East India Securities Ltd

Started in 1999, East India Securities Ltd is engaged in the business of Broking (Equity / Equity Derivatives / Currency Derivatives). EISL is one of the largest Clearing Member for Equity Derivatives in NSE, and Currency Derivatives in NSE/MCX/USE in Eastern India. Company also provides services as a Depository Participant (NSDL/CDSL); Distributor (Mutual Funds, Primary Issuer of Equity and Fixed Income Securities); and play an Advisory role in Corporate Financing and Risk Management. EISL is a member of the: Capital Market segment of NSE of India since 1995; Equity Derivates segment of NSE since 2000; Currency Derivates segment of NSE since 2008; Capital Market segment of BSE since 2005; Equity Derivatives segment of BSE since 2006. Company also has the membership of NSDL since 1997, and CDSL since 2000. EISL was one of the pioneering Depository Participants of NSDL and helped usher in the revolutionary concept of the paperless settlement of securities transactions in India. With over 81 active CM Pool Accounts, and over 1097 active corporate clients, company handles over 1,000 instructions per day. Company received permanent registration from SEBI as Participant of the NSDL and CDSL depositories in the year 2015. EISL is also engaged in the business of Mutual Fund Advisor/Distributor and is a member of AMFI. Company is engaged in making proprietary investments in various tradable securities. Company invests in both securities and derivatives with sufficient liquidity. On financial performance front, EISL has reported total revenues/net profits of Rs. 36.02 cr. / Rs. 11.98 cr. (FY13), Rs. 37.13 cr. / Rs. 15.88 cr. (FY14), Rs. 40.13 cr. / Rs. 14.98 cr. (FY15), Rs. 33.49 cr. / Rs. 15.86 cr. (FY16) and Rs. 44.50 cr. / Rs. 27.74 cr. (FY17). Upto Q3 of 2018, it has reported net profit of Rs. 28.27 cr. on a turnover of Rs. 41.08 cr. There is jump in top-line and bottom-line for FY17 and upto Q3 of FY18, which is surprising. For last three fiscals it has posted an average EPS of Rs. 59.04 and an average RoNW of 8.74% on an equity base of Rs. 3.67 crore. If we annualise latest earnings and attribute it to fully diluted equity post issue, then asking price is at a P/E of around 9. Asking price is at a P/BV of 1.17 (on its NAV of Rs. 789.14 after issue). As per offer documents, its listed peers are trading in range of 2.9 to 607. So issue looks reasonably priced as per latest earnings. On merchant banker's front, this is the 1st SME IPO. As per financials, from last 21 months company has posted surprising performance, RoNW is 8.74% for last three fiscals and issue is reasonably priced as per latest earnings. This is first IPO from merchant banker. Broking business is supposed to grow at good rate in upcoming years and this company will also get its benefit. So we give SUBSCRIBE rating to this SME IPO.

• 1 Mr Vivek Agarwal
• 2 Mr Lakshmendra Kumar Agarwal