Issue Details:
Price Band: Rs 725-Rs 825
Issue Opens: November 15, 2007.
Issue Closes: November 20, 2007.
Business:
Investment banking, institutional equities broking, private client broking, asset management, wealth management and wholesale financing services.
Focus on institutional clientele and high networth individuals.
Shareholders of the company include who is who in the world of financial industry world wide, that talks highly about the quality of the management.
Financials
ECL grew its consolidated revenues and net profit at a CAGR of 130% and 142% over FY2004-07, respectively. It has EBITDA margins and net profit margins at around 47% and 29% levels, respectively.
Objectives of the issue:
To enhance Margin maintenance with the Stock Exchanges – Rs300cr
Pre-payment of Loans – Rs105cr
To open new offices and acquisition of Office Infrastructure – Rs26.9cr
To enhance existing Technological capacity – Rs3.1cr
Other General Corporate purposes
Simply put the company intends to provide an exit route for the existing investor and for ESOP holders.
Outlook:
The offer values the company 35 times its annualized earnings for the 5 months of FY2008. One must note that this is not a low valuation, though compared to some of the players like India Infoline one can say that ECL is fairly valued.
The key concern is that almost 40% of revenues of the company come from arbitrage activities. This is a very volatile stream of earnings. Also most of the subsidiaries don’t have long enough operating history. The future may be uncertain.
The stock is quoting at Rs 1700 in gray market. This is a more a case of euphoric sentiment than any fundamental call. Just few months ago the management has got shares at a price less than the issue price.
We recommend subscribe with a possibility of 100% gains on listing.
Disclosure: We and our clients intend to bid in this IPO.
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