TLDR;
This YouTube video by Sunday Investing discusses three IPOs: KSH International, Exim Roots, and ICICI Prudential AMC. The speakers provide detailed analysis, covering business models, financials, valuations, and potential risks. They offer insights and recommendations for investors, highlighting key factors to consider before applying to these IPOs.
- KSH International: Neutral outlook due to competition and valuation concerns, but anchor book provides some confidence.
- Exim Roots: Difficult to assess due to the business model and competition, further research needed.
- ICICI Prudential AMC: Strong recommendation to apply, citing strong fundamentals, growth potential, and attractive valuation compared to peers.
Opening Remarks [0:00]
The video is about the IPOs coming in the third week of December, featuring two main board IPOs and some SME IPOs. The speaker notes a lack of frenzy around these companies. The discussion will focus on ICICI Prudential AMC, along with KSH International and Exim Roots. The speaker gives a disclaimer that they are not registered advisors and viewers should do their own research before investing. They also promote Sunday Investing's YouTube channel, Instagram, and Twitter.
KSH International (Mainboard) [1:55]
KSH International, incorporated in 1979, is the third-largest manufacturer and largest exporter of magnet winding wires in India, operating under the KSH brand and supplying to OEMs across industries like power and renewables. The IPO is ₹710 crores, with ₹420 crores as a fresh issue and ₹290 crores as an offer for sale. The company's financials for FI25 show a revenue of ₹1938 crores and a bottom line of ₹68 crores. Concerns exist regarding capacity.
KSH International is India's third-largest manufacturer of magnet winding wires by production capacity and the largest exporter. The company produces paper-insulated rectangular copper and aluminum magnet winding wires, transpost conductors, and rectangular enameled magnet winding wires. These products are core components in capital goods like transformers, motors, alternators, and generators. The company is an approved supplier to PSUs like Power Grid Corporation and NTPC, and exports to 24 countries. They have three facilities in Maharashtra and are building a fourth in Ahmednagar, expected to commence operations in September 2025.
Out of the ₹420 crore fresh issue, ₹226 crore is for debt repayment, ₹86 crore for capex, and ₹89 crore for a solar rooftop power plant. FI23 revenue was ₹1150 crores with a 4.75% EBITDA margin and ₹26.6 crore PAT. Revenue grew by 32% to ₹1383 crores in FI24, with a PAT of ₹37 crores. In FI25, revenue grew by 39% to ₹1928 crores, and PAT grew to ₹68 crores with a 6.35% EBITDA margin. The IPO is priced at approximately 25-26 times FI26 earnings.
Concerns include competition and significant capex in the sector. A risk is that 60% of revenue comes from a facility without production approval. Operating cash flow was not strong in FI25. Even with 15-20% growth in FI26, the company is valued similarly to its peers. Positives include the size of operations, customer relationships, and reputable customers. The speaker is neutral on the company, not expecting much on listing or in the long term, but sees potential for a short- to medium-term reward of 10-20%.
The anchor book includes HDFC Manufacturing with a 20% share and had taken 20-25%. The anchor book is slightly better than expected, providing some confidence. There are no other clashing IPOs. The speaker reiterates that it's a fine company but not very lucrative, especially considering the potential pricing war when all companies double or triple their capacities. Precision wires, for example, are not doing well in the stock market despite being a fine company.
Exim Routes (SME) [14:16]
Exim Roots, established in 2019, is a global platform facilitating the exchange of recyclable paper materials, offering end-to-end services to paper mills. The IPO is ₹43-44 crores, entirely a fresh issue, with a market cap of ₹165 crores. FI25 financials show a revenue of ₹121 crores and a PAT of ₹7.6 crores, resulting in a valuation of around 22 times FI25 earnings.
Exim Roots focuses on recycled paper waste and facilitates buying and selling using technology. The promoters are from IIT Roorkee with paper and polymer engineering backgrounds. They have developed a platform called ERIS (Exim Research and Intelligence Services) connecting paper mills and manufacturers from 15-20 countries, providing real-time quotes and quality checks. Exim manages logistics and container handling. The technology incorporates AI for real-time matching between buyers and sellers.
The platform is currently a closed marketplace. ERIS services account for only 2-3% of revenues, with 97-98% from trading. They source various grades of paper and avoid intermediaries to capture more margins. They have subsidiaries in Germany, USA, UK, South Africa, and Singapore, contributing 85-86% of total revenues. In FI23, they had ₹37 crore in revenues with low EBITDA margins. In FI24, revenues jumped to ₹72 crore with 8-9% EBITDA and 6% PAT due to more volumes and integrated subsidiaries. In FI25, they achieved ₹120 crore in revenues with similar margins.
For FI26, they have done ₹44 crore in revenues until September, with margins down. They plan to invest IPO funds into improving the platform for better data and machine learning capabilities. Negatives include existing setups and tie-ups in the market with traditional paper houses and MNCs. The app was recently published on the Apple App Store but is not yet available on the Play Store. ₹12 crore is allocated for platform development, ₹9 crore for working capital, and ₹7 crore for office renovation.
The IPO price is around 20-22 times trailing earnings, and 13-16 times forward earnings. There was a pre-IPO in January at ₹77 per share, and the current IPO is at ₹88 per share. Anchor investors include Pino Fund and Saint Fund. If viewed as a plain trading business, it may get a low valuation, but the 5-6% net margins indicate value addition. The speaker is undecided on whether to apply.
The business model involves connecting buyers and sellers of recycled paper on a platform, charging fees for platform usage and services. They also offer logistic and container services. The platform provides an independent view with transparent margins. The company has connections with Indian mills and buyers in different countries.
The speaker finds it difficult to understand the margins and needs to research the business model further. The objects of the issue seem loose. There was a pre-IPO at ₹77 per share in January.
ICICI Prudential AMC (Mainboard) [29:45]
ICICI Prudential AMC, incorporated in 1993, is an asset management company providing portfolio management services, alternative investment funds, and advisory services. It has an AUM of ₹10,147 billion. The IPO is ₹10,600 crores, entirely an offer for sale. The company operates with a 50% margin. FI25 financials show a revenue of ₹5,000 crores and a PAT of ₹2650 crores.
ICICI Prudential AMC is India's largest asset management company in terms of active mutual fund quarterly average AUM, with a market share of 13.3%. As of September 30, Q2 FI26, the company's total quarterly AUM was ₹10.2 lakh crore for equity and ₹110.7 lakh crore overall. It is also the largest asset management company in terms of equity and equity-focused quarterly AUM, with a market share of 13.6%. It is the largest in equity-oriented hybrid schemes, with around a 50% market share.
The company has a pan-India distribution network with 272 offices across 23 states and four union territories. It manages the largest number of schemes in the mutual fund industry, with 143 schemes. It caters to 1.5 crore mutual fund holders, which is around 25-30% of India's mutual fund investors. The company has the highest individual monthly AUM and a 13.7% market share. It is the most profitable asset management company in terms of operating profit before tax, with a market share of 20% for FI25. The return on equity is 87%.
The IPO is raising ₹10,603 crore at a valuation of ₹1 lakh 7,007 crores, completely an offer for sale by Credential UK. The company did a ₹4,300 crore secondary raise with investments from prominent names like the Rakesh Jhunjhunwala family office, Maduka family office, and Azim Premji Trust.
In FI23, the company had a revenue of ₹2837 crores with an EBITDA of ₹2072 crores (73%) and a PAT of ₹1416 crores (53-54%). FI24 saw a 32% rise in revenue to ₹3758 crores and a PAT of ₹2150 crores. FI25 saw another 32% jump to ₹4977 crores and a PAT of ₹2650 crores. In H1, the company saw 20% topline growth to ₹2950 crores and a PAT of ₹1618 crores. The company is valued at approximately 28-30 times earnings, or 31.5 times FI26 earnings.
ICICI Prudential is a beneficiary of the rising savings and investment behavior in India. It has a healthy portfolio, high corporate governance, and innovative products. The anchor book was strong. The alternatives business is growing at 30-40% CAGR. The return on equity is 86-87%. The speaker recommends a blind apply, expecting a 15-20% immediate upside and 20% compounding for the next 5 years.
The speaker finds ICICI Prudential attractive and reasonable, especially given the potential for rerating of the whole sector. They will apply for listing and medium-term gains. The company has good management, a strong portfolio, and insane market leadership. The speaker is surely applying in ICICI Prudential.
The speaker feels this is one of those stocks where FI India will invest. It's a proxy to the India story, with the middle class earning, saving, and investing more in equity. The anchor book reflects this. The speaker compares it to BSE and NSE.
ICICI Prudential has a slightly better product mix compared to HDFC. HDFC is at 35-35.5 times FI26 earnings. ICICI Prudential's portfolio, including alternatives and hybrid products, is growing faster than the company overall. Profitability growth for ICICI Prudential should be 1.3-1.5 times that of HDFC for the next 2 years. Revenue growth should be 20% plus for FI26 and 18-20% for FI27, while HDFC should be around 15%. ICICI Prudential should be at 25-26 times earnings, a 20% arbitrage. The speaker feels Indian AMC companies are extremely undervalued and the whole sector should get rerated.
The speaker feels this is a classic compounding story and will apply full force. They expect the subscription to be strong, with QIP at 2.5 lakh crore and retail applications around 1.4 times. They expect 50-55 lakh retail applications. The speaker doesn't see it listing at a single-digit percentage and expects mid-double-digit gains.
The speaker will apply for a few retail, big HNI, and shareholder quotas. They feel the shareholder quota would be form allotment at 15 lots. The speaker feels current premiums should be enough.
ICICI Prudential is priced at par with HDFC on some metrics. Its equity portfolio is better than HDFC's. Globally, the top AMCs are getting lower multiples. The speaker thinks discounting the chances is unlikely because the anchor book was so strong.
Closing Remarks [50:08]
The speakers have covered KSH International, Exim Roots, and ICICI Prudential. They will post the recording on YouTube. They request viewers to follow Sunday Investing on social media. Next week's IPOs include a kidney hospital and some SME IPOs. The speaker congratulates those who got allotment in a previous IPO, emphasizing the importance of a good thesis and not judging based on initial results.
