IPO Size: Rs. 840 cr, Entirely Offer for Sale (OFS)

• 90% of OFS is by the 4 financial investors: Multiples (19% stake to drop to 7%), Narotam Seksaria (15% to drop to 5.5%), RBL Bank (10% to reduce to 1.5%), Chennai based NBFC Easyaccess (10% to reduce to 2.5%)
• 10% of OFS by the promoter Dharmesh Mehta (46% stake to shrink to 41.5%)

Price band: Rs. 269-283 per share

M cap: Rs. 2,000 cr, implying 42% dilution

IPO Date: Thu 19^th Dec to Mon 23^rd Dec 2024, Listing date: Fri 27^th Dec 2024

Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.

Pure-Play Investment Bank

DAM Capital, formerly IDFC Securities, is a capital market services company, garnering 2/3^rd of Rs. 180 cr revenue in FY24, from investment banking and 1/3^rd from institutional broking. DAM’s business is more cyclical than other capital market linked operations, like retail broking or asset management.   

Growing Financials

H1FY25 revenue rose to Rs. 108 cr, with net profit of Rs. 44 cr, against Rs. 71 cr in FY24. On an equity of Rs. 14 cr, EPS for H1FY25 and FY24 stood at Rs. 6.2 and Rs. 10 respectively.

Business is asset light, clocking 48% RoE on net worth of Rs. 202 cr (30.9.24), of which cash and equivalents are Rs. 178 cr, mainly used towards margin with stock exchange.

Fully Priced in Short Term

Estimating a bullish FY25E EPS at around Rs. 15, IPO price is being discounted by a PE multiple of 18.8x. Larger and diversified peers JM Financial and IIFL Capital with m caps of over Rs. 11,000 cr each, are ruling at PE multiples of 15x, so is broker Angel One with a growing bottomline of Rs. 1,300 cr.

Company being an investment banker, seems to have priced the OFS to the sellers’ advantage, without leaving much on the table for incoming investors.

Rush to Capitalize on the Bull Market?

The IPO is a complete OFS with a very heavy dilution of 42%.

Selling investors are making a handsome IRR of 93% on their 4.5 year old investment. But the same looks unlikely for prospective IPO investors, given the pricing!