Onelife Capital Advisors - A Lifeless Proposition

Recently, Onelife Capital Advisors (OCAL) tapped the primary market to raise Rs 36.85 crore. The company had fixed a price band of Rs 100-110, and the issue price was fixed at Rs 110 per share. The IPO was oversubscribed 1.53 times. (QIB 1.02 times, institutional 0.92 times and retail investors 2.5 times). Listed on October 17, 2011, the stock opened five per cent higher at Rs 115, while at the end of the day, it was up by a whopping 39 per cent at Rs 153.10.

In our analysis, we had recommended a clear ‘avoid’ for the IPO, and we still stick to that. There has been no fundamental change in the company over the last fortnight, and we see the scrip declining very soon. In case you have been allotted shares, we would suggest that you book profits from the same, as we expect the scrip to dive below its offer price.

OCAL was incorporated in 2007, and is a SEBI-registered merchant banker. The company is planning to enter portfolio management services and the equity broking business. Of the total funds raised, 31 per cent would be used for the development of portfolio management services, approximately 20 per cent would be used for buying a corporate office and for its brand-building activity and the remaining for general corporate and issue-related expenses.

OCAL is a loss-making entity. For FY11, its topline declined by 40 per cent to Rs 37 lakh, while at the bottomline it reported a loss of Rs 60 lakh against a profit of Rs 4.51 lakh in FY10. The funds raised by the company will not help in any value addition in the near future. It is entering into a segment where it has neither past experience nor a client base.

With a subdued growth expectation from the business and with the scrip currently trading at a higher valuation, our recommendation to investors is to avoid taking any fresh position, and to exit the counter if you happen to be holding it.