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Fidel Softech

• Fidel Softech is coming out with an initial public offering (IPO) of 36,48,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 37 per equity share.

• The issue will open on May 30, 2022 and will close on June 2, 2022.

• The shares will be listed on NSE Emerge Platform.

• The share is priced 3.70 times higher to its face value of Rs 10.

• Book running lead manager to the issue is Shreni Shares.

• Compliance Officer for the issue is Pragnesh Ganpat Patel.

Profile of the company

Fidel Softech is a LangTech Consulting firm offering technology services with local language UI/UX. The services offered by the company includes IT services including Software development, Infrastructure & Cloud support, Localization including translation, interpretation, software localization & multilingual data creation and Consulting & Staffing services including training.

It is a LangTech Consulting firm helping its clients with either Technology-Languages- People. It help its customers to deliver their solutions /products /services to the end users in their local languages by leveraging technology, localization solutions and Consulting. The company offers Software development & Cloud infrastructure support services, localization services; such as Translation, Interpretation, Content creation, Multi lingual data creation, transcription & Annotation for training AI engines, Video subtitling and other video audio services, Data engineering, testing, scripting & tooling services and Consulting & Staffing services.

The company offers bilingual software development capabilities & has engineers speaking in various languages working for Asian markets. It train its engineers in various languages & technology & works closely with Asian geography clients. The company takes up turnkey projects, product design & development, operational support & manpower augmentation. The company is ISO/IEC 27001: 2013 and ISO 9001: 2015 certified conforming to the Information Security Management System standard and Quality Management System standard.

Proceed is being used for:

• Funding working capital requirements.

• General corporate purposes.

Industry Overview

India is the world's largest sourcing destination with largest qualified talent pool of technical graduates in the world. According to National Association of Software and Service Companies (Nasscom), the Indian IT industry’s revenue is estimated to reach $194 billion in FY21, an increase of 2.3% YoY. The sector is the largest employer within the private sector. According to Gartner estimates, IT spending in India is estimated to reach $93 billion in 2021 (7.3% YoY growth) and further increase to $98.5 billion in 2022. As of FY21, the IT industry employed 4.5 million people. This push towards cloud services has boosted hyper-scale data center investments, with global investments estimated to exceed $200 billion annually by 2025. India is expected to gain a significant share in the global market, with the country's investment expected to hit $5 billion annually by 2025.

The IT & business service industry’s revenue was estimated at $6.96 billion in the first half of 2021, an increase of 6.4% YoY. The export revenue of the IT industry is estimated at $150 billion in FY21. According to Gartner estimates, IT spending in India is estimated to reach $93 billion in 2021 (7.3% YoY growth) and further increase to $98.5 billion in 2022. The BPM sector in India currently employs >1.4 million people, while IT and BPM together have >4.5 million workers, as of FY21. India's software services exports (excluding exports through commercial presence) increased by 4% in FY21 compared with FY20 and are estimated at $133.7 billion during 2020-21. Indian software product industry is expected to reach $100 billion by 2025. Indian companies are focusing to invest internationally to expand global footprint and enhance their global delivery centres.

Pros and strengths

International presence: The company is currently providing services to over 30 countries including Argentina, Belgium, China, Cyprus, Czech Republic, Dubai, Egypt, Germany, Hong Kong, Ireland, Italy, Japan, Kingdom of Saudi Arabia, Malaysia, Mauritius, Netherlands, New Zealand, Poland, Portugal, Russia, Singapore, South Africa, South Korea, Spain, Sweden, Taiwan, Ukraine, United Arab Emirates, United Kingdom, and United States of America. As a business strategy, it intends to widen its reach by increase its international presence and entering into new geographies for providing software services. For the financial year ending 2022, 2021 and 2020, its revenue from exports contributed 86.09%, 86.89% and 82.40% respectively of its revenue from operations.

Increase brand awareness: The company intends to enhance the brand recognition of its services through its presence in major cities. The company was also affected during pandemic in terms of finding new clients or developing new business. Major impact was on new business development and hence during the last 2 years, the company has increased the digital marketing focus involving lead generation, social media marketing and branding through participation in online events. Its marketing and advertising initiatives shall be directed to increase brand awareness, acquire new customers, drive customer traffic and strengthen its brand recall value.

Increase employee base: The company offers bilingual software development capabilities & has engineers speaking in various languages working for Asian markets. It trains its engineers in various languages & technology & works closely with Asian geography clients. The company takes up turnkey projects, product design & development, operational support & manpower augmentation. Linguistic knowledge is of utmost importance in company’s industry and it also offer in house linguistic and technology skill sets for better control on delivery timelines, quality and pricing. Currently, it has 165 employee base in the Company at various levels and it intends to increase the same so that it is able to take up more projects and thereby increase its revenue from operations and achieve growth in the industry. As part of its business strategy, it is focused on attracting and retaining high quality talent as it continue to expand its service offering.

Risks and concerns

International sales and operations subject to additional risks: The company derives a significant portion of company’s revenues from its business operations outside India. In financial year March 31, 2022, 2021 and 2020, its business operations outside India contributed 86.09%, 86.89 % and 82.40% of its revenue from operations, respectively. Compliance with international laws and regulations that apply to its international operations may increase its cost of doing business in such foreign jurisdictions. These laws and regulations include local laws which may include stricter data privacy requirements, labour relations laws, tax laws, intellectual property laws, anti-competition regulations, import, foreign currency and trade restrictions. Violations of these laws and regulations could result in fines, criminal sanctions against it, its officers or its employees, prohibitions on the conduct of its business, as well as default under its contracts with customers.

Operate in competitive environment: The industry in which the company operates is fairly competitive and its results of operations and financial condition are sensitive to, and may be materially adversely affected by competitive pricing and other factors. Competition may result in pricing pressures, reduced profit margins, lost market share or a failure to grow its market share, any of which could substantially harm its business and results of operations. The domestic segment which it cater to is fragmented and fairly competitive. It compete primarily on the basis of quality of its services, customer satisfaction and marketing. Thus, some of company’s competitors may have certain other advantages over it, including established track record, superior service offerings, larger portfolio of services, technology and greater market penetration, which may allow its competitors to better respond to market trends.

Risks associated with expansion into new geographic regions: Expansion into new geographic regions, including different states in India and overseas expansion, subjects the company to various challenges, including those relating to its lack of familiarity with the culture, legal regulations and economic conditions of these new regions, language barriers, difficulties in staffing and managing such operations, and the lack of brand recognition and reputation in such regions. The risks involved in entering new geographic markets and expanding operations, may be higher than expected, and it may face significant competition in such markets. By expanding into new geographical regions, it could be subject to additional risks associated with establishing and conducting operations, including, laws and regulations, uncertainties and customer’s preferences, political and economic stability. By expanding into new geographical regions, it may be exposed to significant liability and could lose some or all of its investment in such regions, as a result of which its business, financial condition and results of operations could be adversely affected.

Outlook

Fidel Softech is a LangTech Consulting company that provides technological services with local language user interfaces and user experiences. It was incorporated in 2003 and is located in Pune, Maharashtra. Fidel Softech offers a wide range of services including Software development, Infrastructure & Cloud support, Localization including translation, interpretation, software localization & multilingual data creation and Consulting & Staffing services including training, Software development & Cloud infrastructure support services, localisation services; such as Translation, Interpretation, Content creation, Multilingual data creation, transcription & Annotation for training AI engines, Video subtitling and other video audio services, Data engineering, testing, scripting and tooling services. The company has in-house Linguistics and Technology skillsets which provides better control on delivery timelines, quality and pricing and specializes in delivering technology solutions in local language UI/ UX and hence has an advantage to work in regions which has language dependencies. The company has in house product development skill sets, software development, testing, support capabilities in multi-lingual environment and ability to support multiple languages including Indian languages through pre-vetted database of linguists from all over the world. On the concern side, the company is dependent upon the availability of equity, cash balances and debt financing to fund its operations and growth. Any fluctuations in interest rates may directly impact the interest costs of such loans and, in particular, any increase in interest rates could adversely affect its results of operations. Besides, the company requires certain statutory and regulatory permits, licenses and approvals to operate its business.

The company is coming out with a maiden IPO of 36,48,000 equity shares of Rs 10 each at a fixed price of Rs 37 per share to mobilize around Rs 13.50 crore. On performance front, the company’s total income for FY 2021-22 was on similar lines as of FY 2020-21 and has increased by 2.53% from Rs 2620.61 lakh for FY 2020-21 to Rs 2686.78 lakh for FY 2021-22. Profit after tax increased by 32.27% from Rs 345.01 lakh for FY 2020-21 to Rs 456.50 lakhs for FY 2021-22. The company plans to increase the breadth of its software services by offering additional services through software maintenance and staffing facilities for the new enterprise product range, as this will expand its scope of its business and further enhance the reputation of its brand. It also intends to enhance its existing product range by creating customized packages to its customers, based on customers’ needs. These packages will increase revenue per customer.