DAM Capital offers exposure to the rapidly growing merchant banking sector in the country

IPO Dates: December 19-23, 2024
IPO Price: Rs. 269-283
IPO Size: Up to Rs 840 crore

Implied Market Cap: Rs. 2,000 crores
Face Value: Per Share Rs. 2
Lot size: 53 shares
Loose part: 35%

DAM Capital Advisors, which provides investment banking services, has raised Rs. Plans to raise up to 840 crores. After the IPO, the promoter group’s stake will come down from 46% to 40%. Unlike peers, the company’s merchant banking division is the largest revenue generator compared to the broking segment. It has grown at a rapid pace over the past years while improving margins. It is one of the few promoter-led investment banking companies. However, its business is highly dependent on the progress of economic activities in the country and the capital market sentiment. Given these factors, investors with a high risk appetite and long-term horizon may consider an IPO.

Business

Promoted by veteran merchant banker Dharmesh Anil Mehta, DAM Capital offers services such as fundraising through qualified institutional placement (QIP) and IPO, advisory on mergers and acquisitions, and structured financing, and broking, research to institutions. It was set up after IDFC sold its entire stake in IDFC Securities to Mehta and other investors in 2019. The merchant banking segment contributed 67.2% to FY24 revenue. The company’s market share in number of IPOs and QIPs increased from 8.2% in FY21 to 12.1% in FY24.

Financial

Between FY22 and FY24 the revenue was Rs. 93.4 crore almost doubled to Rs. 180 crores while the net profit was Rs. 21.9 crore tripled to Rs. 70.5 crores. Operating margin before depreciation and amortization (EBITDA margin) increased to 56.6% from 36.3% during the period while return on equity (RoE) increased to 54.7% from 28.5%. Revenue and profit for the six months ended September 2024 were Rs 107.8 crore and Rs 43.8 crore respectively. The company has paid dividends continuously in the last three years and future payments will be at the discretion of the board of directors.

evaluation

Based on annualized net profit for the six months to September 2024, the company seeks a price-earnings (P/E) multiple of 22.8. While it does not have an exact peer, several other listed brokerages, which operate merchant banking at P/Es between 17 and 32.