DAM Capital Advisors IPO: Expert Review and Recommendations

Team MoneyWorks4Me calendar icon Dec 18,2024 eye icon2215 time icon 6 min read

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DAM Capital Advisors IPO Details:

Estimated Post-listing Market Cap: ~ Rs. 2,000 Crores

IPO Date: 19th to 23th December, 2024

Offer for Sale: ~ Rs. 840 Crores

IPO Issue Size: ~ Rs. 840 Crores

Price band: Rs. 269 – Rs. 283 per share

Lot Size: 53 shares and multiples thereof

About DAM Capital Advisors

Established in 1993 as S.S. Kantilal Ishwarlal Sharebrokers, the company rebranded to S.S. Kantilal Ishwarlal Securities in 1994. It was acquired by IDFC in 2008, which later divested its stake in 2019 to Dharmesh Mehta and other investors. Renamed DAM Capital Advisors Limited in 2020, the company has evolved through strategic transitions.

Since the acquisition on November 7, 2019, and up to October 31, 2024, DAM Capital Advisors Limited has successfully executed 72 ECM (Equity Capital Market) transactions, including 27 initial public offerings (IPOs), 16 qualified institutional placements (QIPs), 6 offers for sale (OFS), 6 preferential issues, 4 rights issues, 8 buybacks, 4 open offers, and 1 IPO of units by a real estate investment trust (REIT). Additionally, the company has advised on 23 transactions across M&A advisory, private equity advisory, and structured finance advisory, while also executing block trades during this period.

As of October 31, 2024, the institutional equities business includes a team of 29 employees in research and 34 employees in broking, serving 263 active clients. These clients, including registered FPIs, are spread across India, the USA, the UK, Europe, Hong Kong, Singapore, Australia, Taiwan, South Korea, the Middle East, and South Africa.

Source: DRHP

Industry Overview

Macroeconomic

Key drivers of growth in capital markets align closely with those driving economic growth, as both are interconnected. Notably, India’s demographics play a crucial role, with the country having the largest share of young working population (15-30 years) at 27% in 2022, compared to developed and developing nations. Additionally, India’s per capita net national income grew by 7.4% in fiscal 2024, reflecting strong economic performance. As per capita income increases, more people are exploring financial investment opportunities, driving capital market activity.

Primary Market Activity

The primary market has experienced significant activity in recent years. In Fiscal 2024, a total of Rs. 1,022.6 billion was raised through public and rights issues across 385 issuances, reflecting a 42% increase in the number of issues compared to FY23. In the first half of FY25 alone, 275 issues have already been recorded, raising Rs. 907.9 billion.

Increase in BRLM Fees

Since FY20, the BRLM (Book Running Lead Manager) fee percentage has significantly increased, particularly for mid-sized issues (Rs 5 billion to Rs 10 billion), where it nearly doubled from 1.6% in FY20 to 3.1% in FY24. This trend is observed across various issue sizes, highlighting the growing value of merchant bankers in a booming IPO/FPO market.

Additionally, the average fee per BRLM has risen substantially across most issue size categories. For example, the average fee for issues between Rs 10 billion and Rs 20 billion has increased 2.3 times from FY20 to FY24. Even in H1FY25, the average fee per BRLM saw a notable rise compared to FY24, reflecting the growing income in the industry and the increasing demand for expert financial advisory services in the capital markets.

Average BRLM Fees % per Deal

Source: DRHP 

Average fee per BRLM (In Rs. Crores)

Source: DRHP

Financial Performance

Utilisation of Funds

The IPO is entirely an offer for sale i.e. all shares offered will be sold by existing investors and none of the proceeds would flow to the company. The selling shareholders include Multiples Alternate Asset Management, Narotam Sekhsaria, RBL Bank, Easyaccess Financial Services and Dharmesh Mehta.

Positives

High Growth: DAM Capital Advisors is a new entrant in an industry with large and profitable incumbents. Despite the strong competitive challenges, the company has grown its operating revenue at a staggering pace of 39% CAGR over FY22-FY24. This operating revenue growth has led to a massive operating leverage, leading to a PAT CAGR of 80% over the same period.

New Markets: As part of its growth strategy, DAM Capital Advisors plans to enter the retail broking and asset management businesses to enhance returns. The Indian mutual fund industry has seen strong growth, with AUM rising from Rs. 13.52 trillion in March 2016 to Rs. 54.13 trillion in March 2024, driven by robust inflows, retail investor participation, and improved market conditions. AUM is expected to grow at 17-18% CAGR, reaching Rs. 120 trillion by Fiscal 2029 according to CRISIL.

DAM Capital aims to leverage its existing client base and established trust to efficiently monetize these new ventures. To support this, the company has set up a wholly-owned subsidiary for its asset management business.

Concerns

Lack of Diversification: Merchant banking and broking are cyclical businesses and are related to market performances and foreign and domestic inflows/outflows, which are beyond the company’s control. Other players have reduced their cyclical risk by expanding to areas such as Asset Management, Wealth Management, and Lending. Currently DAM Capital Advisors does not have alternative sources of growth and diversification.

Lack of Competitive Advantage: DAM Capital Advisors operations span roughly half a decade, while larger competitors have a significantly longer operational history. As a result, bigger and more established firms have competitive advantages in business lines where DAM Capital Advisors currently competes or will enter in the near future. The company lags more established peers in terms of aggregate issue amounts and the number of stocks and sectors covered by the research team.

In the stock broking segment, which is 39% of the total revenue, the top 10 clients contribute nearly 39% of the revenue. Stock broking is not a sticky business as clients often have multiple brokers. This segment of the business has not shown aggregate profitability over the last 3 years, and may again show losses if the capital cycle turns unfavourable.

Management

Dharmesh Anil Mehta: With over 25 years of experience in capital markets, Dharmesh Anil Mehta is the Managing Director, CEO, and a Promoter of DAM Capital Advisors Limited. Renowned for his expertise in leading capital market transactions across products, sectors, and geographies, he previously served as Managing Director-Equities at ENAM Securities and later as CEO of Axis Capital following ENAM’s acquisition by Axis Bank. In 2019, he, along with other investors, acquired DAM Capital (formerly IDFC Securities). A graduate of H.R. College of Commerce and Economics, he was honored with "The General Leadership Award" in 1991.

Jateen Madhukar Doshi: Jateen Madhukar Doshi, Executive Director at DAM Capital Advisors, has been with the company since 2019. He oversees the institutional equities division, including broking and research functions. A pharmacy graduate from Maharaja Sayajirao University, Baroda, and an MBA from B.K. School of Business Management, Gujarat University, Jateen brings rich experience from his tenure at Axis Capital, where he was Executive Director in the Financial Sponsors Group, and earlier roles at Ketan S Shah and ENAM Securities.

MoneyWorks4Me Opinion

DAM Capital Advisors is one of the fastest-growing merchant banking and broking firms in India, led by a highly experienced management team comprising veterans from one of the country’s leading investment banks. However, the competitive nature of the industry, the company's relatively young presence, and the valuation being sought present challenges to the investment opportunity. At a P/E of 28.4, the company's relative valuation appears elevated compared to peers, particularly as it is driven by cyclically high earnings, which may not be sustainable in the long term.

We recommend that investors should be cautious and avoid subscribing to the stock at these levels.

IPO ActivityDate
IPO Open Date December 19, 2024
IPO Close DateDecember 23, 2024
Basis of Allotment DateDecember 24, 2024
Refunds InitiationDecember 26, 2024
A credit of Shares to Demat AccountDecember 26, 2024
IPO Listing DateDecember 27, 2024

ApplicationLotsSharesAmount
Minimum153Rs. 14,999
Maximum13689Rs. 194,987

When will the DAM Capital Advisors Ltd IPO open?

DAM Capital Advisors IPO will open for subscription on Thursday, December 19, 2024 and closes on Monday, December 23, 2024.   

What is the price band of DAM Capital Advisors Ltd IPO?

The price band for DAM Capital Advisors Ltd IPO is Rs. 269-283/share.   

What is the lot size for the DAM Capital Advisors Ltd IPO? 

Retail investors can subscribe to the IPO minimum lot size is 53 shares, up to a maximum of 13 lots i.e. Rs. 1,94,987/-. 

What is the issue size of the DAM Capital Advisors Ltd IPO? 

The total issue size is ~ Rs. 840.25 Cr. 

When will the basis of allotment be out?

Allotment will be finalized on December 24th and refunds will be initiated by December 26th. Shares allotment will be credited in Demat accounts by December 26th. 

What is the listing date of DAM Capital Advisors Ltd's IPO?  

The tentative listing date of the DAM Capital Advisors IPO is December 27th, 2024.

What if I do not get the allotment?

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calendar icon Last Updated on Dec 24,2024
Category: Stocks IPO

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Team MoneyWorks4Me

A team of business leaders, equity research analysts & investment counsellors. Started in 2008; experienced in equity research, financial planning and portfolio management. Passionate about providing institutional quality research and advice to Retail Investors in a simple easy-to-understand-and-act manner.


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