0:01 Hey, hi everyone. Welcome to primary market chatter brought to you by Sunday investing. This is our May first week episode after a long long time. Just want to make sure am I audible? So Sachin Tano if you guys can hear me can you just give me a thumbs up >> loud and clear. >> Perfect. Yeah, thank you so much. We are back after a long time. The last session we had done was two weeks back, two months back when we had reviewed companies like Gordium when they were coming public. Uh there were no meaningful IPOs or the market for uh primary markets were bad simply because the secondary markets were struggling. Now that there is some kind of recovery and there are some IPOs we thought we'll try and restart again. This is not a perfect restart. we might again just dis
0:46 disappear simply because either there are no IPOs or the markets are just so uh difficult for IPOs that it doesn't make sense to review but yeah we'll try and be slightly more um no promises as such but yeah we'll try and uh be more be more active if there are more IPOs yeah so that we can start today's episode before we actually get started I want to highlight a couple of housekeeping news pointers that I always Do one, we are not say registered. None of it is a qualified opinion. Do not take anything on face value. Only use what we are saying as a additional information which may or may not be right. A lot of it can also be our opinion. So keep that in mind and
1:32 only basis that make a decision. Second thing uh if you haven't followed our YouTube channel, I have pinned it pinned it here. So you'll see pinned comment that is the YouTube channel for us. Go ahead and uh follow that. We post the IPOs that we review. Uh we'll continue to do that uh here as well. In terms of the order for the day, we'll start with value 360 and then go to recode the two SMBs and then we'll do two main boards. Uh we'll start with either Kish or be mana area and do the the round probably start with be money and then cover it close it with uh kiss. It's an interesting week. Uh we have a few
2:18 choices. So it's going to be interesting week at least uh money would be fully utilized. I remember reminiscences of good old time when we used to have like 10 12 IPOs. This is a long after a long time a week where like two three four IPOs are coinciding and quite a few of them are interesting to apply or at least to study with that maybe uh let me start with value 360 that is what we'll probably start with uh and set it up in terms of the company incorporated in 2009 companies are provided of integrated marketing and PR solutions in India so it's a IRP PR company marketing we'll try and understand it in detail in terms of the IPO it's a 42 cr IPO out of
3:04 which 38 cr is a fresh issue uh so market cap 158 crores so 158 cr 42 dilution fi25 financials to 55 crores top line and 5.7 cr bottom but FI26 FI26 completely just that a lot of companies right now are coming with either 6 months or 9 months of numbers and then would release the FI26 numbers soon. But we should look at what the FI26 financial projections are in terms of the LM. The LM is Horizon Management. So with that uh over to you Tan to talk about Value 360. I'm audible. >> Yeah. So this should be uh short I feel. So Value 360 Communications Limited is
3:50 an integrated marketing and PR public relations firm. uh they offer wide range of communication services like IR, investor relations, crisis communication, uh reputation management, digital PR and campaign management. So basically uh they're not a normal kind of a I would say PR advertising company or a digital solutions company. what they do is uh the primary business comes from the IR like let's say uh there is a company which uh you know does lot of you know business related developments or there is some quarterly numbers or there is some investor PPT which has to be made so these companies uh you know like value 360 comes in and you know do do a annual contract or a event based
4:35 contract and provide services for this uh either listed or unlisted companies uh on the investor relations part And so they have basically two main verticals. First is a value 360 vertical in which they see all this IR and kind of a crisis communication kind of a stuff. In the second part they have a uh entity know I would say vertical called as popcorn. Uh so in which they do digital advertisement and you know content management and all that. Uh they they derive revenues from two models. First is the uh contract based uh you know revenues and second are the retainer kind of a revenue revenue model. So the company has got 180 plus employees. But to name some of their clients uh the
5:21 names would be Marauti, Kia, Abn which is second largest you know alcohol company casho and they have all so they were till F25 they have completely zero government or PSUled revenue but in F26 they should have sum and 27 should be very big for them in terms of government revenue. So they have already uh you know have have looked a big contract with UP government. So that should have some kind of a revenue in FI26 but 27 should have a very large chunk from that particular contract. Uh so like largely these are private players but the revenue bifurgation should shift to you know some kind of a private public players. uh here on talking on the IPO raise the company's raising about a 42
6:08 odd crores out of which 37.5 crores is a fresh issue rest 4.5 cr is an offer for sale from the fresh issue they are raising 12.7 cr of towards working capital uh they are doing a capex of 4.65 65 crores. They're repaying debt of 4.5 crores and uh this is an interesting thing. They're investing 7 crores uh in a uh company called as clan connect which is into influencer marketing. So I feel uh they have written it this way that we are looking to increase our stake and uh then acquire the company. So like as per this statement it feels they already they own some kind of a stake in it and they want to n it up through this 7 cr of a infusion uh and the rest about 8 cr would be a
6:55 GCP. So the company has also had undertaken a preipo round at 54 rupees per share. IPO is now coming at 98 rupees I guess. Uh this was done in uh September 2024. There was another small round done in mid of 2025. The investors included you know cube marketing the puger savio pinto humorishi the actress and rohit sharma cricket cricketer so all these guys so there's a a long list of like 30 40 odd names I I've just highlighted some of those talking on the revenues from FI23 to FI25 the revenues have stayed flat from about that 50 to 55 odd cr uh you know mark so if I just want to go through that caggr kind of a thing it is about a
7:41 2 2 and a2%ish CAG in this two financial years but the bitter margins have almost doubled from about 11ish% to about 22 21 22%. And the pat margins have shot up from about 1% to about 11%. So uh as you would have already seen we we had interviewed the company and the interview has just been posted about 3 hours back. So we had asked the management behind you know why are these by the way how like why were the revenues flat and second would be why were those margins went up. So first is what he had said on the what and second would be what I felt regarding those margins. The first what the clarification was key uh you know till FI23 and FI 24 we used to have a blend
8:27 of uh high quality or I would say small ticket high margin as well as large ticket low margin kind of a volume based revenue. So what we have done is we have went from a quantity kind of a revenue to a quality kind of revenue. So we have reduced our customers increased the ticket size and cut off those low margin kind of a contracts. uh so like there were two main reasons they had said is first is the consolidation of the business consolidation doesn't mean any kind of an entire getting acquired but they were so like they had done 100% kind of a keer growth from about 2019 to f23 which they were in a phase to you know just make it stable and then take it to a different path from fi25 which
9:14 has been already seen in the first 9 months number so 9 months numbers are about a 55 5 cr I would say top line from about 53 54 crores in F25 and the these are the 10 month numbers of of course the 2 months should be the incremental revenue over F25 the margins are in but if I looked on the you know what what expenses have made the difference in the P&L these would largely be two three expenses first was traveling expenses to in FI23 the traveling expense in the so another expense it is given in the RSP. So it is nothing I'm saying it from my head you know it is written in the RSP those that number about was 4.6 4.7 crores in F23 the traveling expenses so came down to 1.2 2 crores in FI25.
10:00 So beach that a state went into P of course the tax numbers come in but if I just even if I remove the tax is about a 3 cr kind of impact which took that P from about a cr to now about 10 11 odd crores to for whole FI26 the number should be 10 to 11 crores if you just you know to the TTM basis of first 9 or 10 months. So that is one difference. The second I saw was some entertainment expense which went from 80 lakhs to zero. So that made a state impact and there were again ching stationary lag here and there. So I feel the expenses have been controlled after restricted either of the which was has led to that pad growth and second one more thing I just saw like it was it is nothing much
10:45 significant but the employee benefit expenses haven't shot up even though they have increased their employee. So there has been some I would say either cost management or some you know uh you know uh like efficiencies done there so that their uh employee benefit expenses haven't went up. So I but I feel 26 should see because they have added some two higher leadership position guys and have also increased their employee count. So 26 should see a increase but obviously as the revenue has went up I would I feel that incremental uh you know employee expenses should be tackled. Talking on the valuations, it is coming at you know about 158 cr mcap. Uh this year like what I can see is uh about 10 10 and a half cr on the ttm tms
11:31 9.8 expect last quarter to be slightly better 10 and 12 cr. So it is priced at about 15x. uh so like I feel Apple to Apple comparison in the listed markets like one can like feel this this company can be acquired uh you know compared with your uh digital advertising or your traditional advertising companies maybe a YAP which listed recently but I feel the model is quite different and currently the largest portion comes from those IR services listed and even we had talked in interview the company saying yeah rahar margin or growth profile you should compare us with n factor which is the largest company the segment those guys operate
12:18 kind of a pat it has a $15 million pat in fi26 around to then I had a question for him that company has got predominantly the IPO related road shows and all IR and PR uh so that is a very high margin 40ish% pat business so are you looking to go into it so he has clearly said it. So this is on the interview. So this is in a public domain. So you can guys just go through that interview. So we'll also get from where all this info has came in. So the company is also looking to expand into IPO related services. Uh and also the healthcare services. So this was something new. So I think we have already so on the both the division they have hired someone senior in the healthcare as well as the IPO kind of a stuff. So from FI27 uh this re vertical
13:04 should also start getting revenues is what they are saying. So uh all in all I feel it is a decent company. I would say the biggest red flag could be the 2% QB 2 5% whatever it is like I I would have been very happy if this company would have went with an anchor and I felt anchor but they couldn't get those anchor they chose to not whatever like I don't know that that scenario or situation in which they had maybe it was just you know the due to the bad primary market conditions as such markets have improved but primary markets continue to stay dull So due to that reason they might have reduced that or you know took that anchor portion of but I feel this is not a right justification to it. So I feel
13:50 it is a decent company not a bad company but not even a a company which you can you know bet directly cuz there is no Q anchor. So I would currently treat this company as a neutral uh you know not applying or not not even an award or also an strong apply at least on the listing or short-term maybe in medium to longterm I I believe it should do well because F1 should be big for those this company due to that UP uh you know project so I want like it is a neutral from my end for short-term it is a skip or long-term we can explore post the results are out and or it is slightly below price or whatever it is. So I'm not sure about the short-term scenario but uh it seems a neutral for me.
14:35 >> Thanks Dan. Uh we had also evaluated the company and found it pretty interesting but then there was no anchor etc. So I find the space interesting very like up and cominging space we see IPOs maybe just have been increasing very fast service companies are doing more and more con calls etc. So I like the space valuation company but the liquidity as mentioned is a big concern float is on day one and there are better options. So because of which I would probably skip this one but it's an interesting company to study company interview you can go through the interview uh it's in the pinned comments with that maybe I'll move forward to the second company the second company we'll cover is Recode Studios setting it up in
15:22 corporate 2021 company is Indian BPC uh beauty and personal care company operating under the brand Recode it is omni channel with both online and offline presence we'll understand it in terms of IPO it's a 45 cr IPO out of was 40 cr fresh 5 crs market cap 168 cr company uh to 25 26% and probably such would not like the company but we'll see 25 financials 48 top line 3.3 bottom line but again FI26 financials like 9 months so expected to close or higher but we'll understand the financials In terms of the LM, the LM is Sing capital. So with
16:08 that over to Sin to talk about Recode. >> Uh am I audible? >> Yeah. >> All right. So uh this Record Studios uh as their name has now come up. Uh earlier they were called Lush Looks uh between 2018 to 2022 and finally they transitioned to this current brand of Record Studios by FI23. So what they do simply is they they are a makeup brand. So they make uh products for females primarily be it foundations, primers, lipsticks, eyeliners uh other uh face makeup uh products. Uh and they say that we have around 350 plus squs in their kitty and what they are saying is that they we are they are not manufacturing all of these products. So they are going asset light and they have
16:54 sourced all of their manufacturers and suppliers from various locations. some local manufacturers then there is uh manufacturing from Taiwan, China, some players from Taiwan, China and why they are doing specifically is because they are trying to say that we are competing with those top brands in uh beauty segment and makeup segment like Smashbox, Nars, Huda Beauty and all of these top brands get their products made from these suppliers. So they are applicating the same but how they are making uh and differentiating from these pairs is that they are selling uh less at a price lesser than these international brands around four to five times. So let's say a top brand sells a foundation for 5,000 to 6,000 rupees. So Record is trying to sell it for 1,100
17:41 1,500 rupees. And they are also saying that we are not in competition with the likes of giant players like Nika Mahmad etc. So those are completely different uh players than this recode and what they are saying that we are targeting customers that uh want this international type of products but uh at maybe Indian prices or domestic prices that is their premise for uh their current business. Uh around 45 uh% of the revenues come from online uh website their own website and and this online marketplaces like Amazon, Nika, Myntra etc. uh 30% is from distributors and uh makeup artists etc. and the rest 24 uh to 25% comes from their own uh stores uh across the country around 22 23 stores
18:28 they have. So the rest revenue comes from that. So what they're doing doing for that customer acquisition is they are saying we do not usually market or advertise on uh these platforms like Facebook, Google or influencer etc. they are going it on uh they are going it on a different way that they are targeting makeupmies, beauty schools, salons. So they are targeting all of these then they host seminars and they give free demos and free samples to all of thesemies and beauty schools etc. And advertisement so whenever these makeup artist or customers deal they recommend recode. So that is their u customer acquisition strategy and this is very
19:14 similar to how doctors prescribe medicines or the drugs doctors prescribe. So that model is very similar to how uh record is currently operating and this is actually working if if you see that uh for almost one rupees of advertisement spend that they're doing they are generating almost close to four five to 5 rupees. So five times they are generating on their advertisement spend and customer is also with them around 40 to 45% is that their customer retention etc as well. Uh now coming to the numbers from FI23 to FI24 5 they have grown from 22 CR to 48 CR and in the 9 months for FI26 they have already done 57 cr north and east part of the country has been prime contributors. They are slowly venturing
20:00 into south as well but they don't have a physical presence for now in that region. So that is under penetrated for them. Margins have also increased. Uh they are boasting from 6.5 to 7% in FI23. they have come uh heavily uh they have actually doubled and more than doubled to around 23% aida in this FI26 and the larger peers if you just for context if you say that Mahad Nika etc they operate around 6 to 7% of Aida margins and uh Delareare is also one player that came in uh for uh this inme only that came in so that also operates at similar margin or aida margin of 27 to 30%. Uh in the 9 months they have
20:47 already done uh 9 CR of uh PAD and they are also cash positive. So everything is working uh for now for recode. Uh now coming to uh the IP details around 5CR is offer for sale which is around 11 to 12% of the total issue. Uh three of their uh primary promoter group are selling it. uh rest 39 CR is fresh issue uh where they are using around 20 CR for working capital and around uh 6CR is for setting up one warehouse in Ljana. So Lugana warehouse they will support all of their channels be it franchise stores or be it this online marketplace etc. Ludana stores. Uh one thing to note here that they
21:33 already have one land parcel in Ludjana but uh they are saying that we are not using that land parcel and we are buying another land parcel from these hyper proceeds and then constructing their warehouse in that and then operating for that. They saying that land parcel already existing suitable for construction of warehouse and other things. So for that reason they are not using that land person and the rest 5.5 star is for market and advertisement. Uh one good point here is that they have hired care ratings voluntarily to monitor IP proceeds. U it was not mandated because issue size is not breaching that threshold but they have hired them voluntarily. uh now some reason that I see that uh
22:18 their working capital for which they are using around 40C that is primarily for the reason that they are entering more into modern trade or dark stores etc. So they are entering into that but this is the first time for for them to enter into that. So margin I think there will be some pressure on the margins currently. So that needs to be seen how it pans in F27 and beyond. Now also they are saying that they generally avoid blink zeppto in etc. Uh because margin issues so they they are generally uh avoiding these players also I see that uh around 70 to uh 72% of the revenues is from their uh face makeup only. So
23:06 depend on this product. So this was around 19 to 20% around two to three years back but now it has slowly grown to 70%. And the rival K player which came into that also had only one uh segment that hit that hair care segment but uh different segments hit NEO. So let's see if record can uh decode other segments as well. Uh now coming to the pricing if we just uh annualize this 9 months for FI26 uh the P comes to around 14 to 15 times and they are priced near two to three times price to sales. Uh the main board pairs uh like Mammarth, Nika etc. They trade around 4 to 8 or in 8 8 to nine
23:51 times price to sales and travel care which is into SNE and it is into some influence of other factors as well that trades near uh 25 times price to earnings ratio. So that is with the comparison. So the valuation looks decent. Uh now similar to rival care uh this record also featured on Shark Tank but they did not get the funding from uh these Shark Tank Sharks uh primarily because there was conflict of interest with their uh uh their judge panel Vinita Singh for their uh vertical of sugar cosmetics. So once funding and Sony somehow deleted their uh episode as well for this sharp tank which is now back again on YouTube etc. But this
24:37 controversially controversy that generally got more brand visibility for E code. So that already helped them to come to the current scale. Uh lead manager here is Sin. So they have a decent record for now. FI25 maybe FI26 maybe decent and now anchor list is to rip. So let's see. But the GMP is already high around 40 30 40% I think I saw last time. So GMP is already there. So subscription is so for now I think it's good to apply on a personal level. >> Thanks Sin. Yeah interesting company BPC segment. Uh valuation wise looks good because 14 times per year or RAL is probably the
25:23 nearest P at 20 times and RA if anything is slightly weaker P because most of the reliance is from shampoo customized products versus this. uh but again like uh this is an industry which is like it is very difficult I feel to predict margins for the future simply because like revel they'll also be getting into like rebel was getting into online they at least do online now they'll be getting into offline stores etc right so margins it is difficult to predict for the future but again at least at IPO price this seems like apply uh so I would probably be applying to this issue uh along with pro the next company we'll be talking about but yeah uh with that uh maybe we'll close uh this company uh
26:11 recode and move to the third company the third company we'll be chatting about is raits and invits have essentially been in focus simply because they have they have done very well over the last 2 three weeks where two invits came uh first mark then cities the third this is not invit which is coming is a bag man prime office setting it up. Uh the company is a Bangalore office real estate investment trust focused on owning and managing premium grade A plus business parks in Bangalore. Uh pretty famous in Bangalore. Wagman uh IT parks etc known very very well. Amazon offices here they just signed a deal with Nvidia. So this should probably be one of the top A+ uh builders in India and
26:57 should be a fancy setting it up. It's a 3,400 cr uh issue out of which 2400 is fresh and 1,000 cr is a OFS FI25 financial around 7,200 crores revenue and 900 crores cap. So the distribution will essentially come from this 900 crores in terms of the LM. LM is JM CFL SBI access 361 and HDFC. So with that over to Ro to talk about uh Bman prime office. >> Thanks Manish. Uh so I I'll uh explain this. I'm sure will be interesting for a few people. This was quite new to me also. I've never studied a REIT. Uh I guess in which also is a category we we
27:44 studied recently. Uh now reates are here. Uh especially in these kind of volatile markets, investors often look for uh assets that can be yield generating. you know some kind of fixed income generating uh and I think it's a great time for this B money also to come and generally if you look at the last year a lot of the REITs that are listed have done very well the capital appreciation itself has been very good when the rest of the market was down these uh REITs have actually done very well so I'll cover what a REIT is initially uh I'll just spend a couple of minutes on that and then jump into BMAN and how to uh evaluate this and we also have some information from the BMAN guys direct directly to get a sense on their uh the dividend yields and stuff like that. So at least all of that can be put into math and you can decide whether
28:30 this is something you want to invest in for listing in or for the long term etc. So uh starting with what is a read? It is a real estate uh you know uh investment trust. It's a trust much like your mutual fund is a trust. So it pools people's money. Uh uh you you then uh the the re takes that money. It buys commercial real estate. It could be an office park. It could be a tech park. It could be a mall for example. So one of the listed REITs Nexus owns a lot of malls uh you know all over Bangalore. Uh so depending on the underlying asset these REITs purchase that uh those kinds of properties based on that the strategy of the REIT then the company company would rent those buildings out. That rent then comes back to you as income and it is mandated that a certain
29:16 percentage of that income. So let's say the REIT is generating 100 rupees of income. You take out all the costs maybe there's another 20 25 rupees of cost typically even lesser probably 10 rupees of cost the rest of it will be the operating income or the aid then there'll be some amount of interest uh and and you know depreciation whatever you remove that you'll be left with some cash flow typically that cash flow will be about 70% of the uh you know uh revenue 65 65 odd% of the revenue will be this NDCF which is the net distributable cash flow that cash flow is mandated to come back to the investors of the RET and that uh or up to 90 90% of that money anywhere from 90 to 100% of that money has to come back to you which means that this is going to pay you regular dividends uh you know
30:03 every quarter every half yearly every quarter depends on the reach but most re do it in a quarterly basis uh so there are currently five listed REITs four are office reads which is you know similar to what bugman is and one is nexus which is the a re that is more into this uh commercial spaces like malls and stuff like that but there are four listed re that do something very similar to what bug money does which is more on the office space now as I was saying you get a yield so a read generates value in two ways you get the yield so let's say you've bought the re for 100 rupees uh and they give a say typically somewhere between 5 to 7% will be the distribution that they give you the NDCS the amount that comes back to you every year will be somewhere between
30:48 5 to 7% let's say on an average most of the reads today operate in that 5 to 6% 5.1 5.4 5 it's all in that range. Uh so that amount comes to you every month uh sorry every quarter and adds up to say 56%. And then you're also hoping for some capital appreciation. So today that reach price is 100 rupees. Let's say that rent of 6%. Next year because of all the escalations whatever clauses they have there'll be some marktomarket difference in the rent that they're doing today versus say the rent in that area. And when a when an old lease ends and they start a new lease with somebody else, they get that you know appreciation. So all of that causes the rent and therefore the revenue to go up and that increases the value of the underlying REIT itself. So if you're uh
31:34 today you're getting 6 rupees on a 100 rupees uh you know um there's 100 rupees worth of uh real estate asset and you get a 6% rental lead next year that might be 7%. because of all of these various uh factors. Now generally what happens is the market will not let that yield sit at 7% or 8% or 9%. Because the higher that that is the more attractive it is and then the price of the REIT itself will go up that 100 will go to 105 will go to 107. So generally what happens is you will see a 6 7% kind of distribution yield and you'll probably get a 5%ish kind of appreciation which is generally linked to the rentals that are you know all of these rates they'll have this 5% escalation clause or or 15%
32:19 every 3 years. You'll kind of get the sum of these two which gives you a 12%age kind of return over a long time time frame. Now of course in a short time frame that can fluctuate quite a lot but over a long time frame generally the expectation is that you can get about a 12% return all said and done. So that is the you know basic uh fun. The other small part I'll just mention quickly is that there is also a tax angle here. Uh so the dividend that you get from the REIT a part of that dividend is taxree depending on whether it is comes under a dividend category or an interest category. It has a lot of spec specificity but broadly because you're getting some interest free fee component in your yield plus you're getting some capital gains on the underlying asset itself. Overall a rate is quite tax efficient. You know you
33:05 probably will pay a 15 18% kind of tax on a blended level maybe maybe slightly less than that as well. Uh so that is the basic of a read. Now before I jump into Bman generally there are four three four things you look at uh in a read. You look at the occupancy. You look at the rent growth. All of this information is there in the RSP by the way. Uh you look at the type of tenants which I'll cover. All of these I'll cover for Bonet. You look at the general balance sheet. you look at their uh future you know growth pipeline and can that rent kind kind of keep growing because they have new assets. Uh so if I come to BMAN specifically they are a pure play uh Bangalore office rate they focus on the
33:51 outer ring road and certain central business district micro markets. They have about six buildings uh or six office parks in uh Bangalore. Um and the Bangalore is largely considered the best office market in India. It has the strongest absorption you know even postcoid it has re it rebounded the fastest in today's data it is the strongest office market by most metrics. This of course comes with a concentration risk in that every single bman property uh that is in this rate is currently in Bangalore. So if you want a slightly more diversified play BM is not the answer but at least you're playing it with the best city in terms of office space. Uh so they have very very good if you just look at the basic numbers they have about a 20 million square foot
34:38 portfolio which is probably middle compared to the other three four rates but like you know the other rates might have 30 million 40 million so it's not not very off they have about a 98% occupancy which is a very important factor. So they consistently have the best occupancy among peers most of the other office most of the other rates have between 90 to 94% occupancy. So this is consistently the best operationally. Uh they have a about I think 2700 cr of uh net operating income which translates to about a 2,000 cr per year kind of DCF which I'll and the importance of that I'll come to. uh they have I think 40 almost 2x more pipeline of assets that they can uh uh incorporate into the REIT because their
35:24 sponsor entity which is Bagman is a very large uh reputed builder in Bangalore which has a lot of other properties that are not in this REIT that's not part of the REIT so for them to grow the REIT inorganically through acquisitions or you know they have this right of first refusal uh for some of the other bug property that can help them grow and sort of grow that capital appreciation part as well. Now in terms of the yield that you will get now so this like roughly the math is this they have about a 2,2100 cr of uh distributable cash flow. Uh they have a market cap of around 34,000 cr. So roughly you are getting a 6% 5.8% yield uh today at the issue price. So if the issue price is
36:10 100 rupees, you were to get in at the issue price and hold it for 1 year, you will make 6% simply on the yield leaving aside any capital appreciation. That number is fairly attractive compared to some of these other uh today if you look at the other reach they're at about 5.1 5.4 there's one which is 4.9. So it is in it is slightly better than the rest. So even if hypothetically this were to list 5% up your 5.8 would become 5.6 5.55 or something. So it would still be better than almost any other uh uh property. The breeds typically trade at a discount or you know around the asset value of the properties that they're holding. So let's say B money asset value all put
36:56 together I think is around 36 37,000 crores something like that. Uh so this read is coming at a 9% discount to the asset value. Most of the other reads trade at 3 to 4% because except for Brookfield which I'll again come to later. Except for Brookfield, most of the others trade at between 1 to 3% discount to their NAV. So even if you take that, you can imagine that there is a 5% 6% kind of upside just on the NAV side compared to Bagman versus some of the other uh uh reads. Now what are things? Okay. So there are a lot of things that are good about this but there are a couple of uh okay I'll add one more thing that is very very good about bug money is the quality of their uh tenants. So about 99% of their
37:42 tenants are MNC's. Again this is a very important sub factor but about 99% are MNC's 90% is GCC's which is again a segment that is very high growth. it is I think the highest among all the other listed uh reads about 67% is fortune 500 and I think only about 17% is sec exposure so if you look at the worst performing rate in the last of the four other four listed rates the worst performing is Brookfield because they have the highest exposure to SEC SEC means two things one is there's very little flexibility because a lot of rules from an SEC standpoint uh and SECs tend to have very high IT exposure So for these two factors you can see that Brookfield has actually done the worst and it has the highest SEC
38:28 exposure while this one while BMAN actually has the lowest second lowest or lowest depending on what time of time you look at of SEC exposure as well. So if you look at the general tenant profile it is I would say it is a plus uh I've mentioned about the Bangalore uh tailwind the fact that it is focused in this uh in this city which of course there is a small risk there. So the fact that it's a one city rate is what I think might end up giving this a small discount. All the other big reads here have at least three cities if not more. So you are then only playing a single micro market which is just the city of Bangalore. And so there's a chance that uh that one thing might lead to a discount. Now finally what should you do? Uh so I looked at all the reads that
39:15 have listed so far. four of them uh if you leave aside Nexus the four office list uh rates listed all of them listed positive they listed between 2% to 9% the best was I think uh was it mindspace I think which listed like at 9% of u embassy and knowledge reality listed around 3% and all of them within the day itself they gave anywhere from 5 to 6% this was on listing day this is whenever they listed the only exception was Brookfield which has been the worst performing and it continues to be the worst performing over a very long time frame but I think the reasons for group fields underperformance are not relevant for bman if you put all of this together my expectation is that you should get a 5% kind of uh listing gain intraday you
40:01 might get a 6 7% kind of move as well at that point the yield goes from 5.8% to maybe 5.3 5.4 4 5.5% which is still attractive. the underlying asset. Uh now let's say you get you you are buying this for a 2 year or a 3-ear view a lot of the incremental yield that you might get which is let's say you're happy with a 6% income or distribution yield but you also want some capital appreciation that will depend a lot on the market uh you know it depends on the rate cycles it depends of course on the execution of this business as well but depends on that a lot of macro factors suddenly reats you know will get some boost because government will allow them you know mutual funds to buy more or whatever they'll do thing and then that can sort of increase the demand for it. But I think it's virtually impossible to
40:46 predict what the expected yield will be 2 or 3 years out. So I'll do a simp I I'll just explain a simple math and then I wrap this up. Today the price is at 100 rupees and you're expecting a 6% yield and let's say that 6% yield continues. you know the uh yield grows by 5 7% whatever it is that you would expect over the next 2 3 years and 3 years out let's say the investor at that point is expecting a 6% yield from the REIT as well. If that is the case, the underlying asset price of the uh uh of you know the 100 rupees today will be close to 120 or so or 125 or so if I'm not mistaken. Which means that a lot of the value is determined by what yield the the market is willing to
41:35 take 3 years out. If that is not 6% but if that is 7% that 100 will be at 100. So it is you mean if you're holding it if you're holding it for long enough I think in general historically all of the listed RES in India have given a 12% kind of return. So if you're looking at it you know with a very long time frame it is a very interesting instrument but in a 2 years 3 year time frame there are too many things that will vary. So I don't want to say too much on what this price will be 1 month or 3 months or 12 months or even 2 years down the line. I feel we are safe for a decent listing gain because that initial kind of yield of 5.8% is better than what others are giving and I think there is a 5% kind of pop that you can get just on that maybe five maybe even up to 7%. And then in
42:21 the long term the market will determine what yield people are getting because at that point in time maybe all the rates people will be expecting a 7% yield in which case this price will not go up for 3 years. So that is the background but yeah historically yields have done very well uh sorry VS have done very well over the last several years there was a bad period postcoid as you would expect but apart from that re have consistently done well so I my sense is there is a 5 to 7% kind of you know gain on listing/ immediately after listing >> thanks it's an interesting product are interesting product because if you don't have real estate in your portfolio it's a good way to diversify into real estate without actually getting to manage all the hassle of having physical real
43:07 estate. So uh should be definitely looked at. This is one uh next week's IPO which would be very interesting. And one thing which I want to highlight is that unlike uh IPO where allotment is via lottery here allotment is via proportionate basis. So the more amount that you put in the higher you get allocation. So I have already decided that this is where most of my money is going towards. I would want to hold on to some of this a lotment as well. And I I was looking at like Roh was mentioning rates etc interest rates etc is difficult to predict but again this can be looked at as a way of diversification and not really as a way of uh in like equity investment. So it would be like
43:55 it would not be wise to compare the returns of REIT to a equity returns but this is a good way to kind of diversify yourself and probably get 10 12% a year and if nothing works out then at least you can get some listing gains on day one but yeah these are more stable products so let's see >> yeah I think uh you you're basically looking at this as an alternative to your FD so your FD gives you let's say 6% today 6 and a half% something like that you're getting that much just from the distribution yield. So anything you get on the uh uh on the capital appreciation is upside right. So if you have a certain amount in fixed income instruments let's say 20% 30% of your portfolios in that you can probably remove some of that and move that to you
44:40 know change that allocation and move some of it to a REIT which will also give you the same distribution but give you some upside hopefully without really much downside. >> Yep. But again most of these products are like is also market linked. So keep that in mind. Everything has different risk. So make sure that you go through the risk profile of everything and then take take a decision. As we have mentioned we are not say registered. None of the opinion that we are mentioning is qualified opinion. Uh one question that I have here is what is a strategic investor? Did you see that there's a strategic investor in BMAN? I think there was some preipo which they would have called strategic investor. It's a pri it's a preo they did with a bunch of family offices a few funds uh
45:25 some 360 I don't remember now I don't remember the names off the top of my head but there were some funds and SNI's u uh family offices and stuff who cannot participate in anchor because they are not QIBs right so you're not an institution so you can't participate in anchor so they took some amount I think 4,000 cr may say 650 cr or so they took using this pre IPO and the remaining 3,400 is being offered to the Got it. Makes sense. Uh with that we'll uh move forward. We'll talk about one last company. Uh yeah one very interesting thing as well this has the lowest leverage. I think just 7% was what their uh depth levels were which was lower compared to the other reads. So that's also interesting seems a lot of good things for this going but yeah
46:13 let's see u the returns return expectations would always be very moderate with uh reads and in bits with that we'll talk about one last company it's a proper IPO um it's called 1 EMI technology solutions or at least as we kind of colloqually know it in terms of like uh app etc that we use setting it up in corporate in 2016 company a technology enabled lender in India primarily offering digital loans phones through its mobile application and operates under the brand name Kish for digital landing platform and ring for its payments app. Setting up the IP 926 cr IPO out of which 850 crores fresh 76 crores market 2881 cration
46:58 so they diluting like close to 1/3 of the company which is higher than the lowest uh number needed as such they diluting close to 2/3 of the oneird of the company sorry 25 financials about 1350 crores revenue and 160 crores cap fat although should not look at it as a P level. U PB would be a better metric to evaluate this company. Um one question which I would have for when he is evaluating it how do you like which pier do you look at it? Do you look at more established PS like SDFC uh or do you look at PS like Mud Micro Finance when you look at it as PS but in terms of the LM the LM is JM HSBC SBI caps no and central. So with that over to you to talk about Kisha >> is my voice clear.
47:44 >> So you know I've tried to cover this I'll be trying to cover this IPO in a pretty much depth and I would be hoping that know the retail investors understands three new concepts in the space today at least. So on technology solutions limited is a digital lender lending platform uh which operates under the brand of KISS. So KISS is a mobile app which has got about 6.4 4 crore registered users users out of which 1.1 crore uh users unique users have already used the platform for uh getting digital loans. These are all unique platforms and it includes the past loans as well as the active customers. The company primarily offers digital loans through
48:30 its mobile application. Uh they focus on the urban population and in the mass market. So 63.4% 4% of uh their customers comes from India's top 50 cities and about I would say uh 67% 67.7% customers have a monthly income between 25 to 75,000. So loans average ticket that is about 31,000 kind of a thing. This company is basically targeting the income levels of 25 to 75,000 a month. So 70% of their users have the similar monthly income between 25 to 75. They are giving those loans uh for basically
49:17 two things. First is the consumption loans and second would be working capital loans for the businesses. At the average age of their customer is 32. So about they're targeting a very very young kind of a population. Uh not the company currently has an AUM of about 6,000 KES. Now uh the most so this is all the basic information. I'll be coming on the business models. The company uh has got two uh verticles through which it lends. First is obviously the captive NBFC 100% whole subsidiary called as Crava. So Crava in 100% subsidiary which is an NBFC just through lend and what about the rest 50% is uh they have offbook arrangements.
50:03 Now what does offbook arrangement means and this you should know focusing upon uh due to the contingent liabilities your book and everyone bit WhatsApp or bit Twitter what is 1,800 crores the contingent liability for a 2800 cr market cap company so I'll be coming on that at a later point but first you should know about the second part of the business so this model that is called as offbook arrangement which is in a lending term called is FLG. Okay. So, FLDC full form a first loss default guarantee. So, basically what they do is uh let's say there is a loan which they are uh you know servicing and they take the money through a different fintech bank or NBFC
50:51 which is not their own. So, which is not Craven there's some of another lender who is putting that loan and for that transaction the parent company of KIST gives a corporate guarantee. So these guys currently have 46 lenders which includes banks and BFCs, fintech players uh for servicing those loans and uh this might look new but in a digital lending this is actually a very very normal very normal concept as we see the IPOs of money coming in five coming in the same concept is going to get repeated multiple times. So uh the what I can say the breakup between the captive MBFC servicing the loans and the offbook arrangements have moved uh you know massive you know you know tremendously from FI23 to about FI25.
51:39 Uh so I'll be giving that numbers also. So earlier uh the number used to be 3565. So 35% loans they used to give through their captive NBFC and the rest 65 used to be through the OB book arrangements. Now that split has came to 5149 in the first 9 months. So about 51% of the loans given are through the captive NFCC crava and the rest 49% is through the offbook arrangements. Now coming on the uh collection efficiency 77 97% collection efficiency uh you know in the 30 TPD. So what is 30 TPD? It is basically 30 days you know uh post the claim of the amount of interest
52:24 to uh now like there is a one very important point to be mentioned is in NPA level here that used to be about a 2.3%.1% in FI 23 that has went to 2.9%. And in net NPA used to be 0.01% has went to 0 about 0.24% if I'm not wrong. So why has this happened? So there were lot of concerns regarding the asset quality but there is actually a very small I would say not small but a significant accounting uh change which has been done. So earlier they used to record NPA as it they it used to cross 90 days uh 90 TPD they were very conservative earlier NPA treat and so that used to that used
53:11 to happen due to two different things. First book used to look very great and third which used to be the most best among the industry among listed plus unlisted players current 2.9 this is actually 30 TPD to F23 that number used to be 90 TPD now it is 30 TPD so for this small change it is not actually small but virtually it looks a small change the numbers have went from like about 22 to 2 2.7%. So if you just look at their NNPS uh this this looks about 2.3% it should actually be 05% and the 90 TPD on FI25 basis to uh
54:00 so this is the second thing I'm saying you asset quality you know there have been noise all over so this is what has led to this high NPA which is just an virtual accounting adjustment uh there was a concern regarding the unsecured versus secured portfolio. So the company started in 26 2016 uh you know with a view of this uh digital lending through with a small ticket size in the unsecured part. So uh currently the company has got about 93% from the unsecured portfolio and about 7% from the secured portfolio. So these guys started the secured lending from about 18 to 20 months back. So they had a aum
54:46 of 2.7% in FI25 through uh secured and currently in first 9 months that has went edged up to about I would say five and a half to six percentage which should go to 7% in the full year uh kind of a number. So that actually has rose quite a lot but still uh the split looks uh quite absurd towards you know skewing towards the uh unsecured book. So common he wants a small person. So actually you know currently the dynamics is such even in micro finance lending in a secured manner is also actually quite dangerous than lending a
55:33 small amount in an unsecured way. If you just look at the last two years kind of a trends with this unsecured guys especially on the micr finance level. to 926 crores is raising out of which 850 odd crores is a fresh issue 76 cr about offs break up to 6 37.5 crores is towards augmenting augmenting the capital base of the captive NBFC 100% whole loan subsidiary called asa and the rest about those point would be GCP which would include I know the issue expenses AI to auto capital 76 cr is the OFS which is I would say
56:20 pretty pretty small uh and you know doesn't require much kind of an explanation talking on the EUM FI23 the EUM was about 1267 crores 1,267 crores has went up to 4,87 crores in FIR25 and first 9 months it has went up to about 5956 crores So about between FI 23 to FI 26 which is actually very very uh remarkable on the off book or captive split day it was 3565 now that has went to 5149 which is quite great on book is always a slightly better yielding product than the offbook because offbook
57:06 I'll come on that point very soon specifically on corporate guarantee part and uh that always has got a higher yield. These guys will also look to make higher arbitrage between you know giving that a particular loan portfolio to a offbook player and to the captive MVC which percent which is actually their gains. So that is leading to the company thinking about scaling their captive MVFC and increasing their nibs. 73% of their AUM is from repeat customer is actually quite good number generally you know digital lending that the same customer is repeating the loans and 73% actually quite a good number ticket size about the average if I just want to average up
57:52 for 3 years it should be about 29,7600 something provision covering ratio PCR is about I would say 91.5% which used to be 100% about FI23 now it is 90 to1 192 still it is a great RO is about 8.5% for first 9 months. RO is about 23.5% for first 9 months which is quite a good number. Now coming to the contingent liabilities books 1793 cront contingent liability which has been the biggest risk as far as I know about this company which has been popularly discussed break 1793 1734 guarantees towards the know towards the parent entity for the of book arrangements corporate guarantee so this is actually RBI mandated thing let's say
58:41 so example If there's kind of any kind of a default from the customer which has sourced transaction now it is on the whole amount or the principal or it is principal for entrance that depends on transaction to transaction rules. So part% of that amount would be paid by risk 95% would be then treated as so percent from the off book arrangement is the corporate guarantee which is a very very normal industry phenomen but as this is the first company from the digital space going public in the
59:26 capital market at least for the retailers as such. Uh so this is nothing kind of a worry about 44 crores corporate guarantee pursuant to business correspondence arrangement 1734 + 1444 is 1777 that is very very less and I would say concerning contingent that is barely 10 to 15 crores which given the balance sheet of the company as good as default which is actually not going to happen you don't see very small ticket
1:00:12 size kind of a loans going in default coming on the valuation part for first 9 months is about 231.8 date first 9 months BI27 same I would say standalone growth or net worth fresh capital 30ense just on the 30% growth I'm not saying for sure given the new capital base has got added network price to book 527 post money it is coming at about 1.15 to 1.2 two times post money and 26 pre.5 to 1.54 times about 1.5 figure it is actually quite attractive and
1:00:58 quite cheap by the way like question if you just look at the shows about SBI cards it shows finance cha and I guess again another one or two very large peers but I feel this is kind of a one one of a listing and unique listing as money 5 gets listed uh you know that should be their exact comparable peers but I don't feel this company has got any peers very comparable and the now one can compare it with a micro finance player or someone but that is a right metric because the business models are very different the time is very different and the what I can say the ticket size also quite different compares even if I want to check about
1:01:45 your normal NBFC See these guys trade any anything between two and a half to about four times price to book on F27 basis about I would say number this guy is coming at about 1 uh5ish 1.17ish F27 about 1.5 times F26 actually quite attractive their existing capital includes uh the trifecta capital Altera Capital India partners ENDI not then Sachin Tendulkar is also invested venture east aio and ventures the vortex ventures there and other 10 15 names there's navi technologies there there is uh north northern capital ventures invested there are few family offices in it so very good cap tableable before the
1:02:30 IPO uh talking on the anchor book anchor book was actually quite good given the size of the anchor book we saw SDFC we saw ICIC MF we saw Sundra Mmf Goldman Sachs al May which is uh the affiliate one of uh from the I guess CEO of Abu Dhabi Investment Authority fund then this is Tata MF quant MF new asset management bunan MF so these are very good names uh overall I feel I've covered most of the things I have covered your digit thing which is I I feel new for 90% people concept so I feel these three things have already covered which were the main highlights of this crux of this IPO Overall I feel it is a very high quality
1:03:18 company as far as I can see. There are two one small risk which I saw two of their KMPS had resigned last year. So like you know I would say Pbacked and uh fintech player or an NBS. It is quite normal but huh uh end of the day resignation is resignation. There could be some here and there reasons. It looks normal. It is normal but it is a small risk which I see. Second I would see is the promoter holding about pachi. I mean exactly I guess it is about 25% something which is like fine with this players normally because these guys have to dilute it left right and center. So it is also fine. So I feel uh this is actually a very blind apply for medium-term. So like you you listen the words very carefully blind apply for the medium term listening
1:04:05 given the valuations there's nothing to lose in this company though like I'm quite bullish separate factor but I would be surely looking to so I I see a play something like an I finance or a nomitech or you know a player like shadowax the listing should be slightly up or slightly here and there down and then the stock should start moving up uh is what I feel very high quality company uh so I know one of the co-founders of the company like way back so very good people uh and I would like to surely you know invest in this company uh like quite convinced good company good business model very very strong
1:04:53 growth robust growth solid financials very cheap attractive valuations good anchor book, good management, it should do well for sure. But shortterm, I'm not sure. But in medium-term it should do well. Can you hear me? Can you hear Manish? >> I can I can hear you. I cannot hear
1:05:40 Manish. I'm done with my all thing. Manish cannot hear. I guess some network I was quiet because I thought was speaking. You can go ahead. You're supposed to be the moderator. Moderate. You have one job. Okay. Uh so I I'll add one nuance, okay, to what I said. Uh a lot of things he's saying is true, which is this is a first of its kind listing. It is not expensive. But I I I understand this space to some extent. I've studied this fintech space. I've worked in this space also for some time. Uh there is a there is a slate of hand that happens here. uh when you look at short tenure loans uh and that is what this is right this guy's loan size loan duration is like 9
1:06:26 months if you look at his uh loan duration 2 years ago it was like 60 days or something it was like very very small so he was doing very very small ticket very high yield loans which then uh RBI had a problem with and they uh you know kind of limited what kind of uh uh maximum yield people could it was done in a sort of caraten stick approach saying you can't go beyond a certain threshold because it starts becoming predatory. So then these guys also moved from these very short ticket loans uh these uh one month two month kind of loans and moved to now they've gone towards these mid mid-duration loans you know loans where on average it'll be 9 months 12 months uh 18 months kind of loans. What happens here is these guys will write off loans aggressively. So your GNPA and your NNPA will look okay.
1:07:11 it'll look like 2% 3%.5% whatever right and you'll suddenly look at that NPA and it'll look a lot like your charge finances of the world which also may be in that you know single digit low singledigit kind of percentage uh NPA what these guys do actually is at the end of 90 days they will just write the whole thing off so if you go to their P&L you will see massive massive amounts of write offs if you see the write offs of this company 2 years ago that is FI24 it's 40% of their revenue revenue was written off. Uh if you see today it's about 25% of their revenues being written off. That does not show up in any GNPA metric, NNPA metric because that metric is defined such a way that it is excluding bright but it will show up in your P&L and that will affect your
1:07:57 ROA tree and your ROE tree. Now what these guys do to offset is let's say you have so if you look at their credit cost their true credit cost is not 2% 1% or whatever their true credit cost is closer to 10 12%. 10 12% is huge. Like if you look at most uh listed financial companies, if someone had 10 12% credit cost, they would get a half half price to book just because the market is not sure about the sustainability of this. Uh we've seen this with the micro finance cycle where they were obviously doing well for a period then the credit cycle went bad. All of these companies including Kish in that cycle did horribly. They all struggled. You see the ROA roe of these company three years, four years ago, it have all been
1:08:44 like single digit. Some of them were negative ROA ROE because of how bad the cycle was. In my view, because of this and because this is all largely unsecured, I don't think the market is yet ready for a 95% unsecured book. I know these guys are doing some LAPs and stuff but that's a small percentage but I don't think yet the market is ready for a 95% unsecured low ticket low duration high risk asset even though they generate today they're generating even net of those credit costs they're generating good ROS and ROIs I'm not sure the market as a whole is ready for this uh I still feel the market is looking for secured assets relatively safe uh kind of loans when the cycle turns something like this might do very
1:09:29 well because this guy will grow super fast and when the cycle is good, he will grow fast and generate crazy roses. Uh but you I would leave it at this that you've got to this is going to be insanely cyclical this kind of business. There will be a period when it will do amazingly well and then there'll be a long period when it will do very badly because the market will just not give it a valuation. And if you see the metrics, you see the actual metrics. If you go to page 302, uh you can see the impairment on financial instruments and just look at the financial assets written on. This is the most important metric actually because that's the true credit cost. It's the cost that comes in the P&L which finally determines the ROA roe and that number is crazy high and it will be very high because that's the nature of this business. You charge a high interest. You don't care if there's a 10 12% credit cost because net net you're
1:10:14 still making enough money. But that's always risky and that is why these guys are also I mean I've tracked this company for many years now I know how they started what their initial business model also was and they have shifted from a lot of those things to try and get better and better over the last two years especially they've made a very concerted effort to go from these 1 month 2 month loans to 9 months they will get to 12 months they'll get to 18 months they'll get to 24 months average tenure over the next two three years and
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