You may get happy, happier, happiest on IPO St

MUMBAI: The IPO market is buzzing once again with three initial public offers (IPO) – Computer Age Management Services (CAMS), Chemcon Specialty Chemicals and Angel Broking – opening for subscription next week.

All three IPOs are likely to get a good response from the investors following the huge successes of the last three - Rossari Biotech, Happiest Minds Technologies and Route Mobile.

Happiest Minds made a stellar debut on Thursday with stock listed at Rs 351 on BSE, a 111% premium over its issue price of Rs 166. The IPO was subscribed 151 times last week. Another IPO, Route Mobile saw a demand of 74 times its offer size last week.

Warburg Pincus and NSE backed CAMS, India’s largest registrar and transfer agent of mutual funds with an aggregate market share of 70%, is planning to raise about Rs 2,242 crore at a price band of Rs 1,229-1,230 per share. CAMS has a strong hold on the MF servicing business and is well positioned to benefit significantly.

“With strong profitability, return on equity and capital employed are expected to improve by 636 bps and 547 bps to 38.5% and 36.1%, respectively, during FY20-23” said a note by Venture Securities. “Given the high operating leverage and comfortable cash position with cash & equivalents of Rs. 400 crore, we anticipate strong payouts to shareholders over the forecast period.”

At the higher price band of Rs.1230, CAMS’ stock is trading at 35 times its FY20 earnings. During FY15-20, CAMS’s overall revenue grew at a CAGR of 12.8%. The IPO is commanding a premium of Rs 380 per share or 31% over offer price.

With interest rates being very low, and the grey market premium running high, it provided a lucrative opportunity for retail investors to participate in these IPOs, said analysts.

“In the last five months, a lot of new retail investors have come into the market and have participated heavily in these recent IPOs,” said Hemang Jani, head – equity strategy, Motilal Oswal Financial Services.”

They were attracted by strong grey market premium which has the potential to give substantial listing gains.

Chemcon Speciality is planning to raise about Rs 350 crore. It is India’s largest manufacturer of specialised chemicals, such as Hexamethyldisilazane / Hexamethyldisilane (HMDS) and Chloromethyl Isopropyl Carbonate (CMIC), which are predominantly used in the pharmaceuticals industry.

Chemcon has a strong balance sheet with stable cash flows. It reported an average 43% return on equity and 52% return on capital employed in the past three years. Currently, Chemcon Speciality IPO is trading at a premium of 60% or Rs 200 over its offer price of Rs 338-340 per share.

Meanwhile, the Angel Broking IPO is also going to hit the market mid next week to raise around Rs 600 crores. Although the company is yet to announce the date and price band, India’s fourth largest brokerage with 7.67 lakh active clients could get a decent demand following sharp bounce-back in its business since the beginning of the lockdown.