltas, one of the oldest surviving cooling brands in India, reported a very tepid 4.75% growth in total revenues on a yoy basis at Rs.1,689 crore in the Sep-21 quarter. The revenues were, however lower by -5.38% quarter on quarter basis due to supply chain constraints hitting the auto sector this quarter, including the shortage of microchips.

In terms of top line growth of verticals, it was the unitary cooling products vertical that witnessed 33% growth at Rs.1,006 crore while electro mechanical projects saw revenues fall sharply by about 28% at Rs.536 crore. Here is a gist of the financial numbers of Voltas Ltd for the current and comparable quarters.

Rs in Crore

Sep-21

Sep-20

YOY

Jun-21

QOQ

Total Income (Rs cr)

₹ 1,689.08

₹ 1,612.54

4.75%

₹ 1,785.20

-5.38%

Net Profit (Rs cr)

₹ 103.61

₹ 78.35

32.24%

₹ 121.80

-14.93%

Diluted EPS (Rs)

₹ 3.13

₹ 2.37

 

₹ 3.68

 

Net Margins

6.13%

4.86%

 

6.82%

 

 

Net profits of Voltas for the Sep-21 quarter was up 32.24% at Rs.104 crore. The big boost to the EBIT came from unitary cooling products which saw EBIT increase meaningfully from Rs.86 crore to Rs.102 crore. Actually, the company managed its inventories and its raw material costs quite effectively.

The verticals of electro mechanical projects and engineering products showed EBIT growth of much smaller scale. Net margins at 6.13% was surely a head over the 4.86% on a yoy basis but was a tad lower than NPM 6.82% in the sequential Jun-21 quarter.

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Nykaa IPO - Subscription Day 2

Nykaa IPO - Subscription Day 2
by 5paisa Research Team 29/10/2021

The Rs.5,352 crore IPO of FSN E-Commerce Ventures (Nykaa), consisting of a fresh issue of Rs.630 crore and an offer for sale or OFS of Rs.4,722 crore, was already oversubscribed on Day-1 itself. As per the combined bid details put out by the BSE at the end of Day-2, FSN E-Commerce Ventures (Nykaa) IPO was subscribed 4.82X overall, with the demand coming almost equally from retail segment, HNI segment and QIB segment. The issue closes on 01st November.

As of close of 29th October, out of the 264.85 lakh shares on offer in the IPO, FSN E-Commerce Ventures (Nykaa) saw bids for 1,277.49 lakh shares. This implies an overall subscription of 4.82X. The granular break-up of subscriptions were equally distributed among the three major participants viz. retail, QIB and HNIs. QIB bids and NII bids typically gather momentum only on the last day of the IPO.

FSN E-Commerce Ventures (Nykaa) IPO Subscription Day-2
 

Category

Subscription Status

Qualified Institutional Buyers (QIB)

4.72 Times

Non Institutional Investors (NII)

4.17 Times

Retail Individuals

6.32 Times

Employees

1.18 Times

Overall

4.82 times

 

QIB Portion

The QIB portion of the IPO was subscribed 4.72 times at the end of Day-2. On 27 October, FSN E-Commerce Ventures (Nykaa) did an anchor placement of 212.96 lakh shares at the upper end of the price band of Rs.1,125 to 174 anchor investors raising Rs.2,396 crore.

The list of QIB investors including a number of marquee names like Blackrock, Fidelity, Government of Singapore, ADIA, MAS, T Rowe Price, Aberdeen, Goldman Sachs, SBI MF, HDFC MF, ICICI Pru MF, Kotak MF, Tata MF; among others.

The QIB portion (net of anchor allocation as explained above) has a quota of 143.53 lakh shares of which it has got bids for 677.28 lakh shares, implying a subscription ratio of a healthy 4.72X for QIBs at the end of Day-2. QIB bids typically get bunched on the last day, but anchor response at 40 times does indicate good institutional interest.

HNI / NII Portion

The HNI portion got subscribed 4.17X (getting applications for 297.03 lakh shares against the quota of 71.30 lakh shares). This is a solid response on Day-2 considering that this segment normally sees response bunched on the last day. That is because, bulk of the funded applications and corporate applications, come in on the last day, so the actual picture should only get better. 

Retail Individuals

The retail portion was subscribed a robust 6.32X at the end of Day-2, showing strong retail appetite. However, it must be noted that retail allocation is just 10% in this IPO. For retail investors; out of the 47.53 lakh shares on offer, valid bids were received for 300.22 lakh shares, which included bids for 235.23 lakh shares at the cut-off price. The IPO is priced in the band of (Rs.1,085-Rs1,125) and will close for subscription on 01st November 2021.

Also Read:-

Nykaa IPO - Subscription Day 1

Nykaa IPO - 7 Things to know before applying for IPO

Upcoming IPOs in 2021

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Fino Payments Bank IPO - Subscription Day 1

Fino Payments Bank IPO - Subscription Day 1
by 5paisa Research Team 29/10/2021

The Rs.1,200 crore IPO of Fino Payments Bank, consisting of a fresh issue of Rs.300 crore and an offer for sale (OFS) of Rs.900 crore, saw a tepid response on Day-1. As per the combined bid details put out by the BSE, Fino Payments Bank IPO was subscribed 0.51X overall, with bulk of the demand coming from the retail segment which saw a robust oversubscription. The issue closes on 02nd November.

As of close of 29th October, out of the 114.65 lakh shares on offer in the IPO, Fino Payments Bank saw bids for 58.14 lakh shares. This implies an overall subscription of 0.51X. The granular break-up of subscriptions were tilted in favour of retail investors with HNIs and QIBs hardly participating on the first day of the IPO. QIB bids and NII bids typically come in only on the last day of the IPO.
 

Fino Payments Bank IPO Subscription Day-1

 

Category

Subscription Status

Qualified Institutional Buyers (QIB)

0.00 Times

Non Institutional Investors (NII)

0.05 Times

Retail Individuals

2.73 Times

Employees

0.25 Times

Overall

0.51 times

 

QIB Portion

The QIB portion of the IPO saw nil subscription at the end of Day-1. On 28 October, Fino Payments Bank did an anchor placement of 93,37,641 lakh shares at the upper end of the price band of Rs.577 to 29 anchor investors raising Rs.539 crore.

The list of QIB investors including a number of marquee names like Fidelity, HSBC Global, Pinebridge, Birla Mutual, Tata MF, SBI Life, Invesco, BNP Paribas and Societe Generale; among others.

The QIB portion (net of anchor allocation as explained above) has a quota of 62.25 lakh shares of which it has got bids for Nil shares on Day-1 of the IPO. QIB bids typically get bunched on the last day, but anchor response has been robust and that is good news.

HNI / NII Portion

The HNI portion got subscribed 0.05X (getting applications for 1.44 lakh shares against the quota of 31.13 lakh shares). This is a relatively tepid response on Day-1 and this segment normally sees response on the last day. That is because, bulk of the funded applications and corporate applications, come in on the last day, so the actual picture should only get better. 

Retail Individuals

The retail portion was subscribed a robust 2.73X at the end of Day-1, showing strong retail appetite. Retail allocation for this IPO is 35% of the offer size. For retail investors; out of the 20.75 lakh shares on offer, valid bids were received for 56.56 lakh shares, which included bids for 45.10 lakh shares at the cut-off price. The IPO is priced in the band of (Rs.560 – Rs577) and will close for subscription on 02nd November 2021.

Also Read :-

Fino Payments Bank IPO - Information Note

Fino Payments Bank IPO - 7 Things to Know

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SJS Enterprises Ltd IPO - Information Note

SJS Enterprises Ltd IPO - Information Note
by 5paisa Research Team 30/10/2021

SJS Enterprises Ltd, a leading player in the decorative aesthetics industry, proposes to come out with an IPO of Rs.800 crore. The issue opens on 01-November and closes for subscription on 03-November. The entire issue will be an offer for sale so there will be no fresh funds coming into the company nor any dilution of equity. It will only provide an exit to the existing early investors and provide a basis for stock market valuation.

SJS Enterprises Ltd offers a plethora of such aesthetic products including 2D and 3D appliques and dials, 3D lux badges, domes, overlays, aluminium badges, in-mould labels, lens mask assembly, chrome plate printing etc. SJS Enterprises Ltd essentially caters to the automotive and the consumer durables segment.
 

Key terms of the IPO issue of SJS Enterprises Ltd
 

Key IPO Details

Particulars

Key IPO Dates

Particulars

Nature of issue

Book Building

Issue Opens on

01-Nov-2021

Face value of share

Rs.10 per share

Issue Closes on

03-Nov-2021

IPO Price Band

Rs.531 - Rs.542

Basis of Allotment date

10-Nov-2021

Market Lot

27 shares

Refund Initiation date

11-Nov-2021

Retail Investment limit

13 Lots (351 shares)

Credit to Demat

12-Nov-2021

Retail limit - Value

Rs.190,242

IPO Listing date

15-Nov-2021

Fresh Issue Size

Nil

Pre issue promoter stake

98.86%

Offer for Sale Size

Rs.800 crore

Post issue promoters

50.37%

Total IPO Size

Rs.800 crore

Indicative valuation

Rs.1,650 crore

Listing on

BSE, NSE

HNI Quota

35%

QIB Quota

50%

Retail Quota

10%

 

Data Source: IPO Filings
 

Here are some of the key merits of the SJS Enterprises Ltd business model


1) SJS is one of the leading players in the decorative aesthetics segment

2) It straddles the complete value chain from design to delivery

3) It supplies over 11.5 crore parts to over 170 customers across 20 countries

4) The ten largest customers of SJS have been loyal leaders for over 15 years

5) ROCE of 31.6% makes it a very niche value play in the segment

6) OEMs account for 66%-68% of total revenues, making it a stable business model

7) Free cash flow to EBITDA of 57% and Free cash flow to PAT of 96% makes it a very healthy profitability and cash flow scenario for SJS Enterprises Ltd
 

Check - SJS Enterprises IPO - 7 Things to know
 

How is the SJS Enterprises Ltd IPO structured?


The SJS Enterprise IPO will be a total offer for sale where the promoters will be diluting their stake through the issue. Here is a gist of the IPO offer of the company.

A) The OFS component will comprise of the issue of 147.60 shares and at the peak price band of Rs.542, the OFS value would be Rs.800 crore which will also be the size of the total IPO issue.

B) Out of the total OFS of Rs.800 crore, Evergraph Holdings Pte Ltd, the promoter company will sell shares worth Rs.710 crore while one of the promoters, Mr. K A Joseph will shares worth Rs.90 crore.

The promoter holdings will get substantially diluted post the OFS and the public will end up with 49.63% shares with promoters holding 50.37% shares post the issue.
 

Key Financial parameters of SJS Enterprises Ltd
 

Financial Parameters

Fiscal 2020-21

Fiscal 2019-20

Fiscal 2018-19

Sales Revenues

Rs.251.62 cr

Rs.216.17 cr

Rs.237.25 cr

Net Profit

Rs.47.77 cr

Rs.41.29 cr

Rs.37.60 cr

Net Worth

Rs.315.22 cr

Rs.279.65 cr

Rs.238.56 cr

Net Profit Margins

18.98%

19.10%

15.85%

ROCE

31.63%

26.44%

28.28%


Data Source: Company RHP

The net margins and the ROCE hint at solid financials and have also been consistently growing over time. The EBITDA margins above 31% hint at profitable operations and that is evident from the strong customer franchise built by the company.

Also, being an OFS, there will be no dilution of equity, which shows the ability of the company to self-fund growth from internal resources.
 

Investment Perspective for SJS Enterprises Ltd
 

Being a total OFS, the issue of SJS Enterprises Ltd will not result in dilution of equity and hence shareholders earnings will be protected. Here are some merits.

a) In the kind of decorative aesthetics business that SJS is into, long term relations matter a lot. That is where the OEM links of SJS can be value accretive.

b) The design to delivery approach means that SJS Enterprises Ltd straddles the entire value chain. That gives them greater control over inputs and output as well as costs.

c) It counts among its OEM customers marque global names and domestic names like Suzuki, ,M&M, John Deere, Volkswagen, Honda, Bajaj Auto, Ashok Leyland, TVS Motors, Marelli, Whirlpool, Panasonic, Samsung, Eureka Forbes, Godrej and the list goes on.

d) Share of exports have been growing from 9.8% to 16.1% over the last 2 years. That is a good approach to de-risk the model from the Indian consumer market.

If one looks at the valuations in P/E terms, the stock is quoting at 35X historic earnings and around 31X forward earnings assuming CAGR growth rates sustaining. That is a reasonable level to pick up a stock with leadership position in its niche.

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