Prudent Corporate Share Lists at 4% Premium Over IPO Price; What Should Investors Do?

Prudent Corporate Advisory Services IPO Listing: Shares of the retail wealth management services company, Prudent stock, hit the stock markets on Friday. The stock opened at Rs 660, at a premium of 4.7 per cent to its issue price of Rs 630 on the BSE, while the listing price on the NSE was Rs 650. The Prudent IPO, which opened between May 10-12 with a price band of Rs 595-630 a share, received bids for 73.29 lakh equity shares against an offer size of 60.18 lakh equity shares, subscribing 1.22 times on May 12, the final day of bidding. Retail investors have bought 1.29 times of the allotted quota and employees bid for shares 1.23 times the reserved portion. The part set aside for non-institutional investors has been booked 99 per cent, while qualified institutional buyers (QIB) portion was booked 1.26 times.

The initial share-sale of 85,49,340 equity shares comprised an offer for sale (OFS) of 82,81,340 equity shares by Wagner Ltd and up to 2,68,000 equity shares by Shirish Patel. The company will not receive any proceeds from the issue. Most of the brokerages had suggested investors to exercise caution while subscribing to the issue.

Prudent is one of the leading independent retail wealth management services groups (excluding banks) in India and among the top mutual fund distributors in terms of average assets under management and commissions received. The competitive intensity in the financial product distribution industry has become more intense with an entry of a lot of fin-tech players. “The company might face challenges in maintaining its margins at 25 per cent going forward,” a report from Choice Broking said.

It offers a technology-enabled, comprehensive investment and financial services platform with end-to-end solutions critical for financial products distribution and has a presence across both online and offline channels.

What Should Investors Do Now?

Santosh Meena, head of research, Swastika Investmart Ltd., said: “Prudent Corporate Ltd. has debuted at Rs. 650 i.e. 3.2 per cent above its issue price. The company’s tepid listing can be attributed to the rich pricing of the issue and the competitive and regulated nature of the industry. The company operates in an underpenetrated Indian asset management industry and has a consistent track record of profitable growth due to a highly scalable, asset-light, and cash generative business model. We suggest long-term investors accumulate this stock gradually on dips. Those who applied for listing gains can maintain a stop loss of Rs. 600.”

Piyush Chajed, research associate, Choice Broking, said: “Prudent Corporate Advisory Services (PACL) listed at a discount in line with our estimation. We have assigned a ‘Subscribe with Caution’ rating to the issue as we were cautious over the demanded valuation (at P/E of 33.9x on FY22E annualized EPS) which left no margin of safety for the investors. The company is operating in the highly competitive industry and thus maintaining margin at a higher level would remain challenge for the company.”

Mohit Nigam, head – PMS, Hem Securities, said: “Due to unstable market conditions, Prudent Corporate Advisory Services Limited received a drab response from investors. The company is operating in an underpenetrated Indian asset management industry with a CAGR of more than 20 per cent and a pan-India diverse distribution network with the potential to expand into underserved B-30 markets. Due to a highly scalable, asset-light, and cash-generative business strategy, the company has demonstrated a consistent track record of profitable expansion. As a result, we recommend holding the stock for the long term.”

Disclaimer: The views and investment tips by experts in this report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.

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