Prudent Corporate falls 6% below its issue price despite decent listing

Shares of Prudent Corporate Advisoory Services fell below its issue price after it debuted at Rs 660, 5 per cent higher against issue price of Rs 630 per share on the BSE on Friday. The stock hit an intra-day low of Rs 594.25, down 6 per cent from its issue price.

On the National Stock Exchange (NSE), the stock opened at Rs 650, 3 per cent higher against its issue price. At 10:35 am; it traded at Rs 587.20, 7 per cent discount from its issue price of Rs 660 per share. Later, it hit an intra-day low of Rs 586. Around 6 million equity shares changed hands on the NSE and BSE. In comparison, the S&P BSE Sensex and Nifty50 index up by 2 per cent each.

Prudent Corporate Advisory Services IPO had managed to scrape through with just 1.22 times subscription amid selloff in the secondary market. The institutional investor portion of the issue was subscribed 1.26 times, whereas, high-networth individual portion was subscribed 99 per cent and retail portion 1.3 times.

Prudent Corporate, a mutual fund distributor, had set a price band of Rs 595-Rs 630 per share for its IPO. At the top-end of the price band, the IPO size worked out to be Rs 535.5 crore as the offering was entirely an offer for sale. Wagner, an associate firm of US-based private equity TA Associates, sold shares worth Rs 527 crore in the IPO.

Prudent Corporate Advisory Services provides investment and financial services platforms for online and offline distribution of financial goods. As of FY21, Prudent Corporate Advisory Services is one of the top ten mutual fund distributors in terms of average assets under management (AUM).

Analysts at Angel One believe that the valuations of Prudent Advisory are on the higher side compared to peers. While analysts anticipate the stock to trade at P/E multiple of 34x its annualized EPS for 9MFY2022, peer Anand Rathi continues to trade at 20.5x of FY22 earnings.

“We believe that prudent has a very strong retail focused business model which provides them with a distinct competitive advantage and will be difficult to replicate. However valuations are on the higher side as compared to peers which will limit gains in the near term,” the brokerage firm said.

Those at JM Financial Services believe that the company is subject to undergo persistent changes in a highly-regulated environment.

"The company operates in a highly regulated environment, which is subject to change, and existing and new laws, regulations and government policies affecting the sectors in which it operates could adversely affect the business, financial condition and results of operations. Non-compliance with regulatory guidelines and directions or observations during inspection by regulatory organizations may have a material adverse effect on its business, financial condition or results of operation are among key risk factors," the brokerage firm added.