DU Digital Technologies coming with an IPO to raise up to Rs 4.48 crore

DU Digital Technologies

• DU Digital Technologies is coming out with an initial public offering (IPO) of 6,90,000 Equity Shares of face value of Rs 10 each for cash at a fixed price of Rs 65 per equity share.
• The issue will open on August 12, 2021 and will close on August 17, 2021.
• The shares will be listed on the Emerge platform of NSE.
• The share is priced 6.50 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Hem Securities.
• Compliance Officer for the issue is Jinkal Ashwin Shah.

Profile of the company

The company started its operations in the year 2015 and since then has been in the business of providing Visa Processing Services to embassies of various countries. It manage human interface between the visa applicant and the technical visa processing unit of the embassy of the Country for which it is awarded the contract or subcontract. The company’s role is administrative and nonjudgmental tasks related to visa application, digitalization, document verification and biometric data collection for its customers. This in turn enables the respective government authorities to focus entirely on the critical task of assessment. DU Digital does not play any part in the decision-making process behind visa approvals being granted or denied. Currently it is providing human interface of visa processing services for Greece and Malaysia in and for India by way of various sub-contracts awarded to the company and its subsidiaries.

The services under these contracts include i) Accepting documents on behalf of the Ministry and facilitate the Ministry. ii) Attestation services iii) Collection of finger prints, facial photo, retina scan, etc. with/without passport processing. Along with this, the company also offers Value Added Services (VAS) to support applicants. These include but are not limited to: Premium Lounge, Prime time application, Mobile Biometrics, Form Filling, SMS alert, Courier services etc. The company has been awarded the exclusive sub-contract for providing technical assistance, logistics and back end support services for processing Greece Visa Applications in India. In this connection the company operates the Visa Application Centres (VAC) to facilitate Greece visa services. The visa applications, travel documents, biometrics, visa fees etc are submitted in the VAC for further processing by the foreign missions. The Hellenic Ministry of Foreign Affairs (Greek Ministry) has signed a contract with Global Visa Centre World (Hellas) S.A. (GVCW) for outsourcing of Greece Visa Services.

Proceed is being used for:

• Meeting working capital requirements.
• Making investment in subsidiary company, Dudigital Global LLC.
• General corporate purpose.
• Meeting issue expenses.

Industry overview

Tourism is an integral pillar of the Make in India programme. Tourism plays a role of significant economic multiplier and becomes critical since India has to grow at rapid rates and create jobs. India offers geographical diversity, world heritage sites and niche tourism products like cruises, adventure, medical, eco-tourism, etc. Incredible India has spurred growth in Tourists Arrivals and Employment. India’s ranking in the Travel and Tourism Competitive Index (TTCI) of World Economic Forum moved from 52nd position in 2015 to 40th position in 2017. Now India has moved up by another 6 positions and ranked at 34th position in 2019. Tourism tends to encourage the development of multiple-use infrastructure including hotels, resorts & restaurants, transport infrastructure (aviation, roads, shipping & railways) and healthcare facilities.

Travel and Tourism was the largest service industry in India was worth $234 billion in 2018. The industry has become one of the largest Foreign Exchange Earners in India with earnings of $29.962 billion over Jan 2019-Dec 2019 equating a growth of 4.8% over the previous year. According to The World Travel and Tourism Council (WTTC), tourism generated $194 billion or 6.8% of India’s GDP in 2019 and supported 39.80 million jobs which is 8 % of its total employment. The sector is predicted to grow at an annual rate of 6.9% to $460 billion by 2028 which is 9.9% of GDP. FTAs in April 2019 were 7,71,353 viz-a-viz 7,45,051 in April 2018 registering a growth of 3.5%. Further to this, FTAs during the period January-April 2019 were 39,35,293 viz-a-viz 38,60,871 in January- April 2018 registering a growth of 1.9%. During April 2019 total of 2,01,137 tourist arrived on e-Tourist Visa as compared to 1,57,094 during the month of April 2018 registering a growth of 28.0%. Further to this, during January- April 2019, a total of 11,08,665 tourist arrived on e-Tourist Visa as compared to 9,18,792 during January-April 2018, registering a growth of 20.7%. During 2019, a total of 2.93 million foreign tourists arrived on e-Tourist Visa registering a growth of 23.6%.

Pros and strengths

High entry barriers: The visa outsourcing industry is very large with only few service providers globally engaged in the business of managing the visa applications. Only half of the total visa market is currently outsourced since this industry is less than two decades old. The niche nature of this industry and high entry barriers with very few key players in the market, translates into a huge opportunity for the company. The high entry barrier in the industry like strict technical, financial qualifications and experience needed to procure the service contracts makes it difficult for other players to garner new service contracts.

Exclusive service agreements for visa processing services: The company has been outsourced the sub-contract of providing human interface along with technical and back end support services for processing of Greece and Malaysian Visa in and for India. The terms and conditions of the agreements, in partnership with VFS Global Services, give it right to process all of Greece and Malaysian Visa from India exclusively for the said countries. With a reliable, approachable and easy processing system with local level services and personnel, its positive and customer friendly approach increase the image of the countries it represent and improve upon the number of applicants for all type of visa including tourism, business and others. The rush for its service increases in months when the season is favorable in the two countries for holidays or during vacation in India. It focus on delivering a high level professional service to the visa applicants who intend to visit Greece or Malaysia.

Provides efficient and secure services: DU Digital aims at collecting, according to the demands of the Diplomatic Mission, applicants’ biometric data in the most secure electronic way and securely transmits them to the Consulate of jurisdiction, thus ensuring total protection of applicants’ confidential information and personal data. All its activities help in simplifying and expediting the procedures for issuance of visas in a systematic and efficient manner thus maintaining data confidentiality and security. Further, quality service in the business gives it positive feedback from its customers and enable it to renew existing agreements or attract new sub-contracts as well. Its satisfactory services have helped it to maintain a stable relationship with its mediators like travel agents or airlines etc.

Risks and concerns

Rely on third party service providers: By the virtue of company’s service agreements it avail services of VFS Global Services for backend processing/ support services work in the VACs for processing of Greece Visa and OSC for processing Malaysian Visa, including third-party computer systems, software and service providers, such as payment processors and gateways. The third party may be subject to general business risks, including system downtime, hacker attack, fraudulent and unauthorized access, natural disasters, human error or other causes leading to unexpected business interruptions. Similarly, if they fail to perform adequately, experience difficulty meeting its requirements for quality and customer service standards or fail to comply with applicable laws, rules and regulations in India, its operations and reputation could also suffer, it may be exposed to liability on their account, and its business, financial condition, cash flows and results of operations may be adversely affected.

Revenue depends on visa processing services for limited geographical locations: The company presently provide visa processing services for Greece and Malaysia in and for India. It intends to provide services for additional destinations in other geographical locations, either through direct contracts from diplomatic mission or by way of subcontracts awarded to the Company. It may face additional challenges such as increased competition, different culture, regulatory regimes, business practices, customs, customer preferences and its current experience may not be applicable to such new locations. Its inability to successfully expand its services for other geographical areas may adversely affect its business, financial condition and results of operations. It cannot assure you that it will be able to implement its expansion plans for other destinations in a timely and cost-efficient manner, or at all, and any failure to do so would adversely affect its business, prospects and results of operations.

Operate in very niche industry: The company operate in a very niche industry with only few dominant players providing visa processing services to diplomatic missions of various countries. Currently the revenue from operations of the company and subsidiaries is from visa processing activities of two countries Greece and Malaysia. To increase its revenue and cash flows, it must regularly add new service level agreements for visa processing contracts for more countries and be able to provide recurring services to its existing clients. If it is unable to generate sufficient sales, or if its existing or new clients do not perceive its services to be of sufficiently high value and quality, it may not be able to increase sales and its operating results would be adversely affected. Its client base may decline or fluctuate due to a number of factors, including customers’ preferences, pricing policies of diplomatic mission and the prices of competing service providers.

Outlook

DU Digital Technologies is engaged in the business of providing visa processing services to embassies of different countries. It acts as a human interface between the visa applicant and the technical visa processing unit. The company plays administrative and non-judgmental tasks related to visa application, digitalization, document verification, and biometric data collection for customers. The company offers professional solutions along with maintaining a positive image of the country abroad. It has gained trust of its service providers over the years which have helped it to renew the sub-contracts at favourable terms. Its service offerings coupled with technical know-how, competitive fees, and execution capabilities help it to secure existing and attract new contracts. The company’s Managing Director holds an experience of around 40 years in the travel and tourism industry. It has a qualified and professional employee base of around 29 employees as on March 31,2021 looking after its business operations, either on the marketing front, technical knowhow, back end processing, liaisoning, legal, security and in other avenues. On the concern side, the company’s business is significantly affected by the overall size of its customer base, which is determined by customer preference and spending habits in India. The visa processing business is highly technical and its success, to a significant extent, depends on its ability to attract, hire, train and retain qualified employees. The industry, including the company, experiences employee turnover. There is significant need for professionals with skills necessary to perform the services it offer to its clients. 

The company is coming out with a maiden IPO of 6,90,000 equity shares of Rs 10 each at a fixed price of Rs 65 per equity share to mobilize Rs 4.48 crore. On the performance front, total income for the financial year 2020-21 stood at Rs 226.78 lakh whereas in Financial Year 2019-2020 the same stood at Rs 3206.44 lakh representing a decrease of 92.93%. The company reported Restated profit after tax for the financial year 2020-21 of Rs 10.53 lakh in comparison to loss of Rs 23.81 lakh in the financial year 2019-20. Further the company intends to expand its global footprint by procuring visa processing contracts directly from government of various countries, which shall add to overall profitability of the company. It shall make efforts to further strengthen its business by deploying additional resources such as hiring experts, setting up of data centre and expanding its office network. It shall continue to provide high quality service and improve its visibility and penetration through wider marketing initiative.