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Micropro Software Solutions 

• Micropro Software Solutions is coming out with an initial public offering (IPO) of 37,90,400 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 81 per equity share.
• The issue will open for subscription on November 3, 2023 and will close on November 7, 2023.
• The shares will be listed on NSE Emerge Platform.
• The share is priced 8.10 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Swaraj Shares and Securities.
• Compliance Officer for the issue is Girish Vyas.

Profile of the company

It is an ISO 90001:2015 Company, in the field of Software development, consulting along with Technical Services and providing effective IT Solutions cost-effectively IT Solution to its clients. The company designs, develops, standardizes, and customizes, in case of need, software solutions across various industry verticals. The company does not outsource activities to third party vendors while providing the service to the customers.

The company acts like an end-to-end IT solution specialist service provider for its clients which enables them to offload their IT operations. Since the company provides software development and implementation services to various organisations including government agencies, E-governance in an integral part of software development services. As a development partner, it is essential that it ensure the software being built by it meets the governance requirements and fulfil the prescribed software development standards, meet the review and certification criteria. Certain software developed by it in the past are accessed by large number of users to sustain traffic load, hence apart from it being compliant to governance guidelines, these are also required to be secured from hacking and data leaks which is a part of overall governance. Hence, in the overall process of software development for process automation, E-governance becomes inseparable part of its services. 

Proceed is being used for:

• Working capital requirements.
• Funding capital expenditure requirements.
• General Corporate purposes.

Industry overview

The IT 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. The current emphasis is on the production of significant economic value and citizen empowerment, thanks to a solid foundation of digital infrastructure and enhanced digital access provided by the Digital India Programme. India is one of the countries with the quickest pace of digital adoption. This was accomplished through a mix of government action, commercial innovation and investment, and new digital applications that are already improving and permeating a variety of activities and different forms of work, thus having a positive impact on the daily lives of citizens. India’s rankings improved six places to the 40th position in the 2022 edition of the Global Innovation Index (GII).

IT services is expected to grow at 8.3% in FY2023 compared to last year. The key drivers of growth include Application Modernization, Cloud Migration, Platformization, and Cybersecurity. Business Process Management (BPM) is undergoing a drastic transformation, growing at 8.7% in FY2023. Digital CX, data driven transformation, as well the position of BPM industry as a key strategic partner to the customer is driving growth. ER&D is expected to grow at a double-digit figure of 11.1% y-o-y backed by strong fundamentals and rising demand for Indian ER&D services. Key growth drivers include strategic long-term deals, widespread proliferation of digitalization and cloudification of engineering activities. Software products, expected to grow at 7.8% y-o-y in FY2023, is drastically altering the landscape by creating world class products from India which are scalable, thereby showcasing India's entrepreneurial prowess, and a fast developing diverse and inventive DeepTech start-up ecosystem Indian eCommerce industry is expected to leapfrog achieving 40% y-o-y growth in FY2023, driven by newer business models, rising demand from tier I/III cities, and extensive use of technology in retail through plat formization for customer engagement and experience enhancement. 

Pros and strengths

Long-standing client relationships: The company provides solutions and services with significant expertise to its clients and this helps it in customer retention and repeat business. It has a history of high customer retention. In the Fiscal 2023, it derived approximately 61.34% of its restated revenues from operations from repeat customers (defined as customers from which it has had revenues in the past three fiscal years). In Fiscal 2022, it derived 70.01% of its revenues from operations from repeat customers. These longstanding relationships have also contributed to the growth of its revenues from its existing customers and the expansion of its customer base. 

Track record of financial performance and consistent growth: The company has a track record of financial performance and consistent growth. Total revenue has increased by Rs 462.03 lakh and 26.32% from Rs 1755.17 lakh for the fiscal year ended on March 31, 2022 to Rs 2217.20 lakh for the fiscal year ended on March 31, 2023. In Fiscal 2022, total revenue has increased by Rs 362.68 lakh and 26.04% from Rs 1392.48 lakh in the fiscal year ended on March 31, 2021 to Rs 1755.17 lakh for the year ended on March 31, 2022. Similarly Net Profit/(loss) for the fiscal year ended March 31, 2021 amounted to Rs 129.50 lakh which was increased to Rs 267.141 lakh for the fiscal year ended March 31, 2022. Net Profit/(loss) has increased from Rs 267.141 lakh for the fiscal year ended March 31, 2022 to Rs 591.79 lakh for the fiscal year ended March 31, 2023, reflecting an increase of Rs 324.65 lakh.

Experienced Board and Senior Management: The company’s Promoters, and its Senior Managerial Personnel have led from the front in establishing and growing its business and operations capabilities. It has an experienced board and strong management team led by persons with significant experience in the ceramic and tiles industry. It benefits from the industry experience, vision and guidance of its Promoters and senior management. It possesses a qualified and experienced senior management team with considerable industry experience. It also have experienced professionals with IT industry domain knowledge and sectoral experience leading key aspects of its business. Their industry experience enables it to anticipate and address market trends, manage and grow its business, maintain and leverage customer relationships and respond to changes in customer preferences through innovation and research. 

Risks and concerns

Highly dependent on ability to protect proprietary technology: The company is highly dependent on its ability to protect its proprietary technology. It rely on a combination of copyright and trademark laws, as well as non-disclosure agreements and other contractual provisions to establish and maintain its proprietary rights. It intends to protect its intellectual property rights vigorously. However, there can be no assurance that these measures will be successful. The laws protecting intellectual property rights vary and certain jurisdictions, including India, may provide less protection for its technologies and other intellectual property assets as compared to other jurisdictions, such as USA. Further, as intellectual property rights protection is limited by territory, successfully obtaining intellectual property rights protection in one jurisdiction may not necessarily provide protection in another jurisdiction and it may have to seek such protection in multiple jurisdictions where it and its customers operate. The process for obtaining intellectual property rights protection in certain jurisdictions can be lengthy and may entail substantial costs.

Software and product development a long, expensive, and uncertain process: The development of the company’s software, and products is a costly, complex and time-consuming process, and the investment in their development often involves a long wait until a return is achieved on such an investment. It has made, and will continue to make, significant investments in software product research and development and related product opportunities. Investments in new technology and processes are inherently speculative. Commercial success depends on many factors, including the degree of innovation of the software products and services developed through its research and development efforts, sufficient support from its channel partners, and effective distribution and marketing. Accelerated software product introductions and short product life cycles require high levels of expenditure on research and development. Such expenditure may adversely affect its operating results if they are not offset by corresponding and timely revenue increases.

International sales and operations subject to additional risks: The company derives a significant portion of its revenues from its business operations outside India. In Fiscals 2023, 2022 and 2021, its business operations outside India contributed 25.21%, 21.74% and 24.27% 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 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.

Outlook

Micropro Software Solutions has over a three decade’s track record of successful development and implementing IT projects for medium and large companies and has a best techno expert team of more than 150 IT professionals. It has a client base of around 4000 customers with strong presence in India, USA, UAE and Africa. It has designed - developed & standardized major software solutions for various industry verticals and customized Software Solutions for various Government departments at the Central State Govt., PSU’s & Corporate Customer. As an efficient solutions provider, it approach the client with innovations that impact the business bottom line through a sharp understanding of the business domain the organization operates in. At Micropro, it leverages the combined expertise of its domain experts and technology specialists to deliver solutions in a manner that produces desired output for its customers. On the concern side, the company operates in an intensely competitive industry that experiences rapid technological developments, changes in industry standards, and changes in customer requirements. Its competitors include large IT consulting firms, captive divisions of large multinational technology firms, large Indian IT services firms, in-house IT departments of large corporations, in addition to numerous smaller local competitors in the various geographic markets in which it operate.

The company is coming out with an IPO of 37,90,400 equity shares of Rs 10 each at a fixed price of Rs 81 per share to mobilize Rs 30.70 crore. On performance front, total revenue increased by Rs 462.03 lakh or 26.32% from Rs 1,755.17 lakh for the year ended March 2022 to Rs 2,217.20 lakh for the year ended March 2023. The increase in revenue was on account of an increase in operations and services offered by the company. Profit after Tax (PAT) has increased from Rs 267.14 lakh for the year ended March 2022 to Rs 592.23 lakh for the year ended March 2023, reflecting an increase of Rs 325.09 lakh. Meanwhile, the company intends to expand its geographical footprint, by creating its presence to greater geographical proximity with some of its key clients. This will allow it to build on its existing relationships with them and also allow it to work on more strategic projects with its clients in the key industry sectors it cater to, which require closer geographical proximity.