DAM Capital Advisors IPO: A gateway to India's capital market boom

From FY22 to FY24, the company achieved a Compound Annual Growth Rate (CAGR) of around 39 per cent in revenue and around 80 per cent in net profit.

About the issue  

DAM Capital Advisors Ltd is preparing to launch its Initial Public Offering (IPO) for equity shares. Below are the issue details. 

Objects of the Issue
Considering that the issue is exclusively an offer for sale, it is crucial to note that the company will not receive any offer proceeds. Instead, all offer proceeds will flow to the selling shareholders, distributed in accordance with the number of offered shares they sell as part of the offer.

Promoter holding
Dharmesh Anil Mehta, Sonali Dharmesh Mehta and Boombucket Advisors Pvt Ltd are the promoters of the company. The promoters currently hold a pre-issue shareholding stake of 45.88 per cent in the company.

Company profile
According to a CRISIL report, the company is one of India’s leading merchant banks. It holds a 12.1 per cent market share in Fiscal 2024 based on the number of initial public offerings (IPOs) and qualified institutional placements (QIPs) it managed as the book-running lead manager.

It offers a comprehensive range of financial solutions, including merchant banking services such as equity capital markets (ECM), mergers and acquisitions (M&A), private equity (PE), and structured finance advisory. They also provide institutional equities comprising broking and research.

The company successfully executed 72 ECM transactions, including 27 IPOs, 16 QIPs, 6 offers for sale (OFS), 6 preferential issues, 4 rights issues, 8 buybacks, 4 open offers, and 1 REIT IPO.

It also advised on 23 transactions, covering M&A, private equity, and structured finance advisory, and executed block trades. The company currently serves 263 active clients, including registered Foreign Portfolio Investors (FPIs), across key geographies such as India, the USA, the UK, Europe, Hong Kong, Singapore, Australia, Taiwan, South Korea, the Middle East, and South Africa.

Financials 

After overcoming a setback in FY23, the company experienced a strong rebound in FY24, delivering robust growth in both the topline and bottom-line. Over the period from FY22 to FY24, the company achieved a Compound Annual Growth Rate (CAGR) of around 39 per cent in revenue and around 80 per cent in net profit. When annualized, the figures from the H1FY25 indicate a 20 per cent revenue growth and a 24 per cent surge in net profit compared to FY24.

Valuation & Outlook

The issue is priced with a P/BV ratio of 10.15 times, calculated using its Net Asset Value (NAV) of Rs 27.87 as of September 30, 2024. Considering the company's annualised FY25 earnings and fully diluted equity capital, the price-to-earnings (P/E) ratio stands at 23x.

Compared to its listed peers, the company delivered an impressive return on equity (RoE) of 55 per cent for FY24. However, with competitors offering decent returns at nearly half the price-to-book (PB) ratio, the company’s competitiveness appears less compelling.

In Fiscal 2024, India’s equity markets reached record levels in terms of market capitalization of listed companies and benchmark index performance. The country’s market capitalisation surged by more than 50 per cent year-on-year to Rs 394 trillion as of March 31, 2024, marking the second-highest annual growth in the past 14 years.

The company's growth has been driven by strong market performance but remains closely tied to it. A market downturn could impact its business. Considering the company’s growth potential alongside the uncertain market outlook, we advise investors with surplus funds to approach the issue with a long-term perspective and a moderate subscription strategy.