Nuvoco Vistas and CarTrade Tech IPOs open today; should you subscribe?
The cement company wants to raise ₹5,000 crore while the ditial auto platform seeks to get ₹3,000 crore
The IPO mania continues on Dalal Street. Opening for subscription on August 9 are IPOs of Nuvoco Vistas and CarTrade Tech. The companies will be together mopping up ₹8,000 crore as IPO frenzy reaches fever pitch. Here are all the key details you wanted about the IPOs, business, fundamentals and valuations. Read on.
1. Nuvoco Vistas IPO
Part of Nirma Group, Nuvoco Vistas Corporation Ltd (NVCL) is the fifth largest cement manufacturer in terms of installed capacity. The company is in the industry for 7 years and has been growing inorganically.
The IPO comprises a 23 per cent stake sale by the promoter entity (Niyogi Enterprises), amounting to ₹3,500 crore and a fresh issue for ₹1,500 crore to pare debt.
At a price band of ₹560-570, the company is valued at an EV/EBITDA of about 18 times (FY21). UltraTech Cement and Shree Cements trade at a premium valuation of 20-25 times EV/EBITDA. Other listed peers such as ACC, Ambuja and Dalmia Bharat trade at about 13 times EV/EBITDA.
Nuvoco has a concentrated presence in East, thanks to the recently acquired plants of Emami Cement. Going ahead, the company expects its EBITDA levels to rise by achieving operational efficiencies from its recent acquisitions. The company has debt outstanding of ₹6,885 crore, of which ₹1,500 crore will be repaid post the IPO. Besides, the company has planned capex outlay of about ₹550 crore up to FY23.
The minimum IPO application lot for Nuvoco is 26 shares, which mean investment of ₹ 14,820. Nuvoco IPO closes on August 11 and the shares are expected to get listed on August 23.
What brokers say about Nuvoco Vistas IPO
* Canara Bank Securities – “The company utilises 50% of its power requirement through its captive power generation which lead company to derive operating efficiency. The company’s D/E stood at 0.83x in FY2021 and post issue, D/E would stand at ~0.63x. The company would trade at EV/EBITDA of 16.87x for FY21 which is attractive as compared to its peer competitors. We recommend ‘SUBSCRIBE’ for listing and long term gains.”
* IDBI Capital – “NVCL has plan of organic expansion in east of 2.7mtpa (12% addition) over FY22E and FY23E. We understand NVCL IPO at upper band is priced at 10x FY23E EV/EBITDA or EV/t of USD131. Valuation is at discount to its large cap peers at 12x-19x FY23E EV/EBITDA. Discount partially factors high debt in its books (FY21 Net Debt / EBITDA of 4.5x) and low ROCE. But given up-cycle in the cement industry and expectation of improvement in margin and balance sheet deleveraging over FY21-23E we recommend SUBSCRIBE.”
2. CarTrade Tech IPO
CarTrade Tech (CTT) is an asset light tech company operating as market place for automotive sales. The company is diversely held and has no promoter. Its IPO consists entirely of a secondary offer of sale by existing shareholders of around ₹3,000 crore, will value the company at a market cap of around ₹7,400 crore.
The IPO values the company at a price to revenue (trailing) of around 30 times and EV/ revenue of around 27 times. However, the revenue considered here includes 100 per cent revenue of a subsidiary (Shriram Automall) in which the company has only 55 per cent economic interest.
The company derives revenues from the three main segments. One, the Shriram Automall platform where it makes commission and fees for sale of used cars in its platform (57 per cent of FY21 revenue). Two, online advertising and lead generation solutions on its branded online platforms such as CarWale, BikeWale, Cartrade etc. Three, inspection and valuation services for banks and other financial institutions, insurance companies and OEMs. The company has a strong balance sheet with net cash of around ₹650 crore as of March 31, 2021.
The IPO closes on August 11. Shares are expected to get listed on August 23. IPO application minimum lot is 9 shares, which involve amount of ₹14,562.
What brokers say about CarTrade issue
* Anand Rathi – “CarTrade Tech Ltd has a unique business model with no listed peers in the market. Covid-19 has impacted its FY21 financials. At the upper end of the IPO price band, it is offered at 4.4x P/BV and 29.6x EV/Sales and 73.4x P/E if we exclude accounting adjustments for deferred tax and attribute it on equity, then the asking price is at a P/E of around 199.26x to its FY21 earnings with a market cap of Rs 7,416 crore which shows the issue is priced exorbitantly. However, considering the future prospect of the company and it is also placed at a sweet spot as the first mover advantage we assign “Subscribe” Rating to this IPO investors can invest in this company with medium to long term perspective.”
* ICICIdirect – “CTT offers a unique play on rising digitisation of new and pre-owned vehicle transaction value chain/ecosystem. Given the prevailing preference for digital platforms including the recent listings, we assign SUBSCRIBE rating to the issue for listing gains. Long term wealth generation at CTT will be a function of scalability, relevance and journey towards healthier return ratios.