Abans Holdings IPO review (May apply)

•    AHL is a financial service arm of the well-diversified Abans group. 
•    Surprisingly, it has posted growth in bottom lines despite declining top lines. 
•    Based on its financial track record so far, the issue appears aggressively priced. 
•    IPO allocation of just 10% for QIBs, 30% for HNIs, and 60% for Retail raises concern.
•    Well informed, cash surplus/risk seekers may consider parking of funds. 

ABOUT COMPANY:
Abans Holdings Ltd. (AHL) is the financial service arm of the Abans group. AHL operates 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 corporates, institutional and high net worth clients.

Since the inception of the Company, it has grown from being a commodities trading company into a diversified multi-asset and multi-national financial services company having varied financial services businesses. 

Abans group is a globally diversified organization engaged in Financial Services, Gold Refining, Jewellery, Commodities Trading, Agricultural Trading and Warehousing, Software Development, and Real Estate. On a consolidated basis, it has 100 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its need for further investment in its NBFC subsidiary (Rs. 80.00 cr.), and general corporate purposes, AHL is coming out with a maiden combo issue of fresh equity shares as well as an Offer for Sale (OFS). The company has proposed to issue 3800000 fresh equity shares of Rs. 2 each (approx. Rs. 102.60 cr.), and also an OFS for 9000000 shares (approx. Rs. 243.00 cr.). It has announced a price band of Rs. 256 - Rs. 270 for this book-building route IPO. Thus the company is issuing an overall of 12800000 shares to mobilize Rs. 345.60 cr. (at the upper cap). The issue opens for subscription on December 12, 2022, and will close on December 15, 2022. The minimum application to be made is for 55 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. The issue constitutes 25.53% of the post-issue paid-up capital of the company. 

Surprisingly this company has allocated only 10% for QIBs, 30% for HNIs, and a whopping 60% for Retail investors. Lower allocation to QIBs raises eyebrows. 

The sole Book Running Lead Manager to this issue is Aryaman Financial Services Ltd. and Bigshare Services Pvt. Ltd. is the registrar of the issue. 

Having issued initial equity shares at par, the company issued further equity shares at a price of Rs. 240.51 in March 2020. It has also issued bonus shares in the ratio of 300 for 1 in March 2020, and 2 for 1 in August 2020. The average cost of acquisition of shares by the promoters/selling stakeholders is less than Rs. 0.01 (Negligible).

Post-IPO, AHL's current paid-up equity capital of Rs. 9.27 cr. will stand enhanced to Rs. 10.03 cr. Based on the upper cap of the IPO price, the company is looking for a market cap of Rs. 1353.94 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, AHL has (on a consolidated basis) posted a total income/net profit of Rs. 2771.88 cr. / Rs. 39.22 cr. (FY20), Rs. 1331.37 cr. / Rs. 45.80 cr. (FY21), and Rs. 646.23 cr. / Rs. 61.97 cr. (FY22). Thus the company has marked declining trends in its total income for the last three fiscals, but its bottom line marked growth which is raising eyebrows.  

For the first five months of FY23 ended on August 31, 2022, it earned a net profit of Rs. 29.74 cr. on a total income of Rs. 288.31 cr.

For the last three fiscals, AHL has reported an average EPS of Rs. 11.39 and an average RoNW of 8.15%. The issue is priced at a P/BV of 1.85 based on its NAV of Rs. 146.33 as of August 31, 2022, and at a P/BV of 1.73 based on its post-IPO NAV of Rs. 155.70 (at the upper cap). 

If we annualize FY23 earnings and attribute it to the post-IPO fully diluted equity capital, then the asking price is at a P/E of around 18.96. Based on the comparison with listed peers, this issue is priced aggressively. 

DIVIDEND POLICY:
As per the offer document, AHL has not paid any dividends for the reported periods. It will adopt a prudent dividend policy based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per the offer document, AHL has shown Edelweiss Fin., Geojit Fin., and Choice Intl., as their listed peers. They are currently trading at a P/E of 7.91, 10.11, and 00. (as of December 08, 2022). However, they are not truly comparable on an apple-to-apple basis. 

MERCHANT BANKERS' TRACK RECORDS:
The sole BRLM Aryaman Financial has handled 14 issues in the last three fiscals, out of which 2 issues closed below the offer price on the date of listing.