ESDS Software Solution IPO Review: Date, Price, & GMP

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ESDS Software Solution is engaged in services of Cloud Computing and multi-cloud prerequisites supplier. It has a service portfolio across differentiated ventures such as government companies and ministries. It is also engaged in corporate sectors in BFSI, IT& ITES, telecom, retail, manufacturing, pharma, real estate, and education. It has customers in the APAC region, Africa, the Americas, Middle East, and Europe. In this article, we take a closer look at the ESDS Software IPO Review and its possible future prospects. 

The company offers an IaaS cloud computing service. The service portfolio incorporates private cloud, public cloud, Hybrid Cloud Computing, and different local cloud offerings. The company also provides SaaS Solutions. It includes software and application facilitated on their cloud stage on a yearly, semi-yearly, or quarterly membership model.

In India, they additionally give different models of Billing. It includes “”pay per consumption model,”” “”pay-per-branch model”” It is for their BFSI clients. It also offers a “pay per transaction model,” which helps its clients to bring down their operational costs. They have three centers in India. These are in Navi Mumbai, Nashik, and Bengaluru. These centers are related by a 10 Gbps strength of the Backbone network. A recovery service setup also secures it.

Objects of the IPO Issue:

  • Prepayment of all or significant part of the loan on the company on a consolidated basis.
  • To accomplish corporate targets.

Basis of the ESDS Software IPO offer:

  • ESDS Software Solutions has an experienced and renowned management team. Their coordinated service setup offers an “all-inclusive resource” for cloud computing for their client base.
  • The company’s plan of action is strong and adaptable. The business model has an aspect of growth and development.
  • The company has a robust track record along with an industry driving position.

ESDS SOFTWARE IPO Details:

ESDS Software Solution Limited, a Nashik-based cloud services company, has filled up its DRHP to SEBI. The company awaits SEBI approval to float its IPO in the market. The IPO includes the sale of 21,525,000 equity shares of Face Value Rs.1 through OFS. The promoters and other selling shareholders will dilute their stake in the company. It also includes the sale of fresh equity shares to gain a capital of INR 322 Crore.

In the OFS, the ESDS Partners LLC will sell its 4.23 million equity shares. The other selling shareholder is South Asia Growth Fund II LP. The fund will dilute its 16.86 equity shares in OFS. At present, ESDS Partners LLC has a stake of 4.21%, while South Asia Growth Fund II LP possesses 3.67%. The fund collected from IPO will be used to purchase new technology in cloud computing. The cost of the technology is assessed at Rs155 crore. Around Rs75 crore will be utilized to subsidize working capital prerequisites. Rs22 crore will be utilized to repay the loan of the company. Check Day by Day IPO Subscription Details (Live Status)

IPO Opening DateNovember 2021
Issue TypeBook Building
Listing AtBSE, NSE
Issue Size21,525,000 Equity shares
Offer for Sale21,525,000 Equity shares
Fresh Issue332 Crore
Face ValueRs. 1/ equity share
IPO Price 
Market Lot 
Minimum Order Quantity 
Maximum Order Quantity 
Basis of Allotment DateNovember 2021
IPO Closing DateNovember 2021
The Credit of Shares to Demat AccountNovember 2021
IPO Listing DateNovember 2021

 Strengths Of ESDS Software IPO:

  • ESDS has a very strong and experienced board of directors. The management people are in the business for the past 20 years.
  • ESDS has broadened its operating margins to three data centers. It has led to company growth with a CAGR of 33% in the last four years.
  • It also has a functional history of 15 years which has empowered ESDS to maintain solid relations with its clients and providers. 
  • The organization has a well-established order book with a strong customer base. It incorporates both government bodies and private players.
  • It has a diversified customer base and service portfolio in various sectors.
  • It has robust liquidity with healthy net accruals in cash to its developing obligation commitments. 
  • The company has significantly reduced its debt and improved EBITDA and operating margins. Their business model is based on Asset Light Approach. Under it, they merely possess computational equipment resources. It accounts for faster scalability in their operations with low operation capital cost.

Weakness Of ESDS Software IPO:

  • ESDS has some foreign clients. The company has faced challenges with these clients earlier also. The company needs to build up a strategy to execute the project with foreign clients properly.
  • The company saw a decrease in working capital marked by Gros Current Assets. It dropped to 250 days in FY20. In FY19, the same was at 294 days. 
  • The decrease in this is due to multiple problems, including government deposits worth Rs.10.47 crore and advance duty paid of Rs.13.98 crore. It also includes the elongated debtors’ collection period.
  • The company is subject to Unsecured Loans from the promoter group, and IDFC FIRST Bank can be renounced at any time.
  • COVID-19 has significantly hampered their estimated operating margins and projects delivery.
  • ESDS Software solutions limited enlisted only 40% sales in FY2020. As a result of this, the debtor’s day was at the upper band of 152 days.
  • They’re working capital requirements are supposed to remain high for the FY22 and FY23.
  • Currently, ESDS is not a very big company. The company is under trial for not following the legal procedures. Any negative news in the trial can have an impact on their business.
  • The company has some contingent liabilities. These are not accounted for in their financial statement. No provisioning is also done for these liabilities. 
  • The company also lacks proper insurance coverage concerning the operations they carry out.
  • The company operates in a very highly competitive business. It faces competition from big companies such as Happiest Minds, Persistent System, Coforge Ltd., And Blue-chip companies such as HCL Tech, Infosys, TCS, etc.

Opportunities Of ESDS Software IPO:

  • The company has a diversified service portfolio. The company has also decided to grow its data center’s optimum efficiency. 
  • ESDS has expanded its different services. It has currently done many strategic tie-ups with other companies to increase its operations. It will lead to an increase in their operating margins and other ratios. 
  • The long-term contracts with many customers provide revenue visibility.

Other Threats:

  • Their failure to prevent interferences in service could lead to a negative impact on their business.
  • ESDS Software solutions could have a cyber-attack as they are engaged in cloud computing. It can lead to unauthorized access to their network and database.
  • Strict compliance with Cyber Law and Guidelines.
  • Their business will be affected if they don’t execute their growth plan properly.

Financials of the ESDS Software Solution Company:

  • In FY21, ESDS Software Solution booked a profit of around Rs5.48 crore. In FY20, it was only Rs93.50 lakh. 
  • During the same period, the revenue also increased. It increased from 158.57 Crore to 174.93 Crore. It is due to the fresh infusion of equity in the last two years.
  • In the last financial year, the company reported an increase of 40% in operating profit margins from its core business.
  • The company’s revenue is growing with a CAGR of 19-21% over the last three financial years.
  • From the last three financial years, all the company’s three data centers registered an uptime of essentially 99.995% within their period of operation.
  • The company is constantly increasing its net assets. From FY19 to FY21, the net assets have increased to 61.8%. Currently, net assets value is at 460.44 Crore.
  • Also, the net worth of ESDS has increased by 47.44 % over the same period.
  • EBITDA of the organization has expanded by 3.03 %.
  • In the financial year 2020, the worrying aspect for the company was the PAT margins. It stood at 12.80%, which was less than the expected margins of 15.4%.
  • Sustained year-on-year growth in revenue by over 35% and sustenance of operating margin, at more than 35% 
  • Improvement in debtor’s cycle
  • It signifies its diversified customer base. The top 10 clients of the company contribute around 38% of total revenue. Along with this, long-term contracts with many customers provide revenue visibility.
  • The services have been provided to govt. The company marks a revenue of 43% from the total revenue.
  • The Basic EPS of the company zoomed to 2475 times in FY21. In FY21, it stood at 1.03, while in FY20, it was just 0.04.
  • The solid profit margins have prompted assurances against debt. ICR marks it, that is, interest coverage ratio and DSCR, debt service coverage ratio. The ratios are 8.75 and 2.56, respectively. 
  • The Debt-EBITDA Ratio has improved to 0.88 in FY20 from 1.02 in FY19.
  • ESDS registered an accrual of the cash of Rs.50.07 crore in FY20. It has debt commitments of Rs.15.60 crores only. It signifies that it is a cash-rich company. The cash accruals are estimated to increase to 114 Crore in FY22-23.
  • The company has strong liquidity due to healthy cash accruals and the absence of any debt-funded capital expenditure.
  • The company has recorded a strong EBITDA margin in the past, and expansion of service portfolio and diversified customer base will further boost their margins.

Promoters:

Piyush Prakashchandra Somani is the promoter of the company.

Pre-Issue Share Holding47.49%
Post Issue Share Holding 

Lead Mangers:

  • Axis Capitals
  • IIFL Securities

Contact Details

ESDS Software Solution Limited, Plot No. B- 24 & 25,
NICE Area, MIDC, Satpur, Nashik – 422 007, Maharashtra
Tel: +91 253 6636 500
E-mail: secretarial@esds.co.in
Website: www.esds.co.in

Registrar for ESDS Software Solutions Limited IPO

Link Intime India Private Limited
C-101, 1st Floor, 247 Park, Lal Bahadur Shastri Marg,
Vikhroli (West) Mumbai 400 083 Maharashtra
Tel: (+91 22) 4918 6200
E-mail:  esds.ipo@linkintime.co.in
Website:  www.linkintime.co.in

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