Prudent IPO closes tomorrow! Should you invest?

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Prudent Corporate Advisory Services Ltd. is an Investment Solutions company. They provide retail wealth management services and offer Mutual Fund products, Insurance solutions, Stock Broking services, Trading platforms, etc.

The firm’s IPO closes tomorrow! Should you invest? Let’s find out!

Details:

  1. Dates: 10th May to 12th May
  2. Price band: ₹595 — ₹630 per equity share
  3. Lot size: 23 shares
  4. Minimum Investment: Rs. 14,490 per lot

Why IPO?

The issue is a pure offer-for-sale of up to 85.5 lakh shares by shareholders and promoters. It means that all the IPO proceeds will go to the selling shareholders.

The main ones are Private Equity firm Wagner Ltd, which owns a 40% stake in the company and will exit half of the stake i.e. 20%. Also, the CEO of Prudent, Shirish Patel is selling 20% of his 3.15% stake.

Positives:

  1. Pan India Distribution Network Prudent is one of India’s leading independent and fastest-growing financial services groups. The firm has provided wealth management services to 13,51,274 unique retail investors, as on December 31, 2021.
  2. Technology- They offer wealth management solutions through multiple platforms like FundzBazar, PrudentConnect, Policyworld, WiseBasket and CreditBasket.
  3. Steady Financials — The firm’s revenue, margins and profit have been growing steadily. The revenues and net profit of the firm have grown 20% and 60% respectively since FY20.

Negatives:

  1. No Credible Moat — Investment services is a highly competitive space. Although the company has strong brand recognition, several other well-recognised distributors offer similar products and have larger scale, which makes it tough to win in the market.
  2. Highly Regulated — The industry is subject to extensive supervision and regulation by the Government and various regulatory authorities. Any change in rules and regulations can impact the business.

Conclusion:

Prudent has over 2 decades of experience which helped it build a comprehensive financial services platform. The company operates in an underpenetrated Indian asset management industry, which has grown at a CAGR of more than 20 per cent.

However, if Indian equity markets continue to decline, it might adversely impact retail investor sentiment and also the growth of the sector. Also, being an offer-for-sale, the main reason for the IPO is to provide an exit opportunity for existing shareholders and the CEO, rather than raising capital to boost the business. Given these risks, would you invest?