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UTI AMC IPO review | Mazagon Dock IPO review: UTI AMC, Mazagon and Likhitha Infra IPOs kick off: What brokerages say


NEW DELHI: Three IPOs opened for subscription on Tuesday: Rs 2,160 crore UTI Asset Management Company (AMC), Rs 444 crore Mazagon Dock Shipbuilders and Rs 61.20 crore Likhitha Infrastructure.

Below are the issue details and analyst recommendations:


UTI AMC

Issue details: State Bank of India, LIC and Bank of Baroda will sell up to 1,04,59,949 equity shares each via public issue, while Punjab National Bank and T Rowe Price International (TRP) will divest up to 38,03,617 equity shares each. The price band for the issue is fixed at Rs 552-554.

Anchor response: The AMC said it raised nearly Rs 644.64 crore on Monday through allotment to anchor investors, a day before the scheduled opening of its IPO. The anchor investors included Nomura (Singapore), Goldman Sachs (Singapore), Morgan Stanley Asia (Singapore), ICICI Prudential Mutual Fund and HDFC Mutual Fund, among others.

Analyst take

Angel Broking: At the upper end of the IPO price band, the offer quotes at 25.4 times FY20 earnings and 5.25 per cent of Q1FY21 AAUM, demanding Rs 7,024 crore market cap, which the brokerage believes is reasonable. Listed peers like HDFC AMC trades at 35 times FY20 earnings and Nippon AMC trades at 37 times FY20 earnings, it said.

Anand Rathi: The company has underperformed its larger industry peers in recent past, the brokerage said. The IPO is priced relatively at a discount of about 30 per cent at the upper price band compared to its industry peers. “Considering the future growth prospects for asset management industry and relative valuations we recommend subscribing with a long term view,” it said.

Geojit: This brokerage said the IPO valuation seems to be factoring in lower ROE, high competition and uncertainties from the pandemic. Accordingly, it recommended subscribe rating on a short to medium-term basis, expecting listing gain.

Mazagon Dock Shipbuilders

I
ssue details: The government is selling 15.17 per cent stake in the defence PSU, which is the only dockyard building destroyers and submarines for Indian Navy and Indian Coast Guard, to raise a maximum of about Rs 444 crore. The price band for the IPO has been fixed at Rs 135-145 per equity share with lot size at 103 shares. The company will offer up to 3,05,99,017 shares through an offer for sale, which includes a reservation of 3,45,517 shares for eligible employees.

Analyst Take

Choice Broking: Based on the margin profile and return ratios, analysts at Choice Broking said the asking valuation is justified. “Defence manufacturing has huge potential in the long run and with the sector liberalization, the company may have some concerns in the long run but not in the medium term,” it said.

Samco Securities: Nirali Shah, Senior Research Analyst at the brokerage said the issue appears to be a decent pick from a listing gains perspective. Being a dominant player, it is undervalued from a valuation perspective, but she added that there are certain risks as well.

“With high barriers to entry, Mazagon is debt-free and enjoys a few perks due to its proximity to the coasts of Mumbai. Financially, the topline has seen decent growth. However, the bottom line isn’t growing at the same pace,” Shah said adding there could also be a delay in funding from the Indian defence budget or risks of cost and time overruns due to government dependency that puts it at a higher risk.

SMC Global: The broker counted monopoly in building defence ships, prime location of the dockyard, increase in indigenisation of its vessels and strong order book as strengths. At the same time, its dependence on the Ministry of Defence, imposition of liquidated damages and invocation of performance bank guarantees/indemnity bonds by its customers and expansion constraints due to its location in Mumbai are some of the weaknesses.

Likhitha Infrastructure

Issue details: The IPO by the Hyderabad-headquartered oil and gas pipeline infrastructure service provider has a price band of Rs 117-120. Investors can subscribe to the IPO by betting for a lot of 125 shares or in multiples thereof. One will have to shell out at least Rs 14,625 to bid for the issue. The IPO consists of a fresh issue of up to 51,00,000 equity shares representing 25.86 per cent of the post-issue shareholding. The company expects to raise a total amount of up to Rs 61.20 crore. Unistone Capital is the book running lead manager to the issue.

Analyst Take

Choice Broking: At the higher price band of Rs 120 per share, Likhitha is demanding a P/E valuation of 11.9 times, while on FY23 earnings the demanded P/E multiple comes out to be 9.1 times.

“We feel the demanded valuation is stretched, secondly many strong established companies are available at lower valuations for the investors and lastly, being a labour oriented business operations, the company is highly susceptible to the labour laws. Thus, considering the above observations and the small issue size, we assign an “AVOID” rating for the issue,” it said.

The company’s share will be listed in “T” group with a 5 per cent circuit limit, thereby restricting the speculative bet in the share price movement, it noted.





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