The company commenced operations in the securities market in 1993 as S.S. Kantilal Ishwarlal Sharebrokers and Investors, which was acquired by IDFC in 2006 and became IDFC securities. In 2019, IDFC group divested its entire stake, which was acquired by Dharmesh Anil Mehta and other investors and name was changed to DAM Capital Advisors in July 2020.

The company cornered a market share of 12.1% based on the number of initial public offerings and qualified institutional placements undertaken as the book running lead manager in FY2024.

During the last five years, from the date of the acquisition 7 November 2019 to 31 October 2024, the company has executed 72 ECM transactions comprising 27 initial public offerings (IPOs), 16 qualified institutions placements (QIPs), 6 offer for sale (OFS), 6 preferential issues, 4 rights issues (Rights Issues), 8 buybacks (Buybacks), 4 open offers (Open Offers) and 1 initial public offer of units by a real estate investment trust (REIT). It has also advised on 23 advisory transactions including M&A advisory, private equity advisory and structured finance advisory and has also executed block trades since the acquisition.

The institutional equities business comprises of 29 employees in research and 34 employees in the broking team. They service 263 active clients including registered FPIs spread across geographies such as India, USA, UK, Europe, Hong Kong, Singapore, Australia, Taiwan, South Korea, Middle East and South Africa. By leveraging its deep industry expertise, robust research capabilities, and large investor distribution network in institutional equities business, the company provides tailored solutions to clients. The client retention demonstrated personalized, solution-oriented approach and proven execution capabilities.

The company caters to the Indian capital markets, which is one of the most dynamic and high growth organized markets in the world and aims to capitalize on India’s growth story. An intellectual capital is the cornerstone of success, which allows it to be well-informed about market opportunities and adapt business strategies efficiently. The company had a team of 121 employees across businesses comprising seasoned personnel with experience in executing transactions across product lines and sectors end October 2024.

The wholly owned Subsidiary, DAM Capital (USA) Inc. has enabled to broaden access to serve clients in the United States of America and offer Rule 144A issuances of Indian companies to institutional investors in the United States of America.

For merchant banking business, future growth might be an outcome of expanding products, client base and average transaction value. The company aims to add new products to the existing portfolio such as InvITs, offshore listings, venture capital fundraising, cross-border M&A and debt capital markets to further strengthen the market position.

As a part of the growth strategy, the company intends to venture into complementary fee-based businesses to improve risk-adjusted returns. It intends to venture into the retail broking and asset management business. A wholly owned subsidiary is incorporated to undertake asset management business. The company also aims to explore a strategic partnership with a global merchant bank to enhance cross-border transaction capabilities and expand global reach.

The Offer and the Objects

The initial public offer (IPO) consists of an offer for sale (OFS) of 296.909 lakh equity shares to raise Rs 798.69 crore at the lower band of Rs 269 per share (face value Rs 2 per share) and Rs 840.25 crore at the upper band of Rs 283 per share.

The promoter Dharmesh Anil Mehta has offered 30.989 lakh equity shares for sale in OFS. Among other selling shareholders, Multiples Alternate Asset Management has offered to sale 87.144 lakh equity shares, Narotam Satyanarayan Sekhsaria 70.424 lakh equity shares, RBL Bank 57.710 lakh equity shares and Easyaccess Financial Services 50.643 lakh equity shares.

The promoters shareholding in the company would decline to 41.5% post- IPO from 45.9% pre-IPO.

The issue is to be made through the book-building process and will open on 19 December 2024 and will close on 23 December 2024.

The company expects that listing of the Equity Shares will enhance its visibility and brand image and provide liquidity and a public market for the Equity Shares in India

Strengths

The company is one of the leading investment banks offering comprehensive range of products and services in India with a market share of 12.1% of IPOs and QIPs issue handled in FY2024 up from 8.2% in FY2021.

The company has a proven execution track record with in-depth understanding of sectors and products, enabling to identify niche sub-sectors and product opportunities early. Early market insights contributed to pitching appropriate products to clients.

The company has consummated transactions across sectors including pharmaceuticals, infrastructure, manufacturing, retail, technology, financial services and healthcare.

The institutional equities platform of the company is characterized by its comprehensive research and experienced sales and trading team, providing services to clientele across investor categories.

The company has maintained a long-standing relationship with institutional investors, financial sponsors, corporates and family offices as a result of experienced team and consistent coverage of clients, many of whom have provided repeat business.

Industry expertise and deep relationships across the ecosystem enables to provide a range of offerings across the merchant banking spectrum and improve client retention.

The company has an experienced executive team comprising senior industry leaders with deep domain expertise. An intellectual capital of the company comprises industry expert who have a combination of industry expertise, capital market experience, product knowledge and regulatory understanding. The company endeavours to attract, cultivate, nurture and retain talent to build and strengthen core competitive strengths.

The company has an ESOP Scheme to reward employees for their association, retention, dedication and contribution to the goals of the Company.

Weaknesses

The merchant banking and institutional equities business is highly dependent on market and economic conditions. Adverse market or economic conditions could have a significant economic and financial impact on business.

The brokerage business depends on the number of orders executed and trading volume, which is significantly affected by external factors, such as general economic conditions. The operating revenue is also affected by the size of the client base. The company does not have exclusivity arrangements with clients.

The brokerage business faces various additional risks such as significant changes in the technological environment, changes in client preference, restrictions or limitations on offering internet-based trading services, operational risks and regulatory changes.

Ability to sustain growth depends upon ability to attract and retain key personnel, developing managerial experience to address emerging business and operating challenges and ensuring a high standard of client service.

The merchant banking business depends on the ability to attract and retain clients, investors and employees, execution of the transaction in timely manner.

There is a lack of recurring business as merchant banking clients are typically not recurring, as engagements are often based on specific events or transactions.

There is steep competition in merchant banking business with competitors who have various advantages, such as larger financial resources, broader geographic presence, stronger brand recognition, lower costs and the ability to charge lower fees.

The company is exposed to a variety of risks, including market risk, default risk, liquidity risk, operational risk and legal risk. The effectiveness of risk management is limited by the quality and timeliness of available data.

Regulatory risk is the most prominent in the merchant banking and broking industry.

The operation of businesses is highly dependent on information technology and subject to risks arising from any failure of, or inadequacies in IT systems.

Valuation

DAM Capital Advisors is a leading merchant banker operating majorly into two areas - Merchant banking segment contributing 67.2% of its total income, which is the highest among the peers, the rest being contributed by stock broking segment (28.3%) and other income (4.5%) in FY2024. The company has recorded strong 39% CAGR growth in the total income to Rs 180.04 crore in FY2024 from Rs 93.37 crore in FY2022. The total income has moved up to Rs 107.75 crore in H1FY2025. The net profit has also increased at robust CAGR of 79% to Rs 70.52 crore in FY2024 from Rs 21.90 crore in FY2022. The net profit is strong at 43.78 crore in H1FY2025.

EPS on post-issue equity for FY2024 works out to Rs 10.0. At the price band of Rs 269 to Rs 283, P/E works out to 27.0 to 28.4 times of EPS for FY2024.

The post issue book value of the company stands at Rs 28.6 end September 2024. The scrip is offered at price to book value multiple of 9.9 times.

At the higher price band of Rs 283, the company is demanding m-cap of Rs 2000 crore.

Among the listed peers, JM Financial is trading at PE of 29.7 times of EPS for FY2024, ICICI Securities at 16.8 times, IIFL Capital at 21.6 times and Motilal Oswal Financial Services at 24.1 times.

In terms of P/BV, JM Financial is trading at 1.5 times BV end September 2024, ICICI Securities at 6.4 times, IIFL Capital at 5.0 times and Motilal Oswal Financial Services at 5.3 times.

In terms of return ratios, the ROE of DAM Capital Advisors was at 43.4% for FY2024, ICICI Securities at 43.3%, IIFL Capital at 28.7%, Motilal Oswal Financial Services at 28.0% and JM Financial at 5.2%.

DAM Capital recorded the highest profit margin of 38.7% in FY24 among the peers considered, followed by Motilal Oswal at 34.2% and ICICI Securities at 33.6%. DAM Capital has also recorded the highest profit margin of 40% in H1FY25 among the peers.