IPO Note - Anand Rathi Wealth Ltd By Swastika Investmart
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Anand Rathi Wealth Limited is one of the leading non-bank wealth solutions firms in India and has been ranked amongst one of the three largest non-bank mutual fund distributors in India by gross commission earned in Fiscal 2019, 2020 and 2021. Company serves a wide spectrum of clients through a mix of wealth solutions, financial product distribution and technology solutions. Company provides services primarily through their flagship Private Wealth (“PW”) vertical where they manage ₹ 294.72 billion in AuM as on August 31, 2021. The company's PW vertical caters to 6,564 active client families, through a team of 233 RMs. In addition to the PW vertical, the company has 2 other new-age technology-led business verticals, i.e., Digital Wealth (DW) and Omni Financial Advisors (OFA).
* Company acts as a mutual fund distributor, registered with the Association of Mutual Funds in India and also purchases nonconvertible market linked debentures (“MLDs”) and offers them to its clients and earns income from these sales.
* The Company is currently present across 11 cities in India, namely, Mumbai, Bengaluru, Delhi, Gurugram, Hyderabad, Kolkata, Chennai, Pune, Chandigarh, Jodhpur and Noida and also have a representative office in Dubai.
* Digitisation of operational process, including opening of an account, client approvals and investment transactions and on-boarding process has led to cost efficiency and making execution less cumbersome, more transparent and contributing to the growth.
Outlook & Valuation:
We believe wealth management is the new theme which will market like to bet on amid rising awareness about wealth management, thanks to technology. The penetration of this segment is very low in India therefore the opportunity is big for this industry however competition and regulatory issues are key challenges. The overall outlook for the Indian equity market looks very bullish for the next couple of years which is another big tailwind for companies that deal in the wealth management business. If we talk particularly about Anand Rathi then it has well-experienced management with a strong brand name and distribution network. The key highlight of Anand Rathi's wealth management business is that it deals with HNI clients with a capital of between 5-50cr. Margins are declining side despite its HNI customer base however future outlook looks promising. If we look at the valuations then IPO is arriving at PE of 50x to its FY21 EPS of 10.85 and 18.6x to its annualized earnings of 5MFY22. IIFL wealth is trading at a PE of 22 therefore this IPO is fully priced. On the back of a positive outlook for the industry, we have a subscribe rating for this IPO for the medium to long term view while one can also apply for moderate listing gain.
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