Prudent Corporate Advisory Services IPO: All You Need To Know
Prudent Corporate Advisory Services to launch three-day IPO on May 10.
Prudent Corporate Advisory Services Ltd., an independent wealth management and a leading mutual fund distributor, will sell shares at Rs 595-630 apiece in its three-day initial public offering starting Tuesday.
Private equity investor Wagner Ltd., an arm of TA Associates, and other shareholders will sell 85.49 lakh shares worth Rs 538 crore at the upper end of the price band, according to its red herring prospectus. The company will have a post-issue market value of Rs 2,609 crore.
Prudent will offer 20.7% of the post-issue equity in the IPO. The promoters will hold 56.8% after the share sale.
The IPO comes amid heightened volatility in the global market on account of Russia’s attack on Ukraine and resurgence of Covid-19 cases in China.
Issue Details
Opens on: May 10.
Closes on: May 12.
Size: Rs 538 crore.
Face value: Rs 5 apiece.
Lot size: 23 equity shares and multiples.
Listing on: BSE and NSE.
Lead Managers: Axis Capital, ICICI Securities and Equirus Capital
Use Of Proceeds
The proceeds of the issue will not come to the company.
Business
The company is an independent retail wealth management services group and is among the top mutual fund distributors by average assets under management and commission received.
It is an important interface between asset managers and mutual fund distributors or independent financial advisors.
As of December, its AUM from mutual fund distribution stood at Rs 48,411.47 crore, with 92.14% of total AUM being equity-oriented. This has allowed higher commission rate and revenue for the company. Its average commission rate is 1.09% compared to the industry average of 0.65%. The company distributes two-thirds of the commission it receives with mutual fund distributors and independent financial advisors.
At the end of Dec. 31, it provided wealth management services to 1,351,274 unique retail investors through 23,262 mutual fund distributors on its business-to-consumer platform. Its operations are spread across 110 locations in 20 states. Also, the number of AMFI registration number holders empanelled with the company stood at 23,262, representing 18.46% of the industry.
It has an online platform that provides various investment products. It recently acquired the mutual fund portfolio of Karvy Stock Broking for Rs 151 crore.
The company also focuses on systemic investment plans, with 15.3 lakh such products handled by it as on Dec. 31. SIPs account for 42.48% of the total equity AUM of the company.
It has also forayed into insurance policy distribution through the acquisition of Gennext. But 84.5% of the revenue comes from the distribution of mutual funds, followed by insurance (7.28%) and stockbroking (4.73%).
Financials
Prudent earns most of its revenue from mutual fund distribution commissions.
Peer Comparison
Prudent competes with NJ India Invest, ICICI Securities, Anand Rathi Wealth, Bajaj Capital and JM Financial Services in mutual fund distribution. Its listed peers include IIFL Wealth Management, ICICI Securities, Anand Rathi Wealth.
“We operate in a highly regulated environment, which is subject to change. And existing and new laws, regulations and government policies affecting the sectors in which we operate could adversely affect our business, financial condition and results of operations,” the company said in its prospectus.
Risks
Non-compliance with regulatory guidelines and directions/ observations during inspection by regulatory organisations may have a material adverse effect on business, financial condition or results of operation.
There is an outstanding criminal case (NSEL case) in which the Economic Offences Wing has issued notices to Prudent Comder Pvt. (since merged with subsidiary, Prudent Broking Services Pvt.), its promoter and a director of subsidiary and there is an outstanding SEBI matter against PBSPL, which if determined in an adverse manner, may result in a loss of licence of PBSPL and consequently may adversely impact future operations, reputation and profitability.
If the company do not continue to innovate and further develop platform or platform developments do not perform, or it is not able to keep pace with technological developments, it may not remain competitive and business and results of operations could suffer.
Business operations are highly dependent on information technology. Failure or disruption of Information Technology systems may adversely affect. Systems failures and resulting interruptions in the availability of its platform could adversely affect business, financial condition, cash flows and results of operations.
Any reduction in commission or brokerage of other financial products could have adverse effect on business, financial condition, cash flows, results of operations and prospects.
It depends on ability to attract and retain registered mutual fund distributors on its platforms and any inability to retain them may adversely affect business and results of operations.
Competition from existing and new market participants in its line of business may affect market share, or results of operations.
