C.E. Info systems coming with an IPO to raise upto Rs 1040 crore

08 Dec 2021 Evaluate

C.E. Info systems

  • C.E. Info systems is coming out with a 100% book building; initial public offering (IPO) of 1,00,63,945 shares of Rs 2 each in a price band Rs 1000-1033 per equity share. 
  • Not more than 50% of the issue will be allocated to Qualified Institutional Buyers (QIBs), including 5% to the mutual funds. Further, not less than 15% of the issue will be available for the non-institutional bidders and the remaining 35% for the retail investors.
  • The issue will open for subscription on December 9, 2021 and will close on December 13, 2021.
  • The shares will be listed on BSE as well as NSE.
  • The face value of the share is Rs 2 and is priced 500 times of its face value on the lower side and 516.5 times on the higher side.
  • Book running lead manager to the issue are Axis Capital, JM Financial, Kotak Mahindra Capital Company and DAM Capital Advisors.
  • Compliance Officer for the issue is Saurabh Surendra Somani.

Profile of the company

C.E. Info systems is a data and technology products and platforms company, offering proprietary digital maps as a service (MaaS), software as a service (SaaS) and platform as a service (PaaS). It is India’s leading provider of advanced digital maps, geospatial software and location-based IoT technologies. Having pioneered digital mapping in India in 1995, it has earned its market leadership position in this industry and built a strong moat by capitalizing on its early mover advantage, developing proprietary and integrated technologies, full stack product offerings, continuous innovation and robust sustainable business model.  The company provides products, platforms, application programming interfaces (“APIs”) and solutions across a range of digital map data, software and IoT for the Indian market under the ‘MapmyIndia’ brand, and for the international market under the ‘Mappls’ brand.

The company derived majority of its revenue from B2B and B2B2C enterprise customers. Its business model is to charge its customers fees per period on a per vehicle, per asset, per transaction, per use case or per user basis, as applicable. Its arrangements with automotive OEMs typically envisage payments on a per vehicle basis for the contract period and top-up payments for internet services as subscription charges. For C&E customers, payments are typically received on a per geospatial transaction (or API query) basis, i.e. when the feature requiring geospatial element is used by an end consumer, for instance, a search result for the nearest service centre or merchant. It charge on a fixed price per term on a per use case basis, when the geospatial queries are not specified or known to it. For its Move IoT devices, payments are typically received for the sale of devices and subscription fees which are periodic in nature.

Proceed is being used for:

  • Carrying out the Offer for Sale of up to 10,063,945 Equity Shares.
  • Achieving the benefits of listing the Equity Shares on the Stock Exchanges.

Industry overview

The Indian e-commerce industry is expected to surpass US to become the 2nd largest e-commerce market in the world by 2034. In 2020, there were approximately 549 million e-commerce users in India which are projected to grow at a CAGR (2020-2024) of 12.7% to 885 million by 2024. This sector has witnessed exponential growth over the last years owing to many drivers like, convenience, internet penetration, digital literacy, supply chain infrastructure, etc. The availability of a wide range of brand options, discount offers, personalisation, shorter delivery times, cash on delivery option, digital payment alternatives have all contributed to the growth of e-commerce in India. India B2C e-commerce is expected to reach $127 billion (Rs 9.4 trillion) by 2025, growing at a 27% CAGR between 2019-24. Online penetration of retail is expected to reach 10.7% by 2024, versus 4.7% in 2019. E-commerce retailers in 2020 deliver to around 20,000 out of 100,000 pin codes in the country. With the growth of the logistics and warehousing industry, the e-commerce industry is expected to grow at 31% CAGR from 2.6 billion annual shipments in FY20 to 10 billion shipments in FY25. Out of the total shipments, 3PL deliveries accounted for 0.7 billion shipments in 2020.

The Indian addressable market is expected to grow at around 15.5% CAGR (2019-2025) and is expected to be around $7.74 billion (Rs 474.9 billion) market by 2025 and most of this growth would be from new projects and policies announced by government that encourages domestic players of digital maps and associated solutions. The total global addressable market stood at around $86.55 billion (Rs 6.4 trillion) as of 2020 and is expected to reach around $173.61 billion (Rs 12.9 trillion) by 2025 growing at a CAGR (2019-2025) of 13%. Mobile navigation devices, the wide usage of 3D platforms and advanced survey technology, digital mapping etc., are the key driver for growth in the total addressable market. Digital Maps services are gaining traction and include customized interactive maps that are cloud-based maps used for realtime updates across different platforms, embedded maps with simple images and an easy-to-use interface, street view 2D/3D maps, and HD satellite imagery. Map development and integration service market usually consists of a mix of digital maps providers and also the third-party integration service providers. Geo-spatial analytics creates a conceptualized framework of a geographic location to analyze location-specific data and trends. It integrates software, data, and processes to organize information and visualize it for analysis. This market is expected to grow at a faster rate than any other part of the total addressable market.

Pros and strengths

B2B and B2B2C market leader in India: The company is pioneered in digital mapping in India in 1995 and has earned its leading market position today in the B2B and B2B2C market for digital maps and location intelligence technologies and services by capitalizing on its early mover advantage, creating a niche market, developing proprietary and integrated technologies, full stack product offerings, continuous innovation and robust sustainable business model. The company offers the most comprehensive, detailed and accurate digital map database for India and it offer the widest range of location-powered software and IoT-enabled technologies compared to its peers. The company provides a combined offering of map data, location content and platform through one integrated system. The company has been present in the Indian market for over 25 years and has leading enterprises including global and Indian tech giants and upcoming start-ups, multi-national and domestic businesses across industry verticals, automotive OEMs, and key government organizations across the central, state and local level, as its customers. The company enjoys a strong brand recall in the B2B and B2B2C segments of mapping technologies.

Marquee customers across sectors: The company follow a ‘customer first’ approach that has helped it in developing strong and long-standing customer relationships and created up-selling and cross selling opportunities. The company typically enters into long-term contracts of three to five years’ duration which are mutually renewable, thereby providing continued synergy and revenue predictability with its customers. Many of its customers are leading market players and renowned brands in their respective fields such as Hyundai, MG Motor, PhonePe, Flipkart, GSTN, AVIS, Safexpress, Airtel, HDFC Bank, Yulu etc. and its strong relationship with them help its to up-sell and cross-sell. The company is able to up-sell and cross-sell its various products, platforms, APIs and solutions to new and existing customers. With its expanding suite of location intelligent products and solutions, it target to increase its wallet share of key customers by offering them customised solutions.

Profitable business model with consistent financial track record: The company business model is to charge its customer’s fees per period based on per vehicle, per asset, per transaction, per use case, per user, as applicable. These take the form of subscription fees, royalties, annuities in return for providing licenses and usage rights to its proprietary digital MaaS, PaaS and SaaS offerings. Subscription fee, royalty and annuity payments together contributed over 90% of its revenue from operation for Fiscal 2021. Since most of its products, platforms and solutions are digital, created in-house, and then deployed and delivered over the cloud, the company as a business is asset light, with relatively low variable cost base. This enables it to have a high operating leverage in the business. For the Financial Year 2021, its Contribution Margin was 83%, EBITDA margin (excluding other income) was 35% and PAT margin was 31%.

Market position built around proprietary technology and network effect resulting in strong entry barriers: The company has been able to create, update and maintain digital map data products for India, the world's second-largest country by population, and thereby built what is highly differentiated, unique digital asset that is difficult to replicate. Its technological capabilities of building and offering platforms, APIs, products, and solutions which integrate and leverage its high-quality maps, have furthered its ability to grow its business as well as grow the value of its products. Its innovations in the space of digital maps, geospatial and digital transformation and solutions, specifically localised for a challenging geography such as India, have helped to build a moat and create what is a strong barrier to entry for companies looking to operate in India. The Geospatial Guidelines provide that all digital maps and geospatial data of finer accuracy will be stored and used within domestic territories - cloud, servers, and other forms. This also gives it a competitive edge to partner with global brands for providing navigation related services within India.

Risks and concerns

Dependent on trends in sectors where its enterprise customers operate: Negative sentiments or downturn in global macroeconomic conditions or disruption in business activities can impact its customers, which in turn can impact its sales to its customers. Its revenue from operations can be significantly affected by a downturn trend or disruptions in the industries where its customers operate. The company has particular exposure to cyclical trends in the industries in which its enterprise consumers operate, such as automotive industries, logistics, BFSI and FMCG. It is dependent on the automotive industry for sales of digital maps and data, navigation and mobility solutions to vehicle manufacturers. During Financial Year 2021, its revenue from operations from automotive and mobility technology (A&M) customers was Rs 80.02 crore, comprising 52.48% of its overall revenue from operations from its customers, and was Rs 46.54 crore, comprising 46.53% of its overall revenue from operations from its customers, for the six month period ended September 30, 2021. As a result of the recent financial crisis and staggered growth due to COVID-19 pandemic, motor vehicle manufacturers have experienced a challenging demand environment for vehicle production and sales. Similarly, its customers in the FMCG and BFSI segment have seen slowdown due to the COVID-19 pandemic and resultant lockdowns and a decline in discretionary spending by the end users.

Inability to maintain its map database could harm its reputation: The company’s map database requires constant maintenance and updating. It has procedures in place to regularly maintain and update its database and to ensure its data continues to meet the requirements of its customers and the ultimate end users. There is, however, no assurance that it procedures and programmes for maintaining and updating its digital map database will be sufficient to maintain the standard of quality expected by its customers. To create and update its map database, the company compiles large amounts of data from a wide variety of sources and process the data so collected. If this data is not made available to the company at the requisite level of quality and quantity, it would adversely affect the cost and timeliness of the development, maintenance and updating of its database. The company also relies on community feedback from existing users of its products to update and refresh its map databases. The quality of its products and the success of its business are dependent to some extent upon the availability and accuracy of the data that the company acquires from these sources. The cost incurred by the company towards data probes for traffic which the company source from its third-party suppliers has been negligible during the last three Financial Years and the six month period ended September 30, 2021.

Dependent on success of its research and development: The company’s business is characterized by rapid and frequent advancements in technology and changes in market demand can often render existing technologies and solutions obsolete and could require substantial new R&D and capital expenditures. The company’s future growth depends on its ability to continue to develop and commercialize innovative, viable and sustainable new geo-spatial software, APIs, SDKs and high definition maps and other solutions offerings in a timely and cost-effective manner, its existing systems and components, or to develop process improvements that can improve time, quality improve and cost efficiency. Its major R&D activities are carried out through one of its Subsidiaries, Vidteq (India) Private Limited (Vidteq). Its expenditure on R&D, primarily comprises of Vidteq’s employee expenses. In addition, even where the company successfully develops any such new or improved products and services in a timely manner based on established customer needs, there can be no assurance that the new or improved offering will be commercially successful and meet the price expectations of its customers. Further, if its competitors develop new processes or production techniques, or improve existing processes or production techniques that may give them significant cost and marketing advantages, the company may be unable to retain its customers, which would adversely affect its revenues and profitability.

Operations and growth strategies in international markets are subject to risks of conducting business outside India: Outside India, the company conduct its business and plan to grow its business across emerging and developed markets and increase the share of international sales in its revenues and profits. While the company does not generate any revenue from international operations, the company generates revenue in foreign currency from its customers located outside of India. Its total revenue from operations from customers located outside of India received in foreign currencies was Rs 41.94 crore, Rs 53.48 crore and Rs 53.36 crore in Financial Years 2019, 2020 and 2021, respectively, and was Rs 46.41 crore for the six month period ended September 30, 2021. Further, several of its agreements are governed by laws other than Indian law. The company cannot assure that in the event of a dispute under such agreements, the company will be able to successfully defend its position, and any adverse decision may adversely impact it financial position, results of operations and cash flows. If the company are unable to manage its global operations successfully, its financial results could be adversely affected, which may impact profit margins or make it increasingly difficult for the company to conduct business in foreign markets.

Outlook

C.E. Info systems is a data and technology products and platforms company, offering proprietary digital maps as a service (MaaS), software as a service (SaaS) and platform as a service (PaaS). It is India’s leading provider of advanced digital maps, geospatial software and location-based IoT technologies. It uses its proprietary, end-to-end technology-driven, and AI-assisted mapping systems and processes to acquire and process digital geospatial data as well as to produce and disseminate digital map data. It provides foundational and comprehensive digital maps across India. Its IoT platform, ‘InTouch’, enables connectivity with real world sensors, phones and IoT devices. It provides a wide range of applications for near real-time vehicle and asset tracking, geo-fencing alerts, historical movement and driver behaviour analysis, predictive vehicle health alerts, as well as fleet, transport and logistics management. On the concern side, the company’s business could be impacted by the failure of telecommunications network operators to provide it with the requisite bandwidth which could also interfere with the speed and availability of its platform, as well as by breakdowns at the level of its internet service providers. Unfavorable publicity of the company or companies it has partnered with could adversely affect its reputation. Such negative publicity could also harm the size of its network and the engagement and loyalty of its customers and other participants that utilize its platform, which could adversely affect its business, cash flows, financial condition, and results of operations.

The issue has been offered in a price band of Rs 1033-118 per equity share. The aggregate size of the offer is around Rs 1006.39 crore to Rs 1039.60 crore based on lower and upper price band respectively. On performance front, the company’s revenue from operations increased by Rs 3.83 crore, or 2.58%, from Rs 148.62 crore in Financial Year 2020 to Rs 152.46 crore in Financial Year 2021. The increase in the company’s income during this period was primarily due to increase in number of customers and sale of its base platform products such as its APIs and SDKs that are integrated into web and mobile applications of its consumer tech and enterprise digital transformation business. The company made profit after tax of Rs 59.43 crore in Financial Year 2021, as compared to a profit after tax of Rs 23.19 crore in Financial Year 2020. The company plans to continue investing time and resources to further develop its innovation and technological capabilities, including in AL, ML and deep tech, to augment its existing digital map dataset, and achieve a 4D high-definition, information rich digital and geospatial representation of the real world. It aims to further develop the automation aspect of its map building platform through its investments in artificial intelligence and machine learning, which will enable it to create better content, faster and at a lower cost.

CE Info Systems Share Price

1946.25 14.20 (0.73%)
31-Oct-2024 16:01 View Price Chart
Peers
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