IPO Analysis: Abans Holdings Limited
About the issue:
Abans Holdings (“AHL”), part of Abans Group, a diversified organisation engaged in the business of financial services, gold refining, jewellery and trading among others is coming out with its initial public offering (IPO) of equity shares of the face value of Rs 2 per equity share. The price band of the issue has been fixed at Rs 256 to Rs 270 per equity share. The issue size is Rs 346 crore at higher price band.
The IPO opening date is December 12, 2022, and it will be closing on December 15, 2022. The issue is likely to be listed on the exchange on December 23, 2022. The IPO market lot size is 55 shares and in multiple thereof.
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IPO Opening Date
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12-Dec-22
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IPO Closing Date
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15-Dec-22
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Issue Type
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Book Built Issue IPO
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Face Value
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Rs 2 per equity share
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IPO Price
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Rs 256 to Rs 270 per equity share
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Min Order Quantity
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55 Shares
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Listing At
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BSE, NSE
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Issue Size
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12,800,000 shares of FV Rs 2
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(Aggregating up to Rs 345.6 Cr) *
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Offer for sale
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9,000,000 shares of FV Rs 2 *
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(Aggregating up to Rs 243 cr) *
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QIB Shares Offered
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Not more than 10% of the Offer
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Retail Shares Offered
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Not less than 60% of the Offer
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NII (HNI) Shares Offered
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Not less than 30% of the Offer
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*At Upper Price Band
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Objects of the Issue:
Company will use the issue proceedings for further Investment in the NBFC Subsidiary (Abans Finance Pvt. Ltd.) for financing the augmentation of its capital base to meet its future capital requirements.
The pre-issue shareholding of promoter is 96.45 per cent, post the IPO the promoter stake will be 71.19 per cent.
About the company:
The company was incorporated as “Abans Vanijya Private Limited” in Kolkata on September 24, 2009. The company was promoted by Abhishek Bansal who currently holds 4,46,98,500 Equity Shares, representing 96.45 per cent of the pre-offer paid-up equity share capital of the company. They operate a diversified global financial services business, headquartered in India, providing NBFC services, global institutional trading in equities, commodities and foreign exchange, private client stock broking, depositary services, asset management services, investment advisory services and wealth management services to corporate, institutional and high net worth clients. AHL is primarily a holding company, and they operate all its businesses through their 18 subsidiaries (including 3 direct subsidiaries and 15 indirect/step-down subsidiaries).
Company’s business is mainly organised into these major segments:
Finance Business: This segment contributes 2.7 per cent of the entire business. It operates as RBI Registered NBFC (Non-Deposit taking). Their Finance business is primarily focused on lending to private traders and other small and medium businesses involved in the commodities trading market.
Agency Business: This segment shares 92.3 per cent of revenue. AHL is a SEBI registered Stock and Commodity Exchange Brokers with memberships across all the major stock exchanges in India, including BSE, NSE, MSEI, MCX, NCDEX and ICEX. Further being FCA registered financial services firm in London, they have direct/indirect memberships in various international exchanges like DGCX (Dubai), LME (London), INE and DCE (China). They are also a SEBI Registered Portfolio Management company as well as a SEBI Registered Category-I FPI. They offer various institutional and non-institutional trading services, wealth management and private client brokerage services, mainly in equity, commodities and foreign exchange.
Capital and other Business: The Capital Business includes their internal treasury operations which manage their excess capital funds. AHL do so by investing their capital in low/medium risk strategies, maintaining positions in physical as well as exchange traded commodities and other instruments. They structure their treasury investments to maintain sufficient liquidity in their portfolio to support the capital needs of their other businesses. Further they provide Warehousing Services to commodity market participants.
Financial:
When it comes to the financials of the company, for the last three fiscals, AHL (on a consolidated basis) total income/net profit of Rs 2771.88 crore/ Rs 39.22 crore (FY20), Rs. 1331.37 crore /Rs 45.80 crore (FY21), and Rs 646.23 crore / Rs 61.97 crore (FY22). From the above figure and table below, it is clearly visible that there is a declining trend in the total income of the company, however, profit after tax is showing growth. This does not augur well for the company.
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Financial Year ending / Period ending (Amt in Crores)
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Particulars
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FY20
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FY21
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FY22
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31-Aug-22
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Total Assets
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1,213.00
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1,181.50
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1,168.70
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1,230.70
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Revenues
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2,771.90
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1,331.40
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646.2
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288.3
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Profit After Tax
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39.2
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45.8
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62
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29.7
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Profit Margin (%)
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1.41%
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3.44%
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9.59%
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10.32%
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Valuation and Outlook:
The issue is priced at a P/BV of 1.73x based on its NAV of Rs 155.7 after accommodating the issue and the latest NAV of Rs 146 as of August 31, 2022. Based on P/BV, it looks lower compared to its peers that are trading above 3 times on an average. If we annualize five-month earnings and consider the post-issue expanded equity, then the asking price is at a P/E of around 20.3x, which looks on the higher side based on the other listed players such as Edelweiss Fin and Geojit.
The issue price seems to be reasonably priced however, looking at the declining revenues along with poor return ratios (RoE in single digit and RoCE hardly in double digit) and negative operating cash flow last year we advise readers to skip this issue.