IPO Note : Seshaasai Technologies Ltd By Nirmal Bang Ltd
BACKGROUND
Seshaasai Technologies Ltd. (STL) is a payments, communications & IoT solutions provider catering primarily to BFSI, Insurance industry. STL’s solutions are driven by its proprietary platforms, which allow the company to offer solutions at scale and on a recurring basis. Co is one of the top two payments card manufacturers in India with a market share of 31.9% for credit and debit cards issuance in India and one of the largest manufacturers of cheque leaves in India. It offers a customized portfolio of services through 24 self-sustaining manufacturing units across seven locations in India, equipped with advanced machinery, raw materials, and skilled workforce to meet local requirements.
Details of the Issue
IPO is a book build issue of Rs. 813.07 cr. The issue is a combination of fresh issue of 1.13 crore shares aggregating to Rs. 480 cr and OFS of 0.79 crore shares aggregating to Rs.333.07 cr. Co plans to utilize funds for capex and repayment of debt.
Investment Rationale
1. Leadership Position in the Large and Regulated Payment Solutions Industry with High Barriers to Entry.
2. Long Standing Relationships with a Large Customer Base.
3. Comprehensive Portfolio of Customizable and Scalable Solutions
Risks
1. Emergence of new and advanced technologies could render STL’s existing solutions obsolete or irrelevant, which could adversely impact its cash flows.
2. Top 5/top 10 customers contributed ~49%/66% to revenues. Loss/reduction in revenues from key customers may have an adverse effect on Co’s financials.
Valuation and Recommendation
STL holds prominent position as a payment card manufacturers in India with a market share of ~31.9%. Co updates and keeps introducing latest technologies to remain relevant and maintain client concentration. Post IPO Co will be repaying Rs.300 cr of debt improving its profits and also has capacity expansion plans in place which will aid revenue growth. Co enjoys healthy return ratios and revenues/ebidta have grown at a cagr of 13%/34% over FY23-25. At the upper price band of Rs 423, the issue is valued at a P/E multiple of 30.8x based on FY25 earnings and we recommend ‘Subscribe’ to the issue citing good growth opportunities ahead.
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SEBI Registration number is INH00000176
