Three IPOs of this week

Analysis Sep 22, 2020

It will be a crucial week for Dalal street, as three companies are going public - Computer Age Management Services (CAMS), Chemcon Speciality Chemicals and Angel Broking. Let's begin our discussion with CAMS.

CAMS

CAMS is a mutual fund transfer agency to the Indian asset management companies. It is used by asset management companies to record transactions. It serves over 60% of the transactions in the whole mutual fund industry. CAMS is co-owned by - NSE Investments Limited, HDFC Bank group, Warburg Pincus LLC and Acsys Investments Private Limited.

IPO Details of CAMS

  1. The IPO of CAMS opened on September, 21 and it is 20% subscribed by 11:45 am.
  2. The price band is fixed at Rs. 1229-1230.
  3. CAMS is planning to raise Rs. 2244 crore from the IPO.
  4. The lot size of this IPO is 12, which means an investor has to buy stocks in the multiple of 12.
  5. The company has already raised Rs. 660 crores from 35 investors before the IPO.
  6. The share allocation is likely to be finalized by September 28 and listed by October 1.

Strengths

1. 70% market share in the industry
2. Wide moat because the entry barrier is high
3. Backed by strong promoters

Areas of improvements

1. Revenues are highly dependent on the mutual fund industry
2. Any change in the regulations in the mutual fund industry can impact the business.

Chemcon Speciality Chemicals

Chemcon Speciality Chemicals Ltd is a manufacturer of specialized chemicals, such as HMDS and CMIC, predominantly used in the pharmaceutical industry. Also, inorganic bromides(Calcium Bromide, Zinc Bromide and Sodium Bromide) are used mainly as completion fluids in the oilfields industry.

IPO details of Chemcon

  1. The IPO of Chemcon opened on September, 21 and it is subscribed 5 times on the first day.
  2. The price band is fixed at Rs 338-340.
  3. Chemcon is planning to raise Rs 318 crore from the IPO.
  4. The lot size of this IPO is 44, which means an investor has to buy stocks in the multiple of 44.
  5. The company had already raised Rs 95.40 crore from anchor investors at Rs 340 per share last week.
  6. The share allocation is likely to be finalized by September 28 and listed by October 1.

Strengths

1. Largest manufacturer of pharmaceutical chemicals in the world
2. Largest oilfield chemicals manufacturer in India

Areas of improvements

1. 59 percent of revenue (FY20) was derived from the top 5 customers.
2. Increase in raw material prices is a significant disadvantage for this company.

Angel Broking

Angel Broking Limited is the 4th largest brokerage firm in India. It offers a wide variety of investment and trading services such as stock and commodity broking, investment advisory services, margin funding, loans against shares, and financial products distribution. Angel broking is digital first company when it comes to serving direct customers. Around 85 per cent of their customers are using their digital services.

IPO details of Angel Broking

  1. The IPO of Angel Broking opened on September, 22 and it is subscribed 5 times on the first day.
  2. The price band is fixed at Rs 305-Rs 306.
  3. Angel Broking is planning to raise Rs 600 crore from the IPO.
  4. The lot size of this IPO is 49, which means an investor has to buy stocks in the multiple of 49.
  5. The company has already raised Rs 180 crore by allotting 58.82 lakh shares to 12 anchor investors. Anchor investors include Goldman Sachs, IIFL, Bajaj Allianz, Max Life Insurance and domestic mutual funds such as ICICI Pru, HDFC, Sundaram, Nippon, Invesco and Birla.
  6. The share allocation is likely to be finalized by September 29 and listed by October 5.

Strengths

  1. 4th largest broker in India with a firm brand name.
  2. Massive client base with a 7.7 lakh active customers.
  3. Substantial reach across India with a great network of 11000 sub-brokers.

Areas of improvement

1. Hard to compete with Full bank service brokers such as ICICI.
2. It's PE is 26.74 when the industry PE is 22.82. So, the stock is slightly overvalued.

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