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Prudent Corporate Advisory Services IPO  Fundamental Analysis
  • Prudent Corporate Advisory Services, incorporated in the year 2003 (“the Issuer”) is an independent retail wealth management services group in India and is amongst the top mutual fund distributors in terms of average assets under management and commission received. The Issuer has a presence in the B-30 market catering to retail investors in more than 16,356 pin codes across India.
  • The Issuer offers a technology-enabled, comprehensive investment and financial services platform with end-to-end solutions critical for financial products distribution and presence across both online and offline channels.
  • The Issuer provided wealth management services to 13,51,274 unique retail investors through 23,262 mutual fund distributors on the business-to-business-to-consumer (B2B2C) platform and is spread across branches in 110 locations in 20 states in India, as on 31st
  • 50 branches are located in B30 markets and 60 are located in T-30 markets. Further, 27.83% of registered MFDs (mutual fund distributors) and 20.56% of retail investors are based out of B-30 markets, as on 31st Dec 2021. A large network of MFDs facilitates AMCs access to smaller cities, especially in the B-30 markets.
  • The Issuer is associated as distributors with 42 AMCs as of 31st Dec 21. AUM from the B-30 markets was Rs 2525.03 crore representing 15.15% of the total AUM as of 31st March ‘18 and has grown at a CAGR of 36.20% to Rs 80,58.62 crore representing 16.65% of the total AUM as of 31st Dec ‘21.
  • Prudent also distributes life and general insurance products in India through its wholly-owned subsidiary, Gennext. During 9MFY22, Prudent distributed 74037 policies, across life and non-life insurance segments, with an aggregate premium of Rs 161.20 crore and total brokerage received amounting to Rs 23.22 crore. The total number of policies distributed increased from 53,221 in FY19 to 86,988 in FY21 at a CAGR of 27.85%. Further, renewal of policies constituted 71.32% of the total number of policies sold by us in 9MFY22 which resulted in premium earnings of ? 91.38 crores.

Financial Review

Prudent posted total revenues of Rs 327.99 crore and PAT of Rs 57.63 crore for 9MFY22 which comprised commission and fee income from the distribution of mutual fund products and from insurance products. There was an increase in the number of MFDs joining the platform which resulted in more retail investors and an increase in SIP books supported by the digital platform of the Issuer.

The total revenues increased by 25% to Rs 294.90 crore in FY21 from Rs 236.22 crore in FY20 as the number of SIPs increased to 1,026,102 in FY21 from 997,533 in FY20. PAT increased to Rs 45.30 crore during FY21 from Rs 27.85 crore during FY20 and thus an increasing trend can be seen in the profitability margins.

Return on net worth has been 28.73%, 24.75%, and 25.30% for FY21, FY20, and FY19 respectively.

Table 1 - Financials and Ratios (Amount in Rs Crore)
Particulars 9MFY22 FY2021 FY2020 FY2019
Total Revenue 327.99 294.9 236.22 225.06
PAT 57.63 45.30 27.85 21.02
EBITDA 88.28 72.34 49.24 40.28
Total Assets 387.34 284.93 196.08 193.22
EBITDA Margin 26.92% 24.53% 20.84% 17.90%
Net Margin 14.88% 15.90% 14.20% 10.88%

Valuation and peer comparison

The Issue is being priced at 33.90x with annualized earnings of 18.59 (9MFY22) calculated at the upper price band of Rs 630 per share. P/BV is 12.13x with NAV of Rs 12.13 for 9MFY22. The average peer group P/E is 40.60x which indicates that the Issue is fully priced. HDFC and Nippon AMC have similar P/E while UTI AMC has a P/E of 24.40x as per the RHP. Further peer comparative data can be seen in the peer comparison table.

Table 2 - Listed Peer Comparison
Face Value/share 2 5 10 10 5 10 10
Total Income for FY21 (Cr) 1659.02 2586.2 400.63 735.26 2201.74 1419.34 1198.63
EPS (FY21) 42.24 33.14 19.17 42.08 62.28 11.04 38.97
NAV per share 321.77 56.55 88.04 105.73 224.28 50.29 255.31
Return on net worth 13.06% 5.86% 21.88% 39.80% 27.76% 21.91% 15.27%
P/E (FY21) 41.90 18.00 74.70 62.50 32.90 30.00 24.40
Market Price (As on 25 April 2022) 1750.00 597.05 1431.85 2620.00 2044.00 326.60 949.00

Issue Details

Prudent IPO opens on 10th May- 28th May 2022 with a price band of 595-630 per share. The retail quota is 35% and investors can apply with a minimum bid of 23 shares (Rs 14,490). Maximum lot size is 299 shares (Rs 1,88,370).The issue is entirely an offer for sale by investors Wagner limited and Shirish Patel (promoter group). The Issue is expected to list on 23rd May 2022.

Conclusion and Investment Strategy

The financial market in India is expected to continue to grow as there is under penetration of financial products in India. It is estimated that the Indian retail financial products distribution industry grew at a CAGR of 10% from March 2016 to March 2021. Though it is underpenetrated AMC sector has not grown in the past at an attractive rate. On average, the returns for the sector have remained at 7%-14% in the last 3-4 years.

Prudent has an increasing trend in its topline and profitability margins. The Issuer’s AUM has increased over the several years. However, looking at the valuations, it appears a bit on the higher side and minimal is left on the table for the investors. The peers that are much bigger in size are available at similar valuations to HDFC AMC. ICICI Securities is available at a much lower P/E of 18x. Hence investors may Avoid this IPO.

Reviewer recommends Avoid to the issue.

Review By CA Priyanka Choudhary on 3rd May 2022

Review Author

About CA Priyanka Choudhary

CA Priyanka Choudhary, a freelance chartered accountant

Priyanka Choudhary Jain is a Chartered Accountant and an experienced credit analyst. She has worked with CRISIL as Senior Credit Analyst on ratings assignments including business and financial analysis in Corporates as well as the Public Finance Sector.

Email: [email protected]

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.

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