IPO price: Rs 269-283
IPO size: Upto Rs 840 crore
Implied market cap: Upto Rs 2,000 crore
Face value: Rs 2 per share
Lot size: 53 shares
Retail portion: 35%
DAM Capital Advisors, which offers investment banking services, plans to raise up to Rs 840 crore through an offer for sale by existing investors and the promoter group. The promoter group’s stake will fall to 40% after the IPO from 46%. Unlike peers, the company’s merchant banking division is the largest revenue generator compared with the broking segment. It has grown at a rapid pace over the past years while improving margins. It is among the few promoter driven investment banking firms. However, its business is heavily dependent on the progress of economic activities in the country and capital market sentiments. Given these factors, investors with a high risk appetite and long term horizon may consider the IPO.
BusinessDAM Capital, promoted by veteran merchant banker Dharmesh Anil Mehta, provides services such as fund raising through qualified institutional placement (QIP) and IPOs, advisory on mergers and acquisitions, and structured financing, and broking, research to institutions. It was established after IDFC sold the entire stake in IDFC Securities to Mehta and other investors in 2019. The merchant banking division contributed 67.2% to the FY24 revenue. The company’s market share in the number of IPOs and QIPs increased to 12.1% in FY24 from 8.2% in FY21. Financials
Revenue nearly doubled to Rs 180 crore from Rs 93.4 crore between FY22 and FY24 while net profit more than tripled to Rs 70.5 crore from Rs 21.9 crore. Operating margin before depreciation and amortisation (EBITDA margin) improved to 56.6% from 36.3% during the period while return on equity (RoE) shot up to 54.7% from 28.5%. For the six months ended September 2024, revenue and profit were Rs107.8 crore and Rs43.8 crore respectively. The company has consistently paid dividends over the past three years and the future payments will be at the discretion of the board of directors.
Valuation
Based on the annualised net profit for the six months to September 2024, the company demands a price-earnings (P/E) multiple of 22.8. While it does not have an exact peer, some of the other listed brokerages, which have merchant banking operations trade at P/Es between 17 and 32.
