Naapbooks coming with an IPO to raise upto Rs 4 crore

Naapbooks

• Naapbooks is coming out with a 100% book building; initial public offering (IPO) of 5,39,200 shares of Rs 10 each in a price band Rs 71-74 per equity share.
• The issue will open for subscription on September 01, 2021 and will close on September 06, 2021.
• The shares will be listed on SME Platform of BSE.
• The face value of the share is Rs 10 and is priced 7.10 times of its face value on the lower side and 7.40 times on the higher side.
• Book running lead manager to the issue is GYR Capital Advisors.
• Compliance Officer for the issue is Niharika Shah.

Profile of the company

The company is engaged in the business of developing and providing Information Technological solutions to corporates for their requirements. The company develops and provides Fintech App, Cloud Consulting, Block chain App, Mobile App, Web App, Embedded App products to its clients. The services broadly covers designing, developing, operating, install installing analyzing, designing, maintaining, converting, porting, debugging, coding and programming software to be used on computer or any microprocessor-based device or any other such hardware. The company is also engaged in Software Consultancy services.

The company adheres to all necessary regulatory specifications. It firmly believe in maintaining its service quality against the highest standards, are unflinchingly customer centric, deeply people focused, and follow ethical business practices and corporate governance standards overall. It draw its strength from an age old tradition of quality services as the best strategy for sustained growth.

Proceed is being used for:

• Funding the working capital requirements of the company.
• Funding purchases of equipment.
• Marketing initiatives.
• General corporate purposes.

Industry overview

The information technology (IT) market consists of sales of information technology (IT) services and related goods by entities (organizations, sole traders and partnerships) that apply computers, computer peripherals and telecommunications equipment to store, retrieve, transmit and maneuver data. The IT market involves services such as computer networking, broadcasting, systems design services and information distribution technologies like television and telephones and other equipment used during the process. The IT market also includes sales of goods such as computers, computer peripherals and telecommunications equipment which are used in providing IT services. The IT market is segmented into IT services; computer hardware; telecom and software products. North America was the largest region in the global information technology market, accounting for 34% of the market in 2020. Asia Pacific was the second largest region accounting for 32% of the global information technology market. Africa was the smallest region in the global information technology market.

The global sourcing market in India continues to grow at a higher pace compared to the IT-BPM industry. India is the leading sourcing destination across the world, accounting for approximately 55% market share of the $200-250 billion global services sourcing business in 2019-20. Indian IT & BPM companies have set up over 1,000 global delivery centres in about 80 countries across the world. IT-BPM industry’s revenue was estimated at around $191 billion in FY20, growing at 7.7% y-o-y. It is estimated to reach $ 350 billion by 2025. Moreover, revenue from the digital segment is expected to form 38% of the total industry revenue by 2025. Digital economy is estimated to reach Rs 69,89,000 crore ($1 trillion) by 2025. The domestic revenue of the IT industry was estimated at $ 44 billion and export revenue was estimated at $147 billion in FY20.Total number of employees grew to 1.02 million cumulatively for four Indian IT majors (including TCS, Infosys, Wipro, HCL Tech) as on December 31, 2019. Indian IT industry employed 205,000 new hires, up from the 185,000 jobs added in FY19 and had 884,000 digitally skilled talents in 2019.

Pros and strengths

Development of products incorporating latest technology trends: The company update and upgrade its Software/Digital Products with the latest developments in all the mobile technology platforms by leveraging: i. Vertical specific and in-depth domain and industry knowledge ii. Agile Cloud based Mobility Technology platform and solutions iii. Center of Excellence where constant innovation happens on both the technology and the applications front.

Skilled and dedicated manpower: The company is managed by a team of well experienced and highly knowledgeable personnel. The team comprises of personnel having technical, operational and business development experience. It take pride in relating its success to its employees, for their consistent efforts and dedication has brought it to where it is today. It also require application of high levels of technology at key stages of design and manufacturing processes as an important part of the business procedure.

Strong customer relationship: The company constantly try to address its customer’s needs which help it to maintain a long-lasting working relationship with them and improve its customer retention strategy. Its existing relationship with its customers represents a competitive advantage in gaining new customers and increasing its business.

Risks and concerns

Depends on top 5 customers: The company’s top 5 customers contributed 94.48% of its revenues for the Fiscal 2021, based on restated financial statements. Further, its top 5 customers contributed 98.24% of its revenues for the year ended March 31, 2020 based on restated financial statements. However, its top customers may vary from period to period depending on the demand and thus the composition and revenue generated from these clients might change as it continue to add new customers in normal course of business. Since its business is concentrated among relatively few significant customers, it could experience a reduction in its results of operations, cash flows and liquidity if it lose one or more of these customers or the amount of business it obtain from them is reduced for any reason, including but not limited on account of any dispute or disqualification

Face significant competition: The Software Consultancy industry in India is highly competitive, and the company expects that the competition in this industry will continue to increase. Its Industry is fragmented consisting of large established players and niche players. It compete with organized as well as unorganized sector on the basis of availability of consumers. Thus, its customers have the option of choosing any competitor providing similar services. Further, there are no entry barriers in this industry and any expansion in capacity of existing competitors would further intensify competition. If it is not able to compete effectively with existing or future competitors, its business and financial condition could be adversely affected.

Require additional capital to support the growth of business: To continue to effectively compete, the company will require additional funds to support the growth of its business and allow it to invest in new products, offerings, and markets. If the company raise additional funds through further issuances of equity or convertible debt securities, its existing stockholders may suffer significant dilution, and any new equity securities it issue may have rights, preferences, and privileges superior to those of existing stockholders. Certain of its existing debt instruments contain, and any debt financing it secure in the future could contain, restrictive covenants relating to its ability to incur additional indebtedness and other financial and operational matters that make it more difficult for it to obtain additional capital with which to pursue business opportunities.

Outlook

Naapbooks is engaged in developing and providing Information Technological solutions to corporates. The company develops Fintech App, Cloud Consulting, Blockchain App, Mobile App, Web App, Embedded App products to its clients. Companies’ services include designing, developing, operating, installing, analysing, designing, maintaining, converting, porting, debugging, coding, and programming software to be used on computers, microprocessor-based devices, or any other such hardware. The company also provides Software Consultancy services. The company adopts stringent quality control process which is managed at every stage of its service to ensure the adherence to desired specifications and quality. Its existing relationship with its customers represents a competitive advantage in gaining new customers and increasing its business. On the concern side, the company’s revenues and profits are dependent on several factors such as retaining its key managerial personnel, its compliance with laws, managing costs and expenses, maintaining adequate inventory levels and general market conditions.  The company significantly depend upon such service for providing the desired results to its clients. Decrease in quality of its service provider may affect the company’s reputation and results of operations.

The issue has been offered in a price band of Rs 71-74 per equity share. The aggregate size of the offer is around Rs 3.82 crore to Rs 3.99 crore based on lower and upper price band respectively. On performance front, during the FY 2020-21 the revenue from operation of the company increased to Rs 271.33 lakh as against Rs 225.12 lakh in the FY 2019-20, representing an increase of 20.53% of the revenue from operation. The restated Profit after Tax for FY 2020-21 has increased to Rs 46.98 lakh as against Rs 32.44 lakh in the FY 2019-20. The increase in profit after tax was 44.67% from the FY 2019-20 was due to the higher Profit before tax. The company is planning to expand its network and reaching new geographies. In respect of its present location, it is expanding its network by marketing. The company is working on seamless integration of strong analytics with its solution in the backend which will provide insightful Business Intelligence for the clients.