On May 20, the listing day, Prudent Corporate Advisory Services Ltd. (Prudent), an independent retail wealth management services group in India, made its debut on the bourses at a premium.
The stock opened at Rs 660, at a premium of 4.7 percent to its issue price of Rs 630 on the BSE, while the listing price on the NSE was Rs 650.
Volatility and negative market sentiment impacted the listing of one of the top mutual fund distributors. On May 19, the Indian stock markets tanked more than 1,400 points, wiping off over Rs 6.4 lakh crore of investor wealth in a single day. The after-effects might weigh on the stock’s listing today.
The shares of the company that offers digital wealth management solutions through platforms such as FundzBazar, PrudentConnect, Policyworld, WiseBasket, and CreditBasket climbed or declined x percent on May 20, the listing day.
Most of the brokerages have suggested investors exercise caution while subscribing to the issue.
The issue did not receive a robust response from investors and was subscribed at 1.22 times its size of Rs 538.61 crore. Its QIB portion was subscribed 1.26 times, while the portion reserved for non-institutional investors got a subscription of 0.99 times. Retail investors did not evince much interest and subscribed at 1.29x the portion reserved for them. The employees of the company lapped up 1.23 times of their allotted portion.
Experts are of the opinion that higher valuations demanded by the company for the issue were among the main reasons for the lacklustre response to the IPO. They said fair valuations would have shown a better response.
The competitive intensity in the financial product distribution industry has become more intense with the entry of a lot of fin-tech players. A report from Choice Broking said "the company might face challenges in maintaining its margins at 25 percent going forward."
The brokerage found the demanding valuations quite stretched. "We believe the demanding valuation at Rs 2,608 crore is expensive, leaving no margin of safety for investors in the highly competitive financial products distribution industry," it said.
The key strength of the company lies in the fact that it has a consistent track record of profitable growth due to a highly scalable, asset-light and cash-generative business model. It uses innovation and technology to improve investor and partner experiences and has a growing independent financial products distribution platform. The company operates in an underpenetrated Indian asset management industry that has averaged a compounded annual growth rate of more than 20 percent.
The offer was entirely an offer-for-sale of up to 8.55 million shares by shareholders and promoters. The company will not get any proceeds from the issue. Shirish Patel will sell around 2.68 million shares. Wagner holds 40 percent of the shares, while Patel has a 3.15 percent stake in the firm.
Half of the offer was reserved for qualified institutional buyers; 15 percent for non-institutional bidders; and the rest, 35 percent, for retail investors.