Why invest in Pre IPO equities:
· Get access to investment opportunities before the broader market does
· Diversification and lower correlation to listed companies
· As companies are staying private longer than ever most of the value creation happens in the Pre-IPO space itself
Criteria for Shortlisting Investment Opportunities:
· Access to sectors not available in the public markets (Gaming/ SaaS/ FinTech/ Ecom)
· Significant Mispricing leading to value creation from Listed/Global Peers
· Reasonable Liquidity and availability of options
· Companies on a definite IPO track Ø DRHP filed Ø Funds raised from PE/VC investors Ø Subsidiaries of existing listed/professionally managed companies Ø Companies on a definite IPO track
List of pre IPO Companies with PE investors on board : https://altiusinvestech.com/blog/private-equity-funds-investments-in-the-unlisted-market/
Top 3 companies to look at in the Pre IPO markets:
Chennai Super Kings: Chennai Super Kings, one of the most prominent cricket teams in the Indian Premier League (IPL), was established in 2008, the year the Indian Premier League game debuted. With 4 IPL Trophies, it is one of the most successful franchises.
• Most Reliable Franchisee – They participated in ten leagues and made it to eight finals, making them one of the IPL’s most successful franchises.
• IPL Media Rights Revenue: The IPL Media Rights are a significant source of income, bringing in Rs 920 Cr (2018-2022) and Rs 410 Cr (previous year) (2008-2012). Even with cautious projections, we anticipate that the revenue from IPL media rights will reach Rs 1450 Cr from 2023 to 2027. In the previous six months, CSK’s share price fell from Rs. 230/sh to Rs. 165/sh.
|Revenues||247.83 cr.||350.27 cr.|
|Reserves||213.02 cr.||172.77 cr.|
|Profit After Tax||40.26 cr.||50.34 cr.|
|Profit Before Tax||59.20 cr.||67.25 cr.|
PharmEasy : PharmEasy is an Indian healthcare app and e-commerce platform that allows users to buy and sell online prescription drugs, medical tests, telehealth services, and doctor consultations.
• Acquisition Blitz Since API Holdings recently acquired Thyrocare Technologies and its subsidiaries as well as Akna Medical Private Limited and its subsidiaries, the company is now able to provide a variety of goods and services, including pharmaceuticals, over-the-counter (OTC) and private label medical products, surgical and consumables, diagnostic services, and teleconsultations. Additionally, the business purchased Medlife, a rival, last year.
Online Platform – As of June 30, 2021, it had 87,194 pharmacies, 3,261 wholesalers, 4,617 physicians, and 926 hospitals on its platform.
• DRHP Approved – The company has received SEBI approval for its DRHP for an initial public offering of Rs 6,250 crore.
• Over the past six months, the price of Pharmeasy shares has decreased from 110 to 50.
|Profit After Tax||(-641.3cr.)||(-335.3cr.)|
|Profit Before Tax||(-620.3cr.)||(-347cr.)|
Studds Accessories: Since its founding in 1973, STUDDS Accessories has grown from producing its first helmet in a garage to having a 7 million annual production capacity.
• Studds Accessories, with operations in 39 nations, is the industry’s top maker of two-wheeler helmets in terms of sales volume.
• Brands – It has two main brands, Studds (affordable for all consumers) and SMK (premium tailored), as well as two categories for helmets and bike accessories.
Manufacturing Prowess – In Faridabad, India, it operates two backward integrated manufacturing facilities and is now building a third. The testing facility has also received approval from VCA England. The advantage of having an internal testing lab is that it allows for a profitable company strategy. It has all the necessary safety certifications, including IS: 4151, IS: 2925, ECE 22.05, and SLSI, making it the preferred brand on the global market.
• Product Portfolio – The whole product portfolio consists of over 47 goods, with a 1.5 million annual manufacturing capacity.
• Partnerships with Giants – The business has joint branding agreements with two-wheeler OEMs like Honda Motor India Private Limited, Hero Motocorp Limited, Suzuki Motorcycle India Private Limited, and UM Lohia Two Wheelers Private Limited for the provision of helmets and lifestyle accessories.
During the previous six months, the price of Studds shares decreased from Rs. 1900/sh to Rs. 1245/sh.
|Revenue||479.62 cr.||414.52 cr.|
|Reserve||280.05 cr.||206.19 cr.|
|Profit After Tax||74 cr.||74.53 cr.|
|Profit before Tax||98.30 cr.||95.42 cr.|
Risk & Reward:
· Unlisted Pre-IPO Shares have a slightly higher risk/return profile and is suitable for investors with longer investment horizons (typically more than 2 years)
· On a gross portfolio level average returns for the last 5 year period has been of 25%+ CAGR
· Exit – Either through sale on exchange on IPO or exit in the secondary market (in case of IPO delay/suitable returns achieved)
· Holding Period – 2 years for Long Term
· On Sale of Short term assets – Slab rate @ 30%
· On sale of Long Term Assets – 10% of LTCG without indexation benefits