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.
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.
|Particulars||IIFL Wealth||ICICI Sec.||CDSL||CAMS||HDFC AMC||Nippon AMC||UTI AMC|
|Total Income for FY21 (Cr)||1659.02||2586.2||400.63||735.26||2201.74||1419.34||1198.63|
|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%|
|Market Price (As on 25 April 2022)||1750.00||597.05||1431.85||2620.00||2044.00||326.60||949.00|
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.
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.
Review By CA Priyanka Choudhary on 3rd May 2022
About CA Priyanka Choudhary
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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