Abans Holdings IPO: Detailed Review, Dates, Risk

Abans Holdings Limited IPO opens for subscription on 12th December. The company is looking to raise up to Rs 345.60 crore through the public issue. Here are the details: 

Abans Holdings Limited (AHL) IPO Details

• Abans Holdings Limited IPO Date: 12 December - 15 December 2022
• Abans Holdings Limited IPO Price band: Rs 256 - Rs 270
• Abans Holdings Limited IPO Issue Size: Rs 345.60 crore (Fresh Issue of Rs 102.60 crore and remaining Offer for Sale)
• Reservation: QIB 10%, Retail - 60%, NII 30%
• Minimum Investment: Rs 14,850
• Post Issue Implied Market Cap: Rs 1,284 – Rs 1,354 crore
• Bid lot: 55 shares, and in multiples of 55 shares

Abans Holdings Limited IPO: Objects of the Issue

The objective of the net fresh issue is to raise funds for below two purposes:

• Further investment in the NBFC subsidiary for financing the augmentation of its capital base to meet its future capital requirements.
• General corporate purpose.

Abans Holdings Limited IPO: About Abans Holdings

• The company was incorporated in 2009, and they are engaged in many business activities.
• AHL is involved in Financial Services, Jewellery, Gold Refining, Commodities Trading, Software Development, Agricultural Trading, Warehousing, and Real Estate.
• It represents the financial services arm of the Abans Group.
• AHL provides NBFC services, global institutional trading in equities, commodities, and foreign exchange, private client stock broking, depositary services, asset management services, investment advisory services, and wealth management services to corporates, institutional, and high net-worth clients.
• On a consolidated basis, AHL employs 100 employees (August end), including AHL and their 17 subsidiary companies.

Abans Holdings Limited IPO: Services Offered

The services offered by the company can be divided into three different categories:

• Finance Business: The company is RBI-registered NBFC (Non-deposit taking).
• Agency Business: They are SEBI-registered stock and commodity Exchange brokers with memberships across all the major stock exchanges in India including BSE, NSE, MSEI, MCX, NCDEX, and ICEX.
• Capital and other business: This segment includes their internal treasury operation, which manages their access to capital funds. The company does so by investing its capital in low to medium-risk strategies, and maintaining positions in physical and exchanged traded commodities and other instruments.

Abans Holdings Limited IPO: Industry Outlook

• As of July 2022, AUM managed by the mutual fund industry stood at Rs 37.75 trillion, and the total number of accounts stood at 135.6 million. 
• Inflow in India's mutual fund schemes via systematic investment plans (SIP) stood at Rs 48,565 crore. Equity mutual funds registered a net inflow of Rs 22.16 trillion by December 2021.
• The banking and NBFC sector is once again at an inflection point, given the potential transformational, operational, and stakeholder changes influenced by the above-mentioned drivers. 
• The consolidated balance sheet of the NBFC sector exhibited double-digit growth in the quarter ending December 2021. The gap between the spreads of AAA/AA- rated NBFC bonds began to reduce from January 2021 onwards and reached pre-covid levels in December 2021, indicating growing market confidence in the sector.

Abans Holdings Limited IPO: Listed Peers

The company has three main listed peers. They include Edelweiss Financial Services Ltd, Geojit Financial Services Ltd, and Choice International Ltd. Below is the comparison of Abans Holding with its listed peers:

• In terms of revenue (for FY22), Abans Holding has the lowest revenue, while Edelweiss is the largest player.
• The Earning Per Share (EPS) for AHL is marginally below Choice International and well above the other two players.
• Return on Net Worth (RoNW) is only better than Edelweiss. The highest RoNW reported for FY22 was by Geojit Financial.
• Return on Capital Employed (RoCE) is the lowest for AHL among listed peers. The highest ROCE is reported by Geojit Financial.

Abans Holdings Limited IPO: Financials

• The company has reported revenue of Rs 2765.21 crore, Rs 1325.51 crore, and Rs 638.63 crore for FY20, FY21, and FY22, respectively. The revenue was fallen significantly - approximately at a rate of 50%,
• Despite the fall in revenue, the EBITDA has sustained. For FY20, FY21, and FY22, AHL reported EBITDA of Rs 96.60 crore, Rs 81.53 crore, and Rs 92.49 crore, respectively. 
• The reason EBITDA was sustained, despite the fall in revenue was the increase in EBITDA margins. The EBITDA margin for the same period was 3.50%, 6.15%, and 14.48%, respectively.
• The net profit for FY20, FY21, and FY22 reported was Rs 39.22 crore, Rs 45.80 crore, and Rs 61.97 crore, respectively.
• For the last three financial years, the average EPS and RoNW were 10.57 and 7.81%, respectively.
• The company has a low debt-to-equity ratio. It has come down significantly from 0.54 in FY20 to 0.12 in FY22.
• AHL's RoNW has increased from 6.97% in FY20 to 9.01% in FY22 and ROCE increased from 10.35% to 11.13%, respectively.

Abans Holdings Limited IPO: Unique Selling Propositions

Integrated financial services platform: AHL offers its clients an integrated financial services platform. It offers various financial products and services, including financing, institutional trading, private client brokerage, and many others. It allows them to leverage relationships across lines of businesses and industry/product knowledge by providing multi-channel delivery systems to a client base, thereby increasing their ability to cross-sell their services.

Strong human capital and organizational culture: Company's directors, senior management, and other professionals are the principal reason why they have achieved growth and success in all of their businesses. AHL's management team‘s experience and understanding of the diverse financial market enable them to continue to take advantage of both current and future market opportunities.

Global exposure: Company's international exposure helps its customers diversify a portfolio, which in turn provides a balance between geographies. Global access allows them to deploy treasury funds in the most viable transactions and thus providing them with leveraging opportunities across different locations.

Strong relationships with clients: Over the period, they have grown their network of clients and traders not only in India but also on a global scale, mainly in the UK, Mauritius, Hongkong, and the Middle East. They focus on nurturing long-term relationships with trading counterparts and HNI and institutional clients and serving them through the course of their development, which has enabled them to form strong relationships with clients.

Abans Holdings Limited IPO: Growth Potential

Using technology to create greater scalability: They will continue to strive to effectively use technology to meet the changing needs of their clients, trading staff, and other employees. The increase in the use of technology is strategic and integral to business, as it helps them standardize business processes, improve client and trading experience and reduce costs.

Continue to expand lines of business into complementary businesses: They are a business conglomerate with a primary focus on the financial services business dealing with global equity, commodities, and forex markets. They will continue expanding into complementary businesses related to equities, commodities, and other financial needs.

Augment its fund-based capacities to scale up business operations: They plan to raise funds from the Fresh Issue Proceeds of this Offer and augment the fund-based capital requirements. NBFCs with high liquidity on their balance sheet would be able to expand their loan portfolio and also their client base.

Abans Holdings Limited IPO: Risks

Legal proceedings against group companies: The company, its promoter and director, subsidiaries, and group companies are parties to certain legal proceedings. Any adverse decision in such a proceeding may have a material effect on its business.

Too many subsidiaries: AHL is a holding company that operates its business through 17 subsidiaries. The poor performance of its subsidiaries may reflect on the balance sheet of AHL.

Credit rating: The company is in the finance sector and heavily dependent on its ability to raise funds from the debt markets and other financial institutions. They are hence highly sensitive to changes in their credit ratings. Any downward revision in the company's credit ratings could adversely affect its ability to service debts and raise funds in the future.

Abans Holdings IPO: Detailed review and Analysts' Recommendation

• Consistent decline in revenues: Abans Holdings has seen a near 38% CAGR drop in revenues between FY20- 22.
• Although, a healthy rise in profits: Aban Holdings’ net profit has grown from just Rs 39.22 crore in FY20 to Rs 61.97 crore in FY22, at a healthy CAGR rate of 16.5%.  
• Stable margins: Aban’s EBITDA margins have shown an improvement from 3.5% in FY20 to 14.5% in FY22.  
• Niche player: Abans Holdings offers its clients an integrated financial services platform. The firm holds expertise in Broking Services, Non Banking Financial Dealings, Financial Services, Agri-Commodity Services, Warehousing, Realty & Infrastructure, Gold Dore Refinery and Trading in Metal Products.
• Aggressive valuations: At the higher end of the price band,  Abans Holdings IPO is priced at a post-issue PE ratio of ~29.24 times FY23 annualized EPS on a fully diluted basis. This is higher than peers Edelweiss (27.44 times) Geojit Financial (7.28 times) and Choice International (19.44 times).
• Abans Holdings IPO review: There are positive factors such as robust profits and stable margins with diverse offerings to its clientele, while negatives like extremely high promoter holding and consistently dropping revenues act as an overhang.
• Currently, there are no analyst recommendations on the stock.

This is not investment advice. Investments in the securities market are subject to market risk, read all the related documents carefully before investing. Past performance is not indicative of future returns.