Abans Holdings Limited IPO

About the Company

Abans Holdings Ltd. (AHL) is the financial service arm of the Abans group. AHL operates a diversified global financial services business, headquartered in India, providing 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 corporate, institutional and high net worth clients.

They currently have active businesses across Six countries including Hongkong, the UK, UAE, China, Mauritius, and India.

Services provided by the company:

Since its inception the Company has grown from a commodities trading company into a diversified multi-asset and multi-national financial services company having varied financial services businesses which are mainly organized as under:

1) Finance Business: The company operates an RBI Registered NBFC (Non-Deposit taking), primarily focused on lending to private traders and other small and medium businesses involved in the commodities trading market.

2) Agency Business: The company is SEBI registered Stock and Commodity Exchange Broker with memberships across all the major stock exchanges in India, including BSE, NSE, MSEI, MCX, NCDEX, and ICEX, they also have memberships in various international exchanges. They offer various institutional and non-institutional trading services, wealth management, and private client brokerage services, mainly in equity, commodities, and foreign exchange.

3) Capital and other Business: The Capital Business includes internal treasury operations which manage the company’s excess capital funds. They also provide Warehousing Services to commodity market participants.

Industry Outlook

India’s financial services sector consists of capital markets, the insurance sector, and non-banking financial companies (NBFCs). India’s gross national savings as a percentage of Gross Domestic Product (GDP) stood at 30.50% in 2019. In 2019, US$ 2.5 billion was raised across 17 IPOs. The number of ultra-high-net-worth individuals (UHNWIs), with a wealth of US$ 30 million or more, is expected to rise 63% between 2020 and 2025 to 11,198; India has the second-fastest growth in the world. Though it needs to be kept in mind that Global Trade growth is slowing, from 10.1 percent in 2021 to a projected 4.3 percent in 2022 and 2.5 percent in 2023.

The Objective of the Issue

The Fresh Issue proceeds will be utilized for:
1. Further Investment in our NBFC Subsidiary (Abans Finance Pvt. Ltd.) for financing the augmentation of its capital base to meet its future capital requirements.
2. General Corporate Purposes.

Financials

a) Top line: The Revenue for FY 22 has reduced by 51% as compared to FY 21.
b) Bottom Line: The PAT for FY 22 has increased by 35% (Y-o-Y), despite the decreased in Revenue. The main drivers for increased PAT are reduction in purchase cost (as a % of revenue) & finance cost (as a % of revenue).
c) Net worth: Net worth is positive & is increasing over period.

Peer comparison and valuation

*The PE & Price to BV ratios for Abans Holdings Ltd are calculated on the basis of upper price band of the IPO

As it can be seen in the above table, the RoNW of the Company is lower that the peer average, though both the PE & Price to BV ratios are higher than the peer average, indicating higher valuation ie. Expensive price band.

Key strenghts

1.  Integrated financial services platform
2. Global exposure providing innovative financial products
3. Strong relationships with clients and market participants
4. Strong internal controls & risk management systems and efficient use of technology

Risk

1. One of the company’s subsidiaries is involved in a proceeding before SEBI regarding allegations of participation/facilitation by it of pair contracts as a trading member/clearing member. Any adverse outcome can negatively affect the company.
2. The company has made substantial political contributions including contributions to electoral bonds in the last 5 years and the same has resulted in a reduction in the net profits.
3. A majority of the advances by the NBFC are unsecured and are not supported, if the company is unable to recover such advances in a timely manner or at all it can adversely affect the company.
4. The Company has contingent liabilities amounting to 121.22 crores (as against its FY-22 PAT of Rs. 61.97 Cr).

Some other important points

The usual allocation of IPO is 50% to QIBs, 15% to NII & 35% to Retail Individual Investor, but surprisingly this company has allocated only 10% for QIBs, 30% to HNIs, and a whopping 60% to Retail investors. The lower allocation to QIBs raises eyebrows.

IPO details and subscription

The IPO starts on 12th December 2022 and will end on 15th December 2022 with an issue size of Rs. 345.60 Cr (Fresh Issue- 102.60 Cr & Offer for Sale- 243 Cr). The lot size will be 55 shares and a retail investor can apply for a maximum of 13 lots. The price band offered by the company is Rs. 256-270 per share. As at the time of writing of this blog the Grey Market Price is Rs. 290, making the GMP 7.41%.