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Shares of DAM Capital Advisors were down 5 per cent at Rs 294.25, its lowest level since listing last month, on the BSE in Wednesday’s intra-day trade ahead of the December quarter (Q3FY25) results on Friday, January 25.
The market price of stock broking & allied services company was trading close to its issue price of Rs 283 per share. It has declined 36 per cent from its post listing high of Rs 456.90, touched on debut day i.e. December 27, 2024.
DAM Capital is one of the leading merchant banks in India providing a wide range of financial solutions particularly in the areas of merchant banking (equity capital markets, mergers & acquisitions, private equity, structure financial advisory) and institutional equities (broking and research). The company has demonstrated a consistent improvement in market share, growing from 8.2 per cent in FY21 to 12.1 per cent in FY24 in terms of initial public offering (IPO) and qualified institutional placement (QIP) issuances.
The company is one of the leading merchant banks in India and provides services across the merchant banking and institutional equity domains. The company has showcased remarkable financial performance over the years with Revenue/EBITDA/PAT growing at a compound annual growth rate (CAGR) of 38.9 per cent/76.7 per cent/79.5 per cent respectively over the FY22-FY24 period and had the highest net profit margin among peers as of FY24, SBI Securities said.
DAM Capital derives a significant portion of its revenue from only two income streams namely, advisory fee income and brokerage. Both of these income streams are highly dependent on general macro-economic conditions. As of H1FY25, advisory fee income accounted for ~55 per cent of the total income stream while brokerage comprised of ~39 per cent of the total income.
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However, the company’s merchant banking and institutional equities businesses are highly dependent on the prevailing market and economic conditions both in India and globally. In the event of a market downturn, both these businesses could be affected adversely with impacts seen on revenues and profitability, according to analysts.
The merchant banking and equity business is highly sensitive to economic downturns, interest rate hikes, and geopolitical tensions, which could reduce transaction volumes and investor confidence. Slow growth in major economies (e.g., U.S., China, Eurozone) can affect export-driven businesses, impacting demand for advisory services, KRChoksey Shares and Securities said in IPO note.
As a merchant banking and securities firm, the company’s business is materially affected by conditions in the economy and financial markets both India and globally. In the event of a market downturn, their businesses could be adversely affected. The merchant banking and institutional equities industry has been materially and adversely affected in the past by significant declines in the values of nearly all asset classes, by a serious lack of liquidity and by high levels of borrower defaults.
Their business is highly dependent upon the levels of activity in the securities markets in India and in particular, upon the volume of financial assets traded the number of listed securities, the number of new listings and subsequent issuances, liquidity and changes in investor sentiment. Any adverse changes in such factors, as a result of general economic or market conditions or otherwise, could adversely affect their business, financial condition, cash flows and results of operations, Nirmal Bang Securities said.
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