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IPO follow up on 12th Dec 2012

• The CARE IPO closed on Dec 11th with an amazing last day leap
• Subscription jumped from 2.25 times on 10th EOD to 41 times on 11th
• Institutional subscription was 46 times; Non Institutional – Corporates + HNI was 111 times, while Retail was 6.18 times. The chances of Retail getting an allotment are higher, as well as the proportion of shares he will get will also be higher than other categories
• On a personal note – my expectation of 10-15 times subscription was exceeded. I am happy that my opinion was by and large the market view, and I erred only due to conservatism :-)
• The market is like a slowly awaking ‘Kumbhakaran’ at this stage!!

Original Report Published on: Dec 10, 2012 @ 19:23

• Date Dec 10, 2012
• Industry – Credit Ratings, and Mid Cap share – 2,200 cr. mkt cap
• Price range: Rs. 700-750 and IPO Period: 7-11 Dec 2012

I have to confess, I did not get time to research CARE IPO until today. I got a letter today that goes:

On Mon, Dec 10, 2012 at 5:57 PM, SK wrote:

Hi Punit, Can I go ahead and take CARE IPO when compare with the Upcoming IPO’s . Waiting for your quick response.. thanks in advance. Regards, SK

So I dived into the reports, did some comparisons, and here’s my response.

Dear SK,

CARE IPO looks excellent. Here’s why:

• The Indian ratings industry is dominated by CRISIL, CARE and ICRA, in that order by revenues. The other two are already listed.
• PE valuation of CARE at 17.5 times at upper end is half that of CRISIL, and lower than ICRA (22.5 times).
• CARE has the lowest cost base, employee cost is only 25% compared to almost 50% for ICRA and CRISIL as the back office is located in Ahmedabad.
• ROCE is high and EBITDA margins are highest of the 3.
• Cash on books is 370 crore, 17% of market cap. Debt free status.
• Subscription data of today is that IPO is 2.25 times subscribed, as per NSE website.

Good IPO offering, that leaves a lot on the table for subscribers, but the signs are that it will be 10-15 times oversubscribed due to the last minute rush.

Go ahead and try your luck, use ABSA, and your funds will not even be tied up.

Regards, Punit Jain

 

JainMatrix Knowledge Base:

• Bharti Infratel IPO – Aggressive offering of Passive Infrastructure – LINK
• Bharti Airtel – This is a year of consolidation – LINK
• Telecom – Auctions speak louder than words – LINK
• TBZ: A Glittering IPO Offer – Invest  – LINK
• MCX – 800 pound Gorilla of Commodities; Invest – LINK

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