Next IPO
Motilal Oswal (MOFSL)
Motilal Oswal (MOFSL) a financial services company focused on wealth creation for all its customers such as institutional and corporate clients, HNI and retail customers, proposes to enter capital markets on August 20, 2007 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.
Company Profile
Motilal Oswal is a prominent name in the stock broking community and lately this sector had caught the investor’s fancy due to rich valuations being given by the overseas investors, to financial companies in
Since, present income of the company is mainly from broking, which is becoming competitive, the valuation seems a bit stretched. The company has recently ventured into investment banking and venture capital. Post issue, the company would be expanding its margin funding to over Rs 200 crore, which is presently at about Rs 88 crore to about 585 clients.
The company has estimated requirement of Rs 195 crore of which, Rs 110 crore is for margin funding. Balance is for working capital and for office premises. All this is to be entirely financed from the proposed issue.
However, considering the strong brand equity, consistent track record, low equity base and recent diversification in venture capital and investment banking, investment can be contemplated. Knowledge, commitment and accountability of the promoters, would keep prospective investors’ interest in mind.
Objective of the Issue
Motilal Oswal Financial Services Ltd proposes to infuse funds into MOSL and in MOCB in the form of a subscription for their equity shares, unsecured loans or any combination thereof. Such capital infusion will help strengthen their respective balance sheets and thus enable them to increase trading volumes in the equities and commodities market. MOFSL provides a financing facility to its retail broking customers. MOFSL proposes to enhance this financing facility.
Other Important things
Valuation
TSL offered the shares at P/E multiple of 19.26x to 20.84x at floor and cap price respectively, as against its peers Sasken Communication Technologies and Subex Azure, which are trading at P/E multiple of about 39x and 101.7x respectively. On the other hand, shares of TSL are available in the range of 7.63 to 8.25 times of net asset value at floor and cap price respectively. Among the other factors, TSL`s niche position in supply chain management and life sciences segment combined with large product bank with low ownership costs are expected to strengthen the position of TSL in future.
Considering the above factors, the issue of TSL seems to be underpriced with a potential to provide short term gains, subject to favorable market conditions.
Motilal Oswal is mainly into broking, investment banking. It has presence in 377 cities with 1200 branches and 1120 franchises. They have huge clients in retail (major in internet banking) and institutional segments.
The company has market share of 5%, in derivative segment around 3.75%. Revenues from broking business are nearly 86%, EBITDA margin stood at 32%. It is debt free company.
Motilal Oswal has 30 mandates in investment banking business and going to invest Rs 550 crore in PMS.
People can apply for the issue, which looks to be good.
My Expectation
In usual scenario this IPO must be hitting 1077 on the listing day.
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