MAS Financial Services IPO Recommendations: High valuations but analysts positive


MAS Financial Services IPO opens tomorrow for subscription and brokerage houses have come out with their IPO notes. Priced in the range of INR456 – 459 per share, the upcoming IPO will involve sale of new shares while existing investors will also reduce their shareholding. The IPO has received generally positive ratings from analysts, although some have pointed out that pricing is on the higher side. Here is a snapshot of MAS Financial Services IPO recommendations from major brokerage houses.

Angel Broking has a positive view on the IPO and has said that valuations are in line with high profitability. “High valuations underpinned by high growth potential and profitability: Close peers, Capital First and Shriram City Union Finance are trading at ~3x FY2017 book, however both the companies report moderate ROE of 11%. At the upper end of the price band, MAS is valued at 6.85x of FY2017 book value (Pre-IPO) and on post dilution basis at 4.1x of Book value. Although valuations are on the higher side, looking at the strong and sustainable growth and ROE prospects of the company, we recommend a Subscribe to the issue,” said its IPO note.

Read Also: MAS Financial Services IPO Review: Leverage employed successfully

ICICI Securities is also bullish on the IPO and has put a subscribe rating on the offer. “At the upper price band of | 459, MASFS is available at a multiple of 4x Q1FY18 BV (post issue). MASFS possess fundamental strength with robust growth in advances, steady asset quality and healthy return ratios. We advise investors to SUBSCRIBE to the issue,” noted its research note.

Choice Broking sounded a cautious note owing to high valuations. “The company is witnessing declining trend in margin as NIM declined to 7.0% in FY17 from 10.5% in FY13 mainly due to the decline in yield on advances. Amidst the prevailing low interest rate scenario and high competition, strong improvement in margin cannot be expected. Though RoE of MFSL stood at 26.6% in FY17, if we readjust it with postissue net worth it normalize to around 12% and come in line with capital first (RoE at 11.8% by FY17 and Shriram City Union Finance (RoE at 11.9% by FY17). Considering all these parameters, we are of the view that at P/ABV (x) of 4.5, the issue is aggressively priced leaving limited room for further upside. Thus, we assign ‘Subscribe with Caution’ rating to the issue,” said the research house in its IPO note.

SMC Global Securities believes for long term investors can apply in the IPO. “The Company is pursuing and maintaining stable growth and quality of portfolio by expanding product offerings to anchor its belief that growth with quality will enhance the stakeholder’s value. The company is planning to expand its product in the high growth agri-inputs and equipments segment. With GNPAs within limits, asset quality intact, decent valuations and expected entry in high growth agri-input segment, the company is expected to see good growth going forward. Along term investor may opt the issue,” opined its IPO note.

Prabhudas Lilladher is also among the brokerage houses having positive MAS Financial Services IPO recommendations. “At the upper end of the band at Rs459 MASFIN trades at 5.9x Q1FY18 book value of Rs78.4 and 3.6x post issue trailing book value of Rs129 (incl. recently converted preference shares & debentures) which we believe is reasonably valued and hence we recommend investors to subscribe to the issue with a long term investment objective for a franchise which caters to high potential untapped segment helping strong AUM growth and maintain strong return ratios,” it said in its research note while pointing out that the company operates in riskier segments and its high reliance on wholesale lending is a key risk factor.

Analysts are unanimous about the long term prospects of the company but as we see in MAS Financial Services IPO recommendations, not everyone is comfortable with pricing. To get an idea how bullish are fellow readers, head to our discussion page for MAS Financial Services IPO and the grey market page.


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