IPO Size: Rs. 215 cr 

• Rs. 120 cr Fresh Issue for (i) capex Rs. 80 cr (ii) office purchase Rs. 10 cr
• Rs. 95 cr Offer For Sale (OFS) by 4 promoters (98% combined holding to shrink to 73% post IPO)

Price band: Rs. 195-206 per share

M cap: Rs. 858 cr, implying 25% dilution

IPO Date: Wed 21^st Aug to Fri 23^rd Aug 2024, Listing Wed 28^th Aug 2024

Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.

IT Infrastructure Company

Orient Technologies is a 27-year-old Mumbai-based information technology company, having 3 business units - IT Infra, ITeS, Cloud and Data Management services, accounting for 50%, 25%, 25% of Rs. 600 cr revenue respectively. Company caters to customers in BFSI, Communications, Healthcare, Government sectors, with products accounts for nearly 3/4^th revenue and balance from services.

Capex for Growth

From the fresh issue proceeds, company proposes to utilize Rs. 70 cr for device-as-a-service (DaaS) business, which is a high growth potential service. Another Rs. 10 cr for equipment purchase for network and security operations center.

Financials

FY24 revenue grew 13% YoY to Rs. 604 cr, with 10% EBITDA margin and 7% net margin. On Rs. 41 cr net profit, EPS stood at Rs. 11.80, on an equity of Rs.36 cr (face value Rs. 10 each). On net worth of Rs. 175 cr, company has cash and equivalents of Rs. 55 cr (cash per share of Rs.15), with a healthy RoE of 27%.

Valued Lowered than Peers

On FY25E EPS of about Rs. 12.50, current year expected PE multiple is at about 16x. This is not only inexpensive for 27% RoE, but also lower than similar sized peers:

• IT service management company Dynacons Systems, with Rs. 1,000 cr topline and 5% net margin, is ruling at a PE of 30x. Even if Dynacon’s higher growth is accounted for, Orient’s valuation appears low.
• Peer Allied Digital is also trading at a PE multiple of 24x, for Rs. 670 cr topline and similar margin as Orient. In Feb 2024, company issued shares at Rs. 133 per share.

In Feb 2024, company had raised Rs. 11 cr at Rs. 133 per share from 166 individuals, which is a small fund raise, and appears to have been raised from friends and family. Although IPO price is 55% higher after 6 months, valuation remains lower than listed peers.