Prudent Corporate Advisory Services Limited is one of the largest independent retail wealth management services group (excluding banks and brokers) in India and is amongst the top mutual fund distributors in terms of average assets under management ('AAUM') and commission received. They offer a technology enabled, comprehensive investment and financial services platform with end-to-end solutions critical for financial products distribution and presence across both online and offline channels. They are the fastest growing national distributor (amongst the top 10 mutual fund distributors) in terms of commission and AAUM with a CAGR of 34.4% and 32.5% respectively for the five year period ending Fiscal 2021. They are an independent platform with no single AMC contributing more than 15% of our AUM as of May 31, 2021. Started in 2003, they provided wealth management services to 13,51,274 unique retail investors through 23,262 MFDs on the business-to-business-to-consumer ('B2B2C') platform and are spread across branches in 110 locations in 20 states in India, as on December 31, 2021. Of its branches, 50 are locations in beyond the top 30 cities ('B-30') markets and 60 are locations in the top 30 cities ('T-30') markets. Further, 27.83% of the registered MFDs and 20.56% of retail investors are based out of B-30 markets, as on December 31, 2021. As of December 31, 2021, they are associated as distributors with 42 AMCs. Its AUM from the B-30 markets was Rs 25,250.34 million representing 15.15% of the total AUM as of March 31, 2018 and has grown at a CAGR of 36.20% to Rs 80,586.23 million representing 16.65% of the total AUM as of December 31, 2021. As per CRISIL, as on December 31, 2021, there were 126,000 AMFI Registration Number ('ARN') holders registered with AMFI, while the number of ARNs empanelled with Prudent stood at 23,262 representing 18.46% of the industry. Further, 84,784 MFDs have joined the industry during the period between April 1, 2016 and December 31, 2021. During the same period, they have added 18,915 MFDs on the platform. This has helped them to increase the number of retail investors served from 549,881 as of April 1, 2018 to 13,51,274 as of December 31, 2021. They continue to enjoy long-standing relationships with the MFDs, with more than 50.60% of the AUM as of December 31, 2021, being contributed by MFDs who are associated with them for more than five years. Further, the MFD base is well-diversified, with the top 50 MFDs (by AUM) contributing only 8.52% of total AUM, as of December 31, 2021. They also distribute life and general insurance products in India through the wholly owned subsidiary, Gennext. In the nine months ended December 31, 2021, they distributed 74037 policies, across life and non-life insurance segments, with an aggregate premium of Rs 1612.03 million, and total brokerage received amounting to Rs 232.22 million. The total number of policies distributed through them increased from 53,221 in Fiscal 2019 to 86,988 in Fiscal 2021 at a CAGR of 26.83%. Further renewal of policies constituted 71.32% of the total number of policies sold by them in the nine months ended December 31, 2021 and allowed them to earn premium of Rs 913.80 million. They distribute insurance products through a mix of online and offline channels, with each contributing 34.23% and 65.77%, respectively to new policies issued in the nine months ended December 31, 2021. Gennext recorded the highest EBITDA and PAT margin in Fiscal 2020 among insurance brokers with digital platforms and focus on point-of-sale channels. As per financial performance, Prudent has posted total income/net profits of Rs 225.05 Cr / Rs 21.02 Cr (FY19), Rs 236.22 Cr / Rs 27.85 Cr (FY20), Rs 294.89 Cr / Rs 45.29 Cr (FY21) and Rs 327.99 / Rs 57.63 (9M FY22). So company has posted good growth. They have posted an average EPS of Rs. 8.57 and average RoNW of 26.83% for last 3 fiscals. Issue is priced at a P/BV of 12.13 as per NAV of Rs 51.95 on 31.12.21. If we attribute latest earnings of FY21 on fully diluted equity post issue, then asking price is at a P/E of around 57 and if we annualise FY22 earnings, P/E is 34, which looks aggressively priced. As per RHP, Comparison between listed peers are shown in above table. On BRLM's front, three lead managers are associated with this IPO, and have handled around 82 IPO in last three fiscals. From last ten IPOs, three opened below issue price and remaining opened above issue on the day of listing. As of now, two are trading below issue price and other are trading above issue price. ( As on 04.05.22 ) As per financials, Prudent has shown good growth, RoNW is 28.73% and P/E is respectively 57 and 34 as per FY21 and annualised FY22 earnings, which looks aggressively priced. All wealth management companies, has shown exceptional growth in last two years. But when market provides muted returns, it's difficult to provide high growth. Company is asking valuations similar to CDSL or CAMS, which in current market scenario looks very high. Performance of BRLM is good. So, we are giving NEUTRAL rating to this IPO.
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