Security and Intelligence Services IPO: Here's what the analysts say

Key Highlights: 

• SIS to raise about Rs 780 crore by offering over 95 lakh equity shares
• Price band fixed between Rs 805 - Rs 815 per piece
• SIS raised nearly Rs 351 crore from 18 anchor investors

Security and Intelligence Services (India) Limited (SIS) is launching its initial public offering (IPO) on Monday July 31, 2017 by offering 9,565,404 equity shares including fresh issue and an offer for sale.  The IPO will close on August 02, 2017.

The IPO is fixed at lower band of Rs 805 per piece and upper band of Rs 815 per piece.

75% of the equity shares are kept for qualified institutional buyers (QIB), 15% for non-institutional investors (NII) and remaining 10% was for retail individual investors (RII).

Through this IPO, SIS plans to raise about Rs 780 crore and proceeds will be utilised for repayment and pre-payment of a portion of certain outstanding indebtedness, funding for working capital and general corporate purposes.

SBI Capital Markets Ltd, Yes Securities (India) Limited are IDBI Capital Markets & Securities Limited have acted as book running lead manager (BLRM) for this IPO.

On June 29, SIS raised Rs 350.81 crore from 18 anchor investors after allotting a total of 43,04,432 equity shares at price band of Rs 815 per share.

Analysts at GEPL Capital said, ''Security and Intelligence Services (India) Ltd. (SIS) stands to gain from operating leverage. At a P/E of 65.2x of its FY17 earnings. We believe that SIS demands a discount to its domestic peers. We assign a Subscribe rating to the IPO.”

Alpesh Thacker and Siddhartha Khemka, analysts at Centrum Wealth Research said, "In the past we have seen tremendous market interest in IPOs of companies with similar business model like TeamLease Services and Quess Corp."

The duo added, "These IPOs got significantly over-subscribed and the stocks are currently trading at high valuation (EV/EBITDA of 40x/52x FY17 and P/E of 97x/34x FY17, respectively). If the same happens with this issue despite growth being lower than peers, the listing could be at a premium to the offer price."

SIS employed 148,678 personnel in India and rendered Security and Facility Management services at 11,869 customer premises across India. 

Total Revenue of SIS grew at a CAGR of 14.56% to Rs.4,577.12 crore for FY17  from Rs.2,657.70 crore for Fiscal Year 2013. 

Axis Capital said, "On a pro forma basis, giving effect to their acquisition of Andwills Pty Ltd and Dusters for the year ended March 31, 2017, the Total Revenue would have been Rs 5,131.25 crore."

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• Security and Intelligence Services raises Rs 351 crore from anchor investors