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CapitalNumbers Infotech

• CapitalNumbers Infotech is coming out with an initial public offering (IPO) of 64,40,000 equity shares in a price band Rs 250-263 per equity share.
• The issue will open on January 20, 2025 and will close on January 22, 2025.
• The shares will be listed on SME Platform of BSE.
• The face value of the share is Rs 10 and is priced 25.00 times of its face value on the lower side and 26.30 times on the higher side.
• Book running lead manager to the issue is GYR Capital Advisors.
• Compliance Officer for the issue is Priya Jhunjhunwala. 

Profile of the company

CapitalNumbers Infotech is engaged in the business of digital consulting and IT engineering offering end-to-end software development solutions to enterprises, and startups worldwide. The company provides services in technological advancement, offering a comprehensive suite of services include Digital Engineering, Data Analytics, Artificial Intelligence/Machine Learning (AI/ML), Cloud Engineering, UI/UX Design and advanced technologies such as Blockchain and Augmented Reality/Virtual Reality (AR/VR). The company has more than 500 IT professionals and consultants to serve more than 250 clients worldwide, delivering full-time services from various locations of India. And with ISO:9001, ISO:27001 & SOC 2 certifications, this ensures exceptional quality and adherence to international standards, guaranteeing the highest level of excellence and quality in its work. 

The company’s team excels in Cloud, Mobile, DevOps, Data Engineering and Application Development using React, Angular, .NET, Python, Node, PHP, Java, etc. The company was able to develop a customer-centric focus that aims to fulfil their immediate business requirements and to provide them strategically viable, futuristic and transformative digital solutions. It also designs, develops and maintains software systems and solutions, creates new applications and enhances the functionality of its customer’s existing and new software products.

The company conferred with various awards and recognition with Economic Times Best Tech Brands 2024, Times Business Award 2024 for “Excellence in IT Services” , Clutch Global Leaders Spring 2024, Clutch Champion Awards Spring 2024, Clutch Top 1000 B2B Companies 2024, 2023 & 2022, Financial Times High-Growth Companies- Asia Pacific 2024 & 2023, The Economic Times India’s Growth Champions 2023, Promising Brands 2022, Dun & Bradstreet Leading SMEs of India 2023 & 2022, Manifest Global Awards 2024 & 2023 and G2 Best Software Development Company in 2022. These recognitions and accolades obtained by the company are the outcome of its diligent approach.

Proceed is being used for:

• Technical advancement of leading-edge technology
• Increase in spending on business developments
• Investment in subsidiary
• Funding inorganic growth through unidentified acquisitions and other strategic initiatives and general corporate purposes
• Achieving the benefits of listing the equity shares on the Stock Exchanges
• Carrying out the offer for sale of up to 32,20,000 Equity Shares by the Promoter Selling Shareholders

Industry Overview

The IT & BPM sector has become one of the most significant growth catalysts for the Indian economy, contributing significantly to the country’s GDP and public welfare. The IT industry accounted for 7.4% of India’s GDP in FY22, and it is expected to contribute 10% to India’s GDP by 2025. As innovative digital applications permeate sector after sector, India is now prepared for the next phase of growth in its IT revolution. India is viewed by the rest of the world as having one of the largest Internet user bases and the cheapest Internet rates, with 76 crore citizens now having access to the Internet. India's IT industry is likely to hit the $350 billion mark by 2026 and contribute 10% towards the country's gross domestic product (GDP). The Indian IT industry’s revenue touched $227 billion in FY22, a 15.5% YoY growth and was estimated to have touched $245 billion in FY23. As per a survey by AWS (2021), India is expected to have nine times more digitally skilled workers by 2025. This indicates that a total of 3.9 billion digital skill trainings are expected by 2025. India will need 30 million digitally skilled professionals by 2026.

The IT industry added 4.45 lakh new employees in FY22, bringing the total employment in the sector to 50 lakh employees. India’s technology industry is on track to double its revenue to $500 billion by 2030. Direct employment in the IT services and BPO/ITeS segment is estimated to reach 5.4 million in FY23 with an addition of 290,000 people. The IT-BPM services revenue reached $194 billion in FY21. In 2022, the Indian domestic IT & Business Services market was valued at $13.87 billion and recorded a 7.4% year-over-year (YoY) growth as compared to 7.2% in 2021. By 2025-26, India is expected to have 60–65 million jobs that require digital skills, according to a Ministry of Electronics & IT report titled 'India's trillion-dollar digital opportunity.'

In November 2021, Piyush Goyal, Minister of Commerce and Industry, Consumer Affairs, Food and Public Distribution and Textiles, lauded the Indian IT sector for excelling in its competitive strength with zero government interference. He further added that service exports from India had the potential to reach $1 trillion by 2030. Spending on information technology in India is expected to reach $144 billion in 2023. The cloud market in India was expected to grow three-fold to $7.1 billion by 2022 with the help of growing adoption of big data, analytics, artificial intelligence and the Internet of Things (IoT). India’s digital economy is estimated to reach $1 trillion by 2025. Artificial Intelligence (AI) is expected to boost India's annual growth rate by 1.3% by 2035, according to NITI Aayog. The Karnataka government signed three MoUs worth $13.4 million to help the state's emerging technology sector.

Pros and strengths

Scalable business model with multiple drivers of steady growth: The company’s order-driven business model focuses on optimizing resources, collaborating with its development team, and ensuring client satisfaction. The company approach has proven profitable and scalable over the past few financial years. The company can expand by entering new sectors that require advanced technology, as well as improving its existing offerings. Business growth is mostly driven by expanding into new markets, innovating products, and maintaining continuous quality standards. The company generates diversified revenue through a robust geographical presence, with 100% of its revenue derived from export sales across various countries. As an IT products and services company, its global footprint not only enables it to expand its client base but also ensures it remains aligned with the latest technological advancements worldwide.

Diversified business across several industrial verticals: The company thrives on a diverse revenue stream sourced from multiple regions worldwide, with 100% of its income stemming from export sales spanning various countries. As a provider of IT products and services, its expansive presence across numerous geographies not only enables it to broaden its client portfolio but also ensures that it remains at the forefront of global technological advancements. This extensive industry reach reflects its ability to deliver tailored solutions that cater to the unique needs of each sector. By consistently adapting to the evolving landscape of these diverse industries, it ensures that its services remain relevant and impactful, driving value for its clients across the globe.

Customer satisfaction and revenues from long-standing customer relationships: The company has long-standing ties with its customers around the world. This is attributable, in part, to the importance of its products and services, as well as its technological know-how, to many of its customers’ businesses. It builds long-term connections with its customers to enable multi-layered involvement with various departments and divisions of their organizations. Its diverse product and service offerings enable it to cross-sell to current clients as well as attract new ones. It also conducts regular senior management reviews with its important clients to get feedback and discuss future potential. It combines its broad product and service offerings with industry specific knowledge to give bespoke solutions to its customers across business verticals, sectors, and locations.

Risks and concerns

Derive a significant portion of revenues from clients located in the USA and United Kingdom: The company has historically derived a significant portion of its revenues from operations from clients located in the United States of America and United Kingdom. Revenue from operations from these locations amounted to Rs 3,494.53 lakh, Rs 7,088.86 lakh, Rs 6,835.68 lakh & Rs 5,196.67 lakh for the period and financial year ending September 30, 2024, March 31, 2024, March 31, 2023 & March 31, 2022 respectively, and represented 69.63%, 72.21%, 73.83% & 75.24% of its revenue from operations, in such periods, respectively. Its revenues from the United States of America and United Kingdom may decline as a result of increased competition, regulatory action, pricing pressures, fluctuations in the demand for or supply of its services, or the outbreak of an infectious disease such as COVID-19. The company’s failure to effectively react to these situations or to successfully introduce new services could adversely affect its business, prospects, results of operations and financial condition.

Intense competition in the market for technology services could affect pricing: The company operates in a competitive industry that experiences rapid technological developments, and changes in customer requirements. The company’s competitors include the big global system integrators, mid-sized, and several smaller local competitors in the various geographic markets in which it operates. It may face competition from companies that grow in size or scope as the result of strategic mergers or acquisitions, which may result in larger competitors with significant resources that benefit from economies of scale and scope. Such events could have a variety of negative effects on its competitive position and its financial results, including reducing its revenue, increasing its costs, and lowering its gross margin percentage.

Incorporates third-party open source software into its customer deliverables: The company’s deliverables to customers may incorporate software that is licensed by third parties under 'open source' licenses. Occasionally, companies, including itself, that distribute or use open source software in their products and services have faced claims asserting that such open source software infringes on the intellectual property rights of the claimants. Consequently, its customers might be subjected to lawsuits by third parties alleging that the open source software it uses infringes on their intellectual property rights, and it is generally obligated to indemnify its customers against such claims contractually. Some customers require it to obtain their consent prior to using open source software in the services it provides, and there is no assurance that such consents will be granted. 

Outlook

CapitalNumbers Infotech provides digital consulting and IT engineering services, offering complete software development solutions to businesses and startups globally. The company has scalable business model with multiple drivers of steady growth. Also, it has diversified business across several industrial verticals. On the concern side, the company derives a significant portion of its revenues from clients located in the United States of America and United Kingdom. Any adverse developments in these markets could adversely affect its business. Moreover, intense competition in the market for technology services could affect its pricing, which could reduce its share of business from clients and decrease its revenues and profitability.

The company is coming out with a maiden IPO of 64,40,000 equity shares of Rs 10 each. The issue has been offered in a price band of Rs 250-263 per equity share. The aggregate size of the offer is around Rs 161.00 crore to Rs 169.37 crore based on lower and upper price band respectively. On performance front, the revenue from operations of the company for Fiscal 2024 was Rs 9,817.21 lakh against Rs 9,257.23 lakh revenue from operations for Fiscal 2023, an increase of 6.05% in revenue from operations. This increase was mainly due to improved business development efforts in the Middle East, resulting in a higher volume of client acquisitions and project deliveries from the region. Moreover, profit after tax for the Fiscal 2024 was at Rs 2,598.88 lakh against profit after tax of Rs 1,735.28 lakh in fiscal 2023, an increase of 49.77% mainly due to higher operational efficiency, improved revenue growth driven by expanded business in key markets like the Middle East, and better cost management practices.

Over the years, the company has developed long standing relationships with its customers. It devotes significant attention to being able to understand the behaviour, preferences and trends of its customers through research and a consultation process. This gives it a distinct perspective that it brings to its engagements. It also conducts periodic market scans to identify upcoming technologies. With this approach, it aims to become a key part of its customer’s operating and growth strategy, enabling it to serve its customers across multiple touchpoints and projects. In addition, it intends to continue to build relationships with various global companies as business partners which can provide it with better benefit by introducing local clients.