Beacon Trusteeship coming with IPO to raise Rs 32.52 crore

Beacon Trusteeship 

• Beacon Trusteeship is coming out with initial public offering (IPO) of 54,20,000 shares of Rs 10 each in a price band Rs 57-60 per equity share.  
• The issue will open for subscription on May 28, 2024 and will close on May 30, 2024.
• The shares will be listed on NSE Emerge Platform.
• The face value of the share is Rs 10 and is priced 5.70 times of its face value on the lower side and 6.00 times on the higher side. 
• Book running lead manager to the issue is Beeline Capital Advisors.
• Compliance Officer for the issue is Pratibha Tripathi.

Profile of the company

The Company was originally incorporated as Public Limited Company in the name of ‘Beacon Trusteeship Limited’ under the provisions of the Companies Act, 2013 vide Certificate of Incorporation dated December 23, 2015 issued by the Deputy Registrar of Companies, Mumbai. The company is a SEBI registered Debenture Trustee vide Registration No. IND000000569, which provides wide range of trusteeship service across various sectors such as Debenture Trustee Services, Security Trustee Services, Trustee to Alternate Investment Fund (AIF), Trustee to ESOP, Securitization Trustee, Bond Trusteeship Services, Escrow Services, Safe keeping and other allied services. The company is currently managed by group of professionals having extensive experience in the field of Investment Banking, Finance, Debt Syndication and financial services at large. The company provides trusteeship services by acting as intermediary between the Issuer Company or entity and investors. 

The company as a Debenture Trustee plays a pivotal role in its Scope of work under trusteeship services includes due diligence, Custodial services, Monitoring compliance, Documentation, Disclosures, Record keeping etc. As a trustee, the company plays a crucial role in maintaining investor confidence by safeguarding their interests and promoting transparency and accountability. The company with the help of a technology, a dedicated legal and compliance team for each of its products viz. Debenture Trusteeship, Security Trustee for Loans, Alternative Investment Funds, Securitization and Escrow, it is able to execute transactions as per its clients’ needs. The company has built its own client-facing ERP System, a dedicated platform for Securitization & a Covenant Monitoring Tech Platform, demonstrating its adaption and flexibility to the new age business and ease of doing business for its customers.

Proceed is being used for:

• Building up technology infrastructure for its existing business. 
• Investment in Wholly owned subsidiary i.e. Beacon Investor Holdings, to commence the services of Depository Participant and Registrar & Share Transfer Agent. 
• Purchase of new office premises
• General corporate purpose

Industry overview

The Indian debt market is fairly large, with the bond market presently sized at around $2.34 trillion. Of this, $1.83 trillion is dedicated to government bonds, while $510 billion is allocated to corporate bonds (as of Mar-22). Government bonds constitute 78% of the overall outstanding bonds in the country, while corporate bonds account for 22% of the market. Over the past five years, starting from March 2018, the total outstanding bonds have witnessed a remarkable growth of 77%, with government bonds experiencing an 85% rise and corporate bonds increasing by 53%. 

Indian Corporate Bond Markets: With the growing importance of investment for higher GDP growth, there is an urgent need for alternative sources of financing; and corporate bonds market can play an important role here. A well- developed and smooth functioning corporate bonds market serves as an important driver of economic growth as it provides an additional source of long term finance for industry. In fact, ideally there should be matching of long term projects with long term finance and the bond market offers an avenue for the same. In India, RBI and SEBI have taken various steps to develop and strengthen the corporate bonds market. However, while the size of the corporate debt market has expanded, it still remains relatively underdeveloped relative to the bank credit segment. 

Private placement of debt remained the primary driver of resource mobilization in the debt segment, witnessing rise of 28% in funds raised during 2022-23, relative to the previous fiscal year. As per PRIME Database, India’s Corporate Bond Market raised Rs 8.5 lakh Crore in FY 2022-23 compared to Rs 6.3 lakh crore which was Rs 10 lakh crore in FY2011-12. These are major milestones which have helped corporates in India to raise cheap debt capital. To improve liquidity and participation, the face value of debt securities issued on private placement basis was reduced to Rs 1 lakh from existing Rs 10 lakh with effect from January 2023.

Pros and strengths

Promoter backed management: The ownership of the company is hugely Promoter centric as nearly whole shareholding lies with the Promoters & their family members. Further, the day-to-day management of the Company is closely monitored & directed by the Promoters. Their close involvement with the Company’s daily affairs augurs an expeditious steadfast approach in achieving the organizational objectives.

Marquee client base: Beacon has been able to rank amongst the Top 3 Trustees over the last couple of years as per PRIME Database. Within a short span of time, Beacon has been triumphant in persistently winning noteworthy debt assignments from PSUs, BFSI entities, & prominent conglomerates from the RE, Infra, & Mfg. domains. Being promoted by a group of ex-bankers & elitists from similar domains, Beacon has been able to establish a robust network of connections assuming influential roles in organizations renowned globally.

Technology: The Company has continuously invested in modern technology to improve its efficiency and effectiveness. This allows it to provide its clients with better services at a lower cost. Beacon has successfully developed adaptable and flexible ERP and other product-based software, like Beacon ERP & Beacon Prosec, to further its tech-advent. The digital infrastructure is developed in-house with no dependence on any external agency. The digital infrastructure is well designed to address the needs of all stakeholders with the systems’ ability to offer role-based access to all the participants including the customers.

Risks and concerns

Dependent on few numbers of customer: Its top ten customers contributes 44.39%, 41.99%, and 34.38% for its total revenue from operations for the year ended March 31, 2024, 2023 and 2022 respectively. Any decline in its service standards, growing competition and any change in the demand, may adversely affect its ability to retain them. It cannot assure that it shall generates the same quantum of business, or any business at all, and the loss of business from such top ten customers may adversely affect its revenues and results of operations. While it will not face substantial challenges in maintaining its business relationship with valuable clients, there can be no assurance that it will be able to maintain long term relationships with its valuable clients or find new customers in time.

Face litigation from debenture holders: As the trustee, the company is liable to fulfil its obligations and duties arising from contractual agreements, extant regulations, and applicable guidelines. This requires the company to undertake various activities which largely include carrying out due diligence for security creation, vetting & execution of agreements, calling for periodic reports / certificates, monitoring of payment obligations, registration of encumbrances & ensuring compliance by borrower company with extant regulations and applicable guidelines, undertake security enforcement action and investor grievance redressal. Wherein the company fails to adequately fulfil its obligations and duties, investors shall have all relevant legal rights, and they can file a legal suit against the company. In such a scenario the company may incur expenses in the form of legal costs of own and investor, damages to investors, regulatory penalty, etc.

Trustee industry in India is becoming increasingly competitive: The trustee industry in India is growing rapidly, and this is attracting new entrants into the market. New entrants are may be smaller or agile as compare to established trustee companies, and they may be willing to offer lower fees in order to gain market share. Additionally, established trustee companies are also facing increasing competition from each other. Increased competition in the trustee industry could have a number of negative consequences for trustee companies.

Outlook

Beacon Trusteeship is engaged in the business of Trusteeship, Agency & Administration service. The Company offers its services as a Trustee for Debt Securities (Bonds and Debentures), Loans extended to corporate debtors by banks and financial institutions, Alternative Investment Funds (AIF), Real Estate Investment Trust (REIT), Infrastructure Investment Trust (InvIT), Securitization Trustee (Direct Assignment, Pass Through Certificates, Securitized Debt Instruments etc.). The agency services primarily relate to managing & monitoring syndicated credit facilities, Escrow Accounts, Trust & Retention Account, Safe custody of documents, etc. On the concern side, the company is dependent on Debenture trustee fees for a substantial share of its revenue and profitability. Any reduction in its Debenture trusteeship fees could have material adverse effect on its business, financial condition, cash flows, results of operations and prospects. Besides, the company is obligated to monitor compliance with provisions of extant SEBI Regulations, SEBI Guidelines, SEBI Circulars, Companies Act & Rules, RBI Directions & Notifications, Contract Law, Stamp Duty Law, Finance Act, Income Tax Act, etc.

The company is coming out with an IPO of 54,20,000 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 57-60 per equity share. The aggregate size of the offer is around Rs 30.89 crore to Rs 32.52 crore based on lower and upper price band respectively. On performance front, the total revenue from operations for the year ended on FY 2023- 24 was Rs 1,991.56 lakh as compared to Rs 1,480.56 lakh during the FY 2022-23, increased by 34.51%. Profit after Tax increased by 34.25% to Rs 516.36 lakh in FY 2023-24 from Rs 384.64 lakh in the FY 2022-23. Meanwhile, the company’s Business Strategy is a derivative of its vision to provide multiple capital markets intermediary services & services ancillary to traditional & conventional forms of consortium finance, investment funds, escrow, & other advisory services.