In a first of its kind, a Gujarat based IFA who started selling mutual funds way back in 1992 has listed his company Wealth First Portfolio Managers Ltd on the NSE’s SME Emerge Platform today. The issue opened on March 10 and closes on March 18.
When asked Ashish Shah, Founder of Wealth First Portfolio Managers Ltd on what prompted him to list his company, he gleefully replied, “Well, even though I am among the top 50 mutual fund distributors, I would not be interviewed by people had I not decided to list my company.”
Ashish ventured into financial advisory right after the Harshad Mehta scam in 1992. Coming from an engineering background, Ashish had to learn the ropes about this business on his own. From the very beginning, Ashish is known for his unconventional approach among his peers. When he started his practice from his home, he offered his clients tax-free bonds when others were selling corporate fixed deposits which fetched double digit returns. The idea was to lock in the fixed rates in tax-free bonds for 10 years which were very tax-efficient as compared to fixed deposits. Realizing that Indians loved fixed income, he ventured into selling T-bills, G-Sec and corporate bonds. This strategy paid off. Gradually, Ashish expanded his product offerings through mutual funds and today he manages assets of Rs. 640 crore across products.
While reaching this scale is an achievement in itself, Ashish has bigger plans for his company. His company is offering 16.80 lakh shares of Rs. 50 each, thereby raising Rs. 8 crore. He wants to invest a part of this proceeds to grow his MF distribution business further. Ashish will also use the IPO money to upgrade technology and augment long term working capital for bond market operations.
While it’s a dream come true for Ashish, he says it’s a great strategy for employee retention! It will also motivate senior employees (who will be shareholders) to meaningfully contribute towards company’s growth.
Valuations
A majority of the company’s revenues comes from distribution of third party products which makes it less seasonal as compared to a pure broking businesses.
We can use the AUM of the company to see the valuation. The issue size is 16,80,000 equity shares of face value of Rs.10 each at a price of Rs. 50 each, raising Rs. 8 crore. Thus, Wealth First would be valued at around Rs. 30-35 crore. With an AUM of approximately Rs.640 crore at end of FY15 his company is valued at approx. 5% of the total AUM. Post the listing, Ashish will retain 70% of shares.
Conclusion
Ashish clearly has big plans for his company, which is perhaps unheard of in the IFA practice. He will use the IPO proceeds to expand his company’s footprint pan-India.
‘The secret of getting ahead is getting started’ and that’s what Ashish Shah did. This should inspire other IFAs to do things differently to grow their business.
