About DAM Capital Advisors Limited

BUSINESS OVERVIEW
DAM Capital is the fastest growing merchant bank in India by revenue CAGR from Fiscals 2022 to 2024 with the highest profit margin in Fiscal 2024, among the peers considered (Source: CRISIL Report). They are one of the leading merchant banks in India with a market share of 12.1%, based on the number of initial public offerings and qualified institutional placements undertaken by them as the book running lead manager, in Fiscal 2024. They provide a wide range of financial solutions in areas of (i) merchant banking comprising equity capital markets (“ECM”), mergers and acquisitions (“M&A”), private equity (“PE”), and structured finance advisory; and (ii) institutional equities comprising broking and research.

Since its acquisition on November 7, 2019, DAM Capital has solidified its presence in India's dynamic capital markets. Between then and October 31, 2024, the firm executed 72 ECM transactions, including 27 IPOs, 16 QIPs, 6 OFS, 6 preferential issues, 4 rights issues, 8 buybacks, 4 open offers, and 1 REIT IPO. Additionally, it advised on 23 transactions spanning M&A, private equity, and structured finance, alongside block trades. As of October 31, 2024, its institutional equities team of 63 employees (29 in research and 34 in broking) serves 263 active clients, including FPIs across India, the USA, UK, Europe, Asia, the Middle East, and Africa.

India is projected to almost double its nominal GDP by Fiscal 2030. India’s market capitalisation rose by a strong 52% year-onyear to ₹394 trillion as of March 31, 2024, marking it the second highest growth in a year in the last 14 years. As of October 31, 2024, DAM Capital's 121-member team, experienced across various sectors and product lines, boasts an average of 15.7 years of experience, with 54 members having over 18 years of expertise. The Bankers of the Company is HDFC Bank Limited.

INDUSTRY ANALYSIS
Overview of Capital Markets in India
The Indian Capital Market is one of the most dynamic and high growth organised markets in the world. It witnessed strong performance during the period Fiscal 2011-24. The market capitalization of National Stock Exchange (“NSE”) grew at 14.4% CAGR during Fiscal 2011 to Fiscal 2024. The NIFTY 50 index has grown at a CAGR of 10.9% over this period. BSE Sensex has followed a similar growth trajectory to Nifty 50. Indian equities continued to see strong gains in calendar year 2024. Both domestic and global factors were supportive of foreign capital inflows.

At the end of March 2024, both Nifty and Sensex experienced growth substantial growth of 28.6% and 24.9% compared to March 2023. However, market capitalization at NSE and BSE saw a slight decrease of 0.1% and 0.3% compared to previous month. The P/E ratios for S&P BSE Sensex and Nifty rose to 25.0 and 22.9 respectively in March 2024 as compared to March 2023 of 22.2 and 20.3 respectively. Despite geopolitical tensions among nations, challenging interest rate scenario, the Indian stock market performed well in FY23-24. The bullish sentiment in the stock market can be attributed to India’s strong GDP growth in FY24.

In Fiscal 2024, the equity markets in India have achieved record levels in terms of market capitalization of listed companies and the benchmark index performance. India’s market capitalization to GDP stands at 130% as of fiscal 2024. India’s market capitalization rose by a strong 52% YoY to Rs 394 trillion as of March 31st, 2024, marking the second highest growth in a year in the last 14 years. This translates into an annualised growth of 36% in the last four years from 2020-2024.

Equity Capital Market (ECM)
The performance of entities in the capital markets business is primarily influenced by two factors: the performance of the primary and secondary equity markets, and fund-raising through equity (initial public offer, rights issue, qualified institutions placement) or debt markets. The Indian capital market has shown a strong growth in fiscal 2024 compared to fiscal 2023 in terms of the number of issues which have increased from 234 in fiscal 2023 to 316 in fiscal 2024. In FY25, the number of issues stand at 215 as of October 2024. Further, rising household disposable income and the ease with which investors can open demat account have driven retail investors participation in equity capital markets in past few years, taking the total number of demat accounts to reach 152 million in fiscal year 2024. In H1FY25, the total demat accounts reached 175.4 million accounts. Strong rally in capital markets, increased participation from retail investors and HNIs, and more companies reaching the scale for IPO are some of the key drivers for rising growth in number of issuances.

STRENGTHS OF DAM CAPITAL
1. Fastest-Growing Merchant Ban : DAM Capital leads the industry with the highest revenue growth and profit margin from Fiscal 2022 to 2024, achieving a 12.1% market share in IPOs and QIPs in Fiscal 2024.

2. Sector Expertise and Product Innovatio : With a seasoned team, DAM Capital uses its deep sector knowledge to identify niche opportunities, craft tailored solutions, and bring unique client stories to the market.

3. Comprehensive Equities Platfor : Its institutional equities division combines robust research with skilled sales and trading teams to deliver value across investor categories.

4. Strong Client Relationship : Long-standing relationships with corporates and institutional investors enable repeat business and resilience during market fluctuations.

5. Experienced Leadership and Independent Boar : Guided by an expert management team and an independent board, the company leverages market expertise and regulatory insight for sustained growth.

6. Proven Profitabilit : DAM Capital boasts strong revenue growth and the highest profit margins among peers, cementing its position as a leader in merchant banking.
 

STRATEGIES OF DAM CAPITAL
1. Strengthening Competitive Edg : DAM Capital aims to expand its client base, product offerings, and transaction value in merchant banking. By increasing the number of transactions and targeting high-value deals, the company strives to solidify its position as a leader in the market.

2. Enhancing the Merchant Banking Platform : Leveraging its comprehensive capabilities, the firm seeks to address diverse client funding needs and boost its share of client businesses, reinforcing its market presence and service quality.

3. Expanding Institutional Equities Service : Through research, broking, and corporate access, DAM Capital plans to enhance its institutional equities platform, offering a seamless experience for domestic and foreign investors.

4. Venturing into Fee-Based Businesse : DAM Capital intends to tap into the growing asset management and retail broking segments, capitalizing on the expanding mutual fund industry. With projected AUM growth in India, this strategy aligns with rising investor participation.

5. Global Strategic Partnerships : The company aims to collaborate with a global merchant bank to enhance cross-border transaction capabilities. Such tie-ups will provide access to international markets and integrated services across sectors and geographies.

6. Investing in Talent Development : Recognizing its employees as a key asset, DAM Capital focuses on attracting and retaining highly qualified professionals, ensuring a motivated workforce that drives its success and growth.

Business Risks for DAM Capital
1. Dependence on Market Conditions : DAM Capital’s merchant banking and institutional equities businesses are heavily influenced by domestic and global economic and market conditions. While Indian capital markets performed strongly between Fiscal 2011-24, economic slowdowns and market volatility could adversely impact business performance.

2. Regulatory and Legal Risks : The company and its subsidiary, DAM USA, face periodic inspections from statutory and regulatory authorities. International operations, particularly in the USA, expose DAM Capital to significant legal risks, including potential liability under securities laws and disputes related to trading arrangements.

3. Losses in Stock Broking : The stock broking segment has incurred losses in the past. Revenue from brokerage depends on trading volumes, order execution, and client activity, all of which are influenced by external factors such as economic policies, interest rates, and market conditions.

4. Revenue Concentration : A significant portion of revenue comes from advisory fees and brokerage income, both of which are highly sensitive to macroeconomic conditions. Fee and commission income stood at ₹1,024.96 million (H1 FY2024) and ₹1,738.35 million, ₹814.38 million, and ₹913.54 million in FY2024, FY2023, and FY2022, respectively.

5. Reliance on Exchanges for Institutional Equities : DAM Capital’s institutional equities business depends on the NSE, BSE, and clearing corporations for executing and settling client transactions. Broking terminals are connected to these exchanges, and any disruption in their operations or connectivity could significantly impact the business.

DAM Capital’s business is highly dependent on market conditions, regulatory compliance, and revenue concentration in advisory fees and brokerage. Additionally, reliance on stock exchanges and past losses in the broking segment pose significant operational risks.