Understanding the Upcoming IPO: A Comprehensive Analysis
Today I am going to discuss with you the article of such an IPO. While making the article, I am happy and sad at the same time. You must be wondering why I am saying this.
Gray Market Premium and Profit Expectations
See, I am happy because today the gray market premium of this IPO is going on. It is 100%, the price of the IPO is 220, and the sources are running on JMP Edge, it is 225. You have expectations of profit of Rs 11,000 in retail and profit of Rs 150,000 in the AE category. I am very sure after hearing this, you guys too must be very happy. Then I am at the same time sad because the size of the IPO is only 341 crores. It is such a small IPO that despite having such a good GMP, you will have to be very lucky if you are looking for allotment in this IPO.
Application Strategy for Allotment
In an IPO, you do not just have to apply. Suppose someone thinks that the IPO is very good and wants allotment in it; you have to ensure that you have applied in the name of each and every family member. Apply and also pray to God that, “Bhaiya, please give me the allotment.” If you do not have a D-Mat account yet, check out the description and pin comment; you will find free links to open a D-Mat account.
Key Dates and Application Details
The listing is going to happen on 3rd of October because obviously, 2nd of October is our national holiday. There will be one lot of 65 shares, and there is going to be a basket of ₹1,300. You will have to apply for 14 baskets in the retail category and 70 baskets in the HNI Big category. There is no use in applying more than the minimum basket requirement in any category because IPOs are conducted repeatedly.
For example, as soon as you apply for 70 lots in the HNI Big category, which will be an application of Rs 10,000, you will become eligible for HNI. Now, you think that if you are only 17, and you apply for 140 lots, there will be no benefit. Only 70 lots will be done. Listing will be done on both NAC and BAC.
Price Band and Cut-off Information
The price band is going to be from 209 to 220. In retail, we always have to mention the cut-off price, and in the AAI category, the price is 220. Even if there is a shareholder quota in any IPO, you have to mention its upper band price, i.e., IB at 50, IB at 35, and AAI category at 15.
Financial Performance Analysis
If you look at the financials, the company’s financials have grown very well in the last 2 years. This is where the negative points of the company also come, which means internal risk. First of all, the risk for the company is very simple. If you calculate the CAGR of the company’s revenue from operations for the last 3 years, it is 25%. Will it be maintained further? It remains to be seen whether we will be able to do this at the same time. If you talk about profit after tax, then the CAGR of the last 3 years is 54.5%. Will we be able to sustain it further? This is its risk and also the strength of the financials.
The way the financials are, the company has seen growth in the last 2 years. A growth company is coming in front of us, but will we be able to derive this growth and continue it in the future? This becomes a factor of internal risk.
Customer and Supplier Risks
Today, the biggest customer of the company is a single customer whose name is Dakan. Many of you might have seen Dakan in your house. The revenue coming from him is above 30 percent. The revenue coming from the top 10 customers is substantial, which means there is concentration risk that we will have to consider. Additionally, there is no long-term contract with any customer, which becomes a risk factor.
Similarly, if we talk about suppliers, if above 75% of the supply comes from the top 10 suppliers, then this is also a risk. We are a supplier; we are buying goods from 70 rupees, and we are getting supplies from only 10 customers. If even one of them gets angry with us or the terms and conditions deteriorate, then we will be affected. Today, there are no term contracts with any of these companies, which becomes a risk factor.
Key Financial Metrics
Return on Equity is 40%, Return on Capital Employed is 31%, EPS is 6.56, and P Ratio is 33.5%. The financials are very strong, but we have to keep the risk factors in mind. If seen truthfully, the company is a growth company that has shown impressive growth in the last 2 years. Because it has done amazing growth, today this IPO seems attractive to us. However, if we remove this growth and believe that there will be growth in the future, it may not be the same.
Due to speed, the value of the company may seem a bit expensive to us at times, but overall, it is a very interesting company. There is a very interesting IPO that is coming in front of us. If we talk about the object of issue of the company, then first of all we will invest in it.
Conclusion and Personal Insights
I hope you would have enjoyed the discussion of this IPO and understood the risk factors involved. Apply in this IPO in multiple names without expecting that if we like this IPO, we will get allotment. It would be wrong. I am personally excited; I am interested in this IPO.
I feel good that this IPO will be studied in detail. Attention will be given to the anchor book. I think in this company we will not see only mutual funds; there will be some more big names in the anchor book as well. There are expectations of seeing big funds from major countries, which will always remain in my mind.
If you liked this article, don’t leave without giving it a thumbs up! I am excited about this IPO, and it is almost certain what my decision will be. You must have understood from my words what your decision will be. Please comment and let me know your thoughts. You will find the link in the description for more details.