TTL is a full-service software developer for the IT segment.
- Its offer document has many anomalies and mismatches.
- Its basis of IPO price data is too misleading as it is based on pre-bonus equity.
- The issue is greedily priced based on FY23 earnings.
- There is no harm in skipping this “high risk/low return” bet.
Tridhya Tech Ltd. (TTL) is engaged in full-service Software Development which includes all IT services and resources. It provides turnkey consultancy services to various industries like e-commerce, Real estate, transport and Logistics, Insurance and other sectors. It also provides services related to e-commerce development, Enterprise Content Management, Bespoke Web Management, Mobile App, Development, API Development, Product Support & Maintenance, Front End Development and Graphic design.
TTL provides customized software products, which start from the initial concept of the product requirement, designing the architecture, coding and testing, and deploying to the final deployment of the product. It also provides post-deployment support on time to time basis to clients. The company also provides project management, consultation services, maintenance and support services to ensure the successful completion of the project and the longevity of the software. This helps to ensure that the software is properly developed and deployed, meeting the expectations of the client. As of May 31, 2023, the total employee strength was 211.
ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden book-building route IPO of 6288000 equity shares of Rs. 10 each with a price band of Rs. 35 – Rs. 42 per share. The company mulls mobilizing Rs. 26.41 cr. at the upper cap. The issue opens for subscription on June 30, 2023, and will close on July 05, 2023. The minimum application to be made is for 3000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 27.00% of the post-IPO paid-up capital of the company. The company has reserved 5.01% shares for the market maker and from the rest, it has allocated not more than 50% to QIBs, not less than 15% for HNIs and not less than 35% for Retail investors. TTL is spending Rs. 1.61 cr. for this IPO process. The offer document is missing the usage of net proceeds from the IPO. This is really surprising that the company could give the IPO expenses figure, but it missed provision data for repayment of certain borrowings and general corporate purposes. (refer to page 64 of the offer document).
Interactive Financial Services Ltd. is the sole lead manager and Link Intime India Pvt. Ltd. is the registrar of the issue. Econo Broking Pvt. Ltd. is the market maker for the company.
Having issued initial equity shares at par, the company issued further equity shares at a price of Rs. 60 per share between February 2022 – April 2022. It has also issued bonus shares in the ratio of 12 for 1 in June 2021, and 9 for 1 in February 2023. The average cost of acquisition of shares by the promoters is Rs. 0.02, Rs. 7.72, and Rs. 8.74 per share. (its rights issue data has a mismatch as it shows an FV of Rs. 5 on page no. 54 and Rs. 10 on page no. 73-74).
Post-IPO, TTL’s current paid-up equity capital of Rs. 17.00 cr. will stand enhanced to Rs. 23.29 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 97.81 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, on a consolidated basis, TTL has posed a turnover/net profit of Rs. 14.07 cr. / Rs. 3.43 cr. (FY22), and Rs. 15.08 cr. / Rs. 2.81 cr. (9M-FY23).
On a standalone basis, the company posted a turnover/net profit of Rs. 4.36 cr. / Rs. 0.24 cr. (FY20), Rs. 8.34 cr. / Rs. 0.86 cr. (FY21), and Rs. 13.55 cr. / Rs. 3.23 cr. (FY22). For 9M of FY23, it earned a net profit of Rs. 1.92 cr. on a turnover of Rs. 9.75 cr.
For the last three fiscals, TTL has reported an average EPS of Rs. 44.44 and an average RoNW of 65.52%. These are based on standalone and before the February 2023 bonus issue impact. The issue is priced at a P/BV of 0.74 based on its NAV of Rs. 56.58 as of December 31, 2022, and at a P/BV of 0.74 based on its post-IPO NAV of Rs. 56.99 per share (at the upper cap). Its Pre and Post-IPO NAV data is also garbled.
Its RoE and RoCE margins have come down from 156.45% (FY20) to 2.85% (9M-FY23) and 55.83% (FY20) to 9.69% (9M-FY23) respectively.
If we annualize FY23 earnings and attribute it to the post-IPO fully diluted paid-up equity capital of the company, then the asking price is at a P/E of 26.09. Thus the issue appears greedily priced.
DIVIDEND POLICY:
The company has not declared any dividends since incorporation. It will adopt a prudent dividend policy post-listing, based on its financial performance and future prospects.
COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Dev Info, Silver Touch and InfoBeans Tech as their listed peers. They are currently trading at a P/E of 38.42, 55.02, and 30.12 (as of June 23, 2023). However, they are not truly comparable on an apple-to-apple basis.
MERCHANT BANKER’S TRACK RECORD:
This is the 10th mandate from Interactive Finance in the last three fiscals (including the ongoing one). Out of the last 9 listings, 2 opened at a discount, 1 at par, and the rest listed at premiums ranging from 0.78% to 20.74% on the listing date.
Conclusion / Investment Strategy
The company operates in a highly competitive and fragmented segment with many players. Its offer document has many mismatches and anomalies. Based on its financial performance so far, the issue appears greedily priced. There is no harm in skipping this “High Risk/Low Return” bet.
Reviewer recommends Avoid to the issue.
DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. My reviews do not cover GMP market and operators game plans. Readers must consult a qualified financial advisor before making any actual investment decisions, based the on information published here. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the recent past, SME IPOs drew the attention of investors across the board and lead to seer madness. However, as SME issues have entry barriers and continued low preference from the broking community, any reader taking decisions based on any information published here does so entirely at their own risk. The above information is based on information available as of date coupled with market perceptions. The Author has no plans to invest in this offer.
Dilip Davda
Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.
Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.
Tridhya Tech IPO FAQs
- Why Tridhya Tech IPO?
The initial public offer (IPO) of Tridhya Tech Limited offers an early investment opportunity in Tridhya Tech Limited. A stock market investor can buy Tridhya Tech IPO shares by applying in IPO before Tridhya Tech Limited shares get listed at the stock exchanges. An investor could invest in Tridhya Tech IPO for short term listing gain or a long term. - How is Tridhya Tech IPO?
Read the Tridhya Tech IPO recommendations by the leading analyst and leading stock brokers. - Tridhya Tech IPO what should investors do?
Tridhya Tech IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Tridhya Tech IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer. - Is Tridhya Tech IPO good?
Our recommendation for Tridhya Tech IPO is to avoid. - Is Tridhya Tech IPO worth Investing?
As per the analysis by lead analyst Mr. Dilip Davda, we suggest you to avoid the Tridhya Tech IPO. - When will Tridhya Tech IPO allotment status?
The Tridhya Tech IPO allotment status will be available on or around Jul 10, 2023. The allotted shares will be credited in demat account by Jul 12, 2023. Visit Tridhya Tech IPO allotment status to check. - When will Tridhya Tech IPO list?
The Tridhya Tech IPO list date is not yet available. The Tridhya Tech IPO is planned to list on Jul 13, 2023, at NSE SME.