The Rs 309.38 crore initial public offer (IPO) by Tracxn Technologies opened for subscription on Monday. The issue by the Bengaluru-based private market intelligence platform consisted of an offer for sale (OFS), aggregating 38,672,208 equity shares, being sold in the Rs 75-80 price band. Among selling shareholders are Flipkart founders Binny Bansal and Sachin Bansal and a few other investors, in addition founders Neha Singh and Abhishek Goyal.
Ahead of its IPO, the firm attracted Rs 139.22 crore from anchor investors by allocating 17,402,494 shares at Rs 80 per share a piece. The company posted losses in FY22 and FY21 but has reported profits in June quarter of FY23. Initial brokerage reports suggest analysts are cautious on the IPO. The issue could, at best, be suitable for investors with a fairly long-term view. Attrition at the company continues to remain at elevated levels and added that the company uses open-source software, which could be subject to litigations, analysts said.
Arihant Capital has a ‘subscribe with a long-term’ rating on the issue while Choice Broking has recommended ‘avoid’ on the issue. Religare has ‘neutral’ rating on the issue while ICICIdirect did not rate the issue.
“There is no peer company in the listed space having operations similar to the company. At higher price band, Tracxn is demanding an EV/Sales multiple of 12.3 times, which seems to be stretched for a loss-making operation. Considering the high attrition rate in the IT-enabled sector and already double-digit attrition level (49 per cent in FY22 and 13.8 per cent in Q1 FY23) of Tracxn, we are cautiously optimistic on the company’s efforts in bringing down the employee costs,” Choice Broking said.
Also, partial or full exits by PE investors raises the concerns on the long-term potential growth outlook, it said while assigning an “AVOID” rating on the issue.
At FY22 price-to-sales of 12.7 times, Arihant Capital Markets finds the issue fairly priced.
“The company is a leading global player, ranking amongst the top 5 in its segment. With cost arbitrage advantages, high operating leverage, a strong technology platform, and comprehensive data coverage strengthening Tracxns position. It has achieved breakeven and reported gains in Q1FY23,” Arihant Capital Markets said.
ICICIdirect did not rate the IPO said the issue is demanding a P/E of 240 times and a market cap-to-sales of 10.9 times on Q1FY23 (annualised basis).
“On the financials front, the company’s revenue has grown at a CAGR of 30.4 per cent. Although the revenues have increased, Ebitda and PAT have been in negative for the past 2 years. So, an investor needs to keep a watch on the financials for FY23,” adding that competition intensity is high across industry. This brokerage has a ‘neutral’ rating on the issue,” Religare Securities.
The issue was not commanding any premium in the grey market.
Investors can bid for a minimum of 185 shares and in multiples of 185 shares thereafter.
Founded in 2012 by Neha Singh and Abhishek Goyal, Tracxn have received investments from Ratan Tata, the NRJN Family Trust, Neeraj Arora, Sachin Bansal, Binny Bansal, Amit Ranjan, Girish Mathrubootham, Anand Rajaraman, Amit Singhal and Ashish Gupta, Elevation Capital, Accel Partners, Sequoia Capital, Prime Venture Partners and KB Investments.
The company offers customers private company data for deal sourcing, identifying M&A targets, deal diligence, analysis and tracking emerging themes across industries and markets, among other uses, through its subscription-based platform. Analysts said Tracxn Technologies has an asset light business model and operates a Software as a Service (SaaS)-based platform.
Tracxn, that has scanned over 662 million web domains, and profiled over 1.84 million entities across 2,003 Feeds categorized across industries, sectors, sub-sectors, geographies, affiliations and networks globally, as of June 30, 2022.
The company has 3,271 users across 1,139 Customer Accounts in over 58 countries, as of June 30, 2022 and its customers include a number of Fortune 500 companies and/or their affiliates
Over 70 per cent of the company’s revenue comes from outside India. In FY22, nearly 29 per cent of its revenues came from India, 27 per cent from US, and 44 per cent from other countries.
In FY22, Tracxn Technologies reported a 44.94 per cent rise in revenue from operations at Rs 63.45 crore compared with Rs 43.78 crore in the previous year,led by a rise in income from sale of subscription services of its platform.
There was a drop in restated loss to Rs 4.85 crore for FY22 against a restated loss of Rs 5.35 crore for FY21. For June quarter, revenues rose 22.93 per cent to Rs 18.40 crore from Rs 14.97 crore in the year-ago quarter. Net profit for the quarter stood at Rs 0.84 crore compared with a loss of Rs 0.72 crore in the year-ago quarter.
IIFL Securities is the sole book running lead manager and Link Intime India Private is the registrar to the issue.