Microsec Financial Services - Review

[sunil]

Here is HSBC's Recommendation on the Public issue of Microsec Financial Services,

The net asset value/book value per share, on a consolidated basis, was Rs. 47.4 and on a standalone basis was Rs 29.0, as on March 31, 2010. At the price band of Rs 113-118 per share, the offer is available at 2.4x–2.5x at its FY10 Book Value. We feel that the offer is expensive compared to its peers like Motilal Oswal Securities at 2.5x and Edelweiss at 1.8x which are already having PAN India Presence.

We like the Business model of the company with least capital requirement and higher revenue generation, but we remain cautious over cyclical nature of business and volatility involved with in as well as hurdles that it may face for expansion. We believe in the management’s ability to grow the business in such a competitive environment however it remains a challenge to grow at the similar pace across India in the coming years.   

So seeing the expensive valuations and volatility of the business, we would suggest avoiding the issue. However investors with high risk appetite can subscribe the issue for initial listing gains.

[sunil]

Unicon's Shweta Rane has the following Recommendation on the iPO,

In terms of valuation, the stock is offered at 1.57x and 1.54x book value at upper and lower band, respectively. Its peer group valuation is in the range of 1.1-5x. Looking at company’s growth plans to expand its business, product & services will benefit the company in long term. Also, the strong Indian economic growth is likely to benefit the overall financial market which will in turn benefit the firms like MFSL. SUBSCRIBE

[sunil]

HDFC Securities Recommendation,

MSFL’s position is as one of the established equity broking and investment banking companies in Eastern India. However, in its move to expand pan-India, the company faces strong competition from national brokers. To name a few competitors, from whom MSFL faces competition currently are SREI Capital Market, Ashika Capital Market, BMA Securities, Guiness Securities and Eureka Stock Brokers. Also, its experience in investment banking seems to be limited, as it has done only a few small-ticket deals. Limited deal execution and reach are expected to limit the company’s ability to bag deals, especially in the newer markets. Eastern India accounts only for 11-12% of the total equity trade in the country. Its concentrated presence in Eastern India has registered low fund-raising activity compared to other regions in the country.

While the issue is not priced cheap, it could provide listing gains. However decision on investment needs to be postponed till it proves that it is capable of scaling up nationally without many hiccups.