Business Analysis 24: DAM Capital
When India grows, its stock market grows. Do the business of capital market will clearly grow. DAM is in the capital market business.
When India grows, its stock market grows. So the business of capital market will clearly grow. DAM is in the capital market business. It's India's fastest growing merchant bank with 13.6% market share in filed IPOs.
They have done 78 equity capital market transactions executed between Nov-19 and Mar-25 including 30 IPOs, 19 QIPs, 7 preferential issues, 6 OFS with a total amount over 142000 cr.
In 2019, IDFC securities was acquired by DAM Capital Advisors Ltd, a firm backed by Dalmia Group. Since then, DAM has made a long stride in the capital market.
What do they do?
As for business mix, there are two major segments.
1. Merchant Banking with 62% of total revenue
2. Institutional Equities with 32.4% share
And the other segment including interest income comprises 5.6% of total revenue
Merchant Banking business includes equity capital market, M & A, Private Equity and structured finance advisory.
Whereas Institutional equities include broking and research services.
Because of high margin merchant banking business, the company is focusing more on this segment rather than retail broking which is a low margin business. However, they have plans to enter retail broking and also asset management businesses.
Going forward, there are 20 IPOs in the pipeline. As on March 31st 2025, 118 mainboard IPOs were filed with SEBI of which DAM has filed 16. As they diversify their business, topline will increase by leaps and bounds. Their subsidiary in the US will aid growth going forward.
Conclusion
When do you make money through such businesses? When there's a bull market. When there is madness about IPOs, QIPs, retail participation. And we are in bear market now. That means this is right time to buy such stocks? Wait... Hold on. There's more to ponder over.
Yes you can stil make money buying now and selling in the next bull market. But my point is if you are getting enough margin of safety? If you ask me if I would invest right now or not, I would say I'll wait for another one or two quarters to see how the revenues are shaping up in these businesses.
How I see the situation?
Right now, we are seeing slowdown in the capital market. There's not enough IPOs, not enough fund raising, not enough retail participation which you see in a bull market. So, this is why I see it would be prudent to wait for sometime to see how the company is doing going forward in FY26.
Most of the capital market businesses such as Motilal Oswal, ICICI Securities, IIFL Capital, JM Financials have all delivered lower than expected numbers. The whole industry is witnessing slowdown due to their inherent cyclicality in the industry. Management of those businesses reiterated that there's a tightening in the market by the regulators. These businesses may look cheaper because of low PE but don't be cheated with such things. They are in a cyclical industry. So, you buy the business at high PE and sell it at low PE.
Although the management is good, strong balance sheet and positive tailwinds in the long term, they are in a cyclical industry even if they diversify their business.
Considering the low penetration of capital market in India as compared to other countries, DAM Capital is also supposed to grow.
Thanks for reading
Take care
Rabi
Disclaimer: I'm not SEBI registered. This content is for educational purposes only. Do your own diligence.
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