Abans
Holdings is the financial services arm of the Abans Group and operates a diversified
global financial services business providing NBFC services, global
institutional trading in equities, commodities and foreign exchange, private
client stock broking, depositary services, asset management services,
investment advisory services and wealth management services to corporates,
institutional and high net worth clients.
The
Abans group is globally diversified organization engaged in Financial Services,
Gold Refining, Jewellery, Commodities Trading, Agricultural Trading and
Warehousing, Software Development and Real Estate. The group is founded by
Abhishek Bansal, who leads a global team operating the businesses from multiple
locations including India, United Kingdom, Dubai, Shanghai, Hongkong and
Mauritius.
Since
inception in 2009, the company has grown from being a commodities trader to a
diversified multi-asset and multi-national financial services company with
varied financial services businesses. The company is primarily a holding
company and operates all businesses through seventeen (17) subsidiaries
including three (3) direct subsidiaries and fourteen (14) indirect / step-down
subsidiaries. Abans currently has active businesses in six (6) countries
including HongKong, UK, UAE, China, Mauritius, and India. The employee base of
the company stands at 100 full time employees end August 2022.
Finance
Business: Abans operate an RBI Registered NBFC (non-deposit
taking), primarily focused on lending to private traders and other small and
medium businesses involved in the commodities trading market. The lending assets stood at Rs 174.95 crore end August 2022,
down from the pre-covid level of Rs 455.38 crore end March 2020. Interest income
from finance business represented 26% of total gross operating income in
FY2022. The gross NPA in lending business was nil end August 2022.
Agency Business: The SEBI-registered Stock
and Commodity Exchange Brokers, with memberships across all the major stock
exchanges in India, including BSE, NSE, MSEI, MCX, NCDEX and ICEX. Further,
being FCA registered financial services firm in London, Abans has a direct/indirect
membership of various international exchanges like DGCX (Dubai), LME (London),
INE and DCE (China). It is also a SEBI Registered Portfolio Management company
as well as a SEBI Registered Category-I FPI. The company offers various
institutional and non-institutional trading services, wealth management and
private client brokerage services, mainly in equity, commodities, and foreign
exchange.
Income from the agency businesses
consists of financial intermediary business contributing stock broking income,
consultancy and advisory income, wealth and asset management commissions, and
commissions from the transactional advisory services and accounted for 14% of
total gross operating income for FY2022.
Capital
business and others: The capital
business includes internal treasury operations which manages excess capital
funds invested in low / medium risk strategies, maintaining positions in
physical as well as exchange traded commodities and other instruments. The treasury
investments are structured to maintain sufficient liquidity in portfolio to
support the capital needs of other businesses. The company also provideswarehousing
Services to commodity market participants.
The capital business vertical comprises mainly internal
treasury operations including physical commodities trading combined with
exchange-based trading in foreign exchange, equities and commodities and
includes investments and dividend incomes. Gross profit from internal treasury operations
and Investment and dividend Income from the capital business vertical accounted
for 59% of total gross operating income in FY2022.
The
Offer and the Objects
The
initial public offer (IPO) consists of a fresh issue of 38 lakh equity share of
face value of Rs 2 each to raise Rs 97.3 crore at lower price band of Rs 256
per share and Rs 102.6 crore at the upper band of Rs 270 per share. The offer
for sale (OFS) comprises 90 lakh equity shares to raise Rs 230.4 crore at the lower
price band and Rs 243.0 crore the at upper price band.
Promoter
Abhishek Bansal has offered 90 lakh equity shares for sale in the OFS. The
promoter and promoter group shareholding would decline to 72.09% post IPO from 97.42%
pre-IPO.
The
issue is to be made through the book-building process and will open on 12
December 2022 and will close on 15 December 2022.
The
company proposes to utilize about Rs 80 crore from the net proceeds towards further
Investment in NBFC subsidiary Abans Finance for financing the augmentation of
its capital base to meet its future capital requirements. The net proceeds
invested into the NBFC subsidiary will be utilized to grow their loan portfolio
by reaching a larger client base.
In addition, it expects to receive the
benefits of listing of the equity shares on the stock exchanges and enhancement
of the company’s brand name amongst existing and potential customers and
creation of a public market for equity shares in India.
Strengths
Abans
offer its clients an integrated financial services platform, offering various
financial services and products, including financing, institutional trading,
private client brokerage, asset management and investment advisory services.
Further, these services are provided not only in the Indian markets but across
various markets and exchanges globally.
In-house
NBFC business provides lending support to clients.
Gross NPAs in lending business have been nil end August 2022
as well as in the earlier periods.
Integrated
service platform with various lines of businesses increases ability to
cross-sell services.
Abans is a global financial services provider offering
opportunities in multi-asset global institutional trading in equities,
commodities and foreign exchange, private client broking, asset management and
investment advisory services and wealth management services to corporate,
institutional, and high net worth individual clients. International exposure
helps customers to diversify a portfolio, which in turn provides a balance
between geographies.
Abans has grown its network of clients and traders not only
in India, but also on a global scale, mainly in UK, Mauritius, Hongkong and the
Middle East.
The company has implemented standardized operating procedures
and it is efficiently using technology to drive the business.
The debt instruments issued by the company are currently
rated BBB+ and have been maintaining a stable rating.
Weaknesses
The company has witnessed decline in revenues mainly due to
reduction in physical commodities trading due to covid-19 related changes and
gradual movement towards exchange traded commodity instruments instead of
physical commodities.
The top line is highly volatile as it largely derives from
trading in physical commodities market and cause fluctuations to financial
results from quarter to quarter.
A significant portion of revenue is generated from treasury
operations, which are are highly dependent on market conditions and the
uncertain price movements in the commodities.
The treasury operations are affected by various factors like
availability of capital, interest rates, impact cost of international trades,
availability of leveraging opportunities etc.
The capital business vertical is restricted by the limits
sanctioned by each exchange and the company may not be able to make the
necessary and profitable trades if such limits are exhausted.
One of the subsidiaries, Abans
Commodities, is involved in a proceeding before SEBI regarding allegations of
participation/facilitation by it of pair-contracts as a trading member/clearing
member. Abans Commodities contributed 2.6% of revenues and 1.7% of net profit
in FY2022. Any adverse outcome in the matter would have an adverse effect on
the operations and the reputation of the Abans Group.
The company has made substantial
political contributions of Rs 34 crore in FY2021 and Rs 29 crore in FY2019 including
contributions to electoral bonds and the same has resulted in reduction in net
profits. Any such large contributions if any made in the coming years could
materially adversely affect profits.
Entire lending assets/loan book is unsecured
in nature as at end August 2022.
The business depends upon qualified
personnel and ability to attract and retain it.
The business is dependent on economic
and political conditions in India and other countries.
In the treasury segment the top ten parties represent 98%of
total sale and purchase of physical commodities for FY2022. The top ten
customers in the finance business represent around 73%of the total interest
income for FY2022. The top ten customers represent around 92%of revenue from the
agency business for FY2022. These dependences are primarily because the company
wish to deal with trusted counter parties as these commodities being volatile
in nature would expose to credit default risks.
Assets level may fluctuate from period
to period depending on holding values of inventories.
Abans Finance, a subsidiary, has invested in unquoted
compulsorily convertible debentures and unquoted market-linked debentures of
third-party companies at Rs 30.30 crore, accounting for 32% of total investment
end August 2022. The company may face problem from any decline in the value of
these investments and liquidation at or prior to their redemption date to
realize equivalent value.
The securities industry is characterized by rapidly changing
technology and the future success of business will depend in part on ability to
effectively adapt to technological advances and to emerging industry standards
and practices on a cost-effective basis.
The financial services industry globally
and in India is fragmented and typified by low barriers to entry. The competition
isbased ona number of factors, including execution, depth of product and
service offerings, innovation, reputation, price and convenience.
Valuations
Abans Holdings has grown its net profit at CAGR of 28% to
Rs 56.88 crore in FY2022 from Rs 34.83 crore in FY2020, despite economic
contraction caused by the pandemic & reduction in total income.
The consolidated EPS on post-issue equity
works out to Rs 11.3 for FY2022. At the price band of Rs 256 to Rs 270, P/E
works out to 22.7-24.0 times of consolidated EPS for FY2022.
Post-issue, the book value (BV) will be Rs 155.7 at upper price
band and adjusted BV (ABV) is also Rs 155.7 (due to NIL NPAs). The scrip is
being offered at price to Adj BV multiple of 1.7x at the upper price band.
Among
the peer financial services companies, Geojit Financial Services is trading at
PE multiple of 7.5 times and Edelweiss Financial Services at 32.8 times of
consolidated EPS for FY2022.
On
price to book value front, Geojit Financial Services was trading at 1.7 times
and Edelweiss Financial Services at 1.0 times of their book values at end
September 2022.
Abans Holdings : Issue
highlights
|
For Fresh Issue Offer
size (in Rs crore)
|
|
- On lower price band
|
97.28
|
- On upper price band
|
102.60
|
Offer size (in no of
shares)
|
3800000
|
For Offer for Sale
Offer size (in Rs crore)
|
|
- On lower price band
|
230.40
|
- On upper price band
|
243.00
|
Offer size (in no of
shares)
|
9000000
|
Price band (Rs)
|
256-270
|
Minimum Bid Lot (in
no. of shares )
|
55
|
Post issue capital (Rs
crore)
|
|
- On lower price band
|
10.03
|
- On upper price band
|
10.03
|
Post-issue promoter
& Group shareholding (%)
|
72.1
|
Issue open date
|
12-12-2022
|
Issue closed date
|
15-12-2022
|
Listing
|
BSE, NSE
|
Rating
|
43/100
|
Abans Holdings:
Consolidated Financials
|
|
2003 (12)
|
2103 (12)
|
2203 (12)
|
2208 (5)
|
Income from Operations
|
2765.21
|
1325.51
|
638.63
|
284.90
|
OPM (%)
|
3.26
|
5.71
|
13.22
|
10.10
|
OP
|
90.22
|
75.67
|
84.42
|
28.76
|
Other Income
|
6.67
|
5.85
|
7.61
|
3.41
|
PBDIT
|
96.90
|
81.53
|
92.03
|
32.17
|
Interest (Net)
|
53.21
|
31.30
|
25.51
|
2.08
|
PBDT
|
43.69
|
50.22
|
66.51
|
30.09
|
Depreciation /
Amortization
|
1.36
|
1.12
|
0.72
|
0.25
|
PBT before EO
|
42.33
|
49.11
|
65.80
|
29.83
|
EO
|
0.00
|
0.00
|
0.46
|
0.00
|
PBT after EO
|
42.33
|
49.11
|
66.26
|
29.83
|
Tax Expenses
|
3.11
|
3.31
|
4.28
|
0.09
|
PAT
|
39.22
|
45.80
|
61.97
|
29.74
|
Profit attributable to
non-controlling interest
|
4.38
|
3.90
|
5.09
|
2.46
|
Share of profit/loss
of Associate
|
0.00
|
0.00
|
0.00
|
0.00
|
Net Profit after
minority and share in associate
|
34.83
|
41.90
|
56.88
|
27.28
|
EPS *
|
6.9
|
8.4
|
11.3
|
13.1
|
Adj BV (Rs)
|
107.8#
|
121.3
|
136.2
|
146.3
|
*EPS annualized on
post issue equity capital of Rs 10.03 crore of face value of Rs 2 each
# adjusted for subsequent split of Rs 10 to Rs 2 and bonus issue of 2:1,
Figures in Rs crore
Source: Abans Holdings Issue Prospectus
|
|