Apply Motilal Oswal IPO : Cub Share Broking Services Ltd
2007-08-21 14:19:09
Cub Share Broking Rating for IPO is (51/100)
Motilal Oswal Financial Services , a financial services company
focused on wealth creation for all its customers, is open for
subscription with an initial public offering (IPO) of 29,82,710 equity
shares of Rs 5 each for cash at a price band between Rs 725 and Rs 825
per share with 100% book building process.
The issue will close for subscription on August 23, 2007.The company
is going to raise Rs 216.25 crore in lower end of the price band and
Rs 246 crore at higher band.
Research on Motilal Oswal IPO
Company Background
Motilal Oswal Financial Services is the holding company providing
financing facilities to its customers. Most of the business is being
operated through its subsidiaries. Motilal Oswal Securities is the
key 99.95% subsidiary contributing 88.5% of revenues in FY07 through
retail wealth management and institutional brokerage services. As on
31st Mar '07 Motilal had presence in 377 cities and towns with 1200
client touch points, 68% of which are business associates.
During FY07, the brokerage income and advisory fees contributed 81.2%
and 7% respectively to the total revenues of the company. The
promoters Mr Motilal Oswal and Mr Ramdeo Agarwal carry over 2 decades
of experience in the financial services industry, they along with the
team of professionals would be very instrumental in the company's
growth in the coming years. The company offers to raise about Rs 2460
million (at upper band) and the issue proceeds will be utilised to
enhance financing facilities offered to broking clients, support
growth plans to counter competition and invest in additional office
space and latest technology.
Investment Area
Strong brand and presence
MOFSL enjoys strong brand recognition in the industry. A pan India
presence across 377 cities has helped the company get a formidable
retail reach. Its registered retail equity broking clients have grown
50% yoy from 159,091 as on 31st March 06 to 238,421 clients on March
31, 2007. We expect the company's established presence to benefit from
the rising per capita income and ease in trade at across geographies.
Dedicated research focus
The company has a dedicated research and institutional sales team
focused on cash equities, derivatives and commodities. The research
team comprises of about 25 analysts covering 221 companies in 26
sectors and 9 analysts covering 26 commodities. Leveraging on research
capabilities has helped the company empanel itself with over 250
institutions, including over 165 FII's. Going ahead, we expect strong
traction in institutional business with more focus on overseas
investors.
Diversifying portfolio of products
Brokerage income which formed over 87% in FY06 has been brought down
to over 81% of its revenues during FY07 and is further slated to go
down as the new business ventures fructify. The company has expanded
its business offerings to include investment banking, venture capital
management and distribution of third party products.
Valuations
The IPO priced in the band of Rs.725-825 does offer scope for
appreciation given the long term business traction. At the upper band,
the NBFC is priced at a PE of 33.7x its FY07 consolidated diluted EPS
of Rs 24.5 and a price to book value of 3.2x. We recommend investors
to "Apply" the IPO.
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