Tracxn Technologies
Tracxn Technologies is coming out with a 100% book building; initial public offering (IPO) of 3,86,72,208 shares of Rs 1 each in a price band Rs 75-80 per equity share.
Not less than 75% 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 10% for the retail investors.
The issue will open for subscription on October 10, 2022 and will close on October 12, 2022.
The shares will be listed on BSE as well as NSE.
The face value of the share is Rs 1 and is priced 75 times of its face value on the lower side and 80 times on the higher side.
Book running lead manager to the issue is IIFL Securities.
Compliance Officer for the issue is Megha Bohra.
Profile of the company
The company is among the leading global market intelligence providers for private company data and rank among the top five players globally in terms of number of companies profiled offering data of private market companies across sectors and geographies. It has one of the largest coverage of private companies in emerging technology sectors including IoT, artificial intelligence, virtual reality, robotics, blockchain and electric vehicles. It has an asset light business model and operate a Software as a Service (SaaS)-based platform, Tracxn, that scanned over 662 million web domains, and profiled over 1.84 million entities across 2,003 Feeds categorized across industries, sectors, subsectors, geographies, affiliations and networks globally, as of June 30, 2022. Its platform has 3,271 Users across 1,139 Customer Accounts in over 58 countries, as of June 30, 2022. The company’s Customers include a number of Fortune 500 companies and/or their affiliates.
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, Tracxn. It launched its platform in Fiscal 2015 with a particular focus on the global emerging technology sector, providing users with detailed profiles of companies including detailed information of funding rounds and acquisition related information, taxonomy and market maps, global competitor benchmarking, financial information, valuation and capitalization tables, employee count, investor profiles, competitor mapping, information about founders, key team and board member, company and sector specific reports and news events. It has since then expanded its coverage to include 18 data modules and over 1.84 million entities, as of June 30, 2022. Its extensive global database of entities coupled with customized solutions and features allows customers to source and track companies across sectors and geographies to address their requirements. It is among the few private market data service providers in the world to have a proprietary taxonomy for technology sector companies and prepare market maps.
Proceed is being used for:
Achieving the benefits of listing the equity shares on the stock exchanges and the sale of up to 38,672,208 equity shares by the selling shareholders.
Enhancing the company’s brand name and provide liquidity to the existing shareholders.
Industry overview
Private market data is a subset of the bigger B2B information services market. Most players in this market are a mix of old and new companies and have seen strong growth over a period of time. Private markets are growing rapidly worldwide and the business activities happening around these companies have been immense. To stay in competition, businesses, especially PE firms, VC firms, large corporates have to have greater insight into the market. These businesses should know which sectors are making exceptional growth; skill-set that is prevalent in market and also about what other private market investors or large corporates are doing. To understand this, these firms have to dedicate both time and resources to develop an in-house research teams that tracks the progress of private companies across the globe. However, due to lack of time and limited resources, businesses prefer services from private market intelligence providers who not only collect data across multiple factors but also provide valuable insights that help businesses in better and quicker decision making without compromising on the core business activities.
Total Available Market is the market that has not yet been fully penetrated and still has opportunities as there are many different PE, VC, M&A teams and public and private side research teams which are getting incorporated but are not yet using private market data service. Total Available Market is dependent on factors like the total number of investment firms, corporates and other entities that are added every year, the pricing that changes over a period of time and also the gradual shift of businesses from a single user to multiple user subscriptions. The total available market for private market data service industry is expected to grow at a rate of close to 6.79%. The growth of the market is expected to be mainly dependent on the growth of number of PE, VC and other investment firms, large corporates and other entities who will be willing to invest in private companies. Growth in this market will also be driven by increasing demand for better and accurate strategic decision making by organizations; for competition analysis by existing private companies; for peer benchmarking; for understanding the technology trends that is shaping up; for governments to make strategic investment decisions; for availing funding by private companies and similar others.
Pros and strengths
Leading global provider of differentiated private market data and intelligence: The company is among the leading private market intelligence providers for private company data globally and rank among the top five players globally in terms of number of companies profiled that offer private market data across sectors and geographies. Its extensive global database coupled with customized solutions and features allows customers to source and track companies across sectors and geographies to address their requirements. Its platform offers detailed coverage of company information that includes company profiles, funding rounds, capitalization tables, financials and valuation, news, team size and trends, competition mapping and information about founders (to the extent available publicly). It is focused on increasing the number of entities reviewed and profiled by it. The number of entities it profiled on its platform has increased at a CAGR of 37.00%, from over 937,698 as of March 31, 2020 to over 1.76 million, as of March 31, 2022. As of June 30, 2022, the number of entities it profiled on its platform were over 1.84 million. It also provide global coverage of emerging technology sectors with 2,003 Feeds categorized across industry, sectors, sub-sectors, geographies, affiliations and networks globally, as of June 30, 2022, including sectors such as internet first insurance, life sciences technology and regulatory technology. Its focus on covering new and emerging sectors sets it apart from its competitors.
Diverse, longstanding and growing global customer base: The company has a diverse base of 1,139 Customer Accounts present in over 58 countries, as of June 30, 2022. Its Customer Account base has increased by 450 Customer Accounts at a CAGR of 30.42% from 642 Customer Accounts, as of March 31, 2020 to 1,092 Customer Accounts, as of March 31, 2022, and further to 1,139 Customer Accounts, as of June 30, 2022, as a result of its marketing efforts and referrals by existing customers. Some of these Customer Accounts are for Customers that include ‘Fortune 500’ companies and/or their affiliates. Its global customer base helps it limit its dependency on a specific customer, industry or geography thereby reducing financial and concentration risk. It also cater to a number of corporate development, investment and innovation teams at organizations such as Wipro, Lixil Corporation, and Yamaha Motor Solutions India that use its platform for inter-alia, their M&A activity, strategic investment decisions, purchase decisions and partner selection.
Scalable and secure technology platform conceptualized and developed in-house: The company’s platform, based on a combination of technology and human analysts, is able to process vast amounts of data. It conceptualized and developed its platform in-house, and it is designed to be scalable and reliable providing it flexibility to launch new features as per its internal product road map. The platform has been designed and built primarily using new-age technologies, for hosting on cloud infrastructure. At its core, Tracxn is a data and market intelligence platform with over a million curated entity profiles mapped to over 49,000 different business models, searchable in near real-time through a set of search tools built in-house using an open search engine and analytics solution. In addition, it has built a range of business and workflow tools like an inbuilt CRM tool, custom dashboard builder, tools for sourcing, tracking companies, portfolio tracking, API support, browser extensions, ability to save searches and provide alerts and export tools.
Significant cost advantages from India-based operations: While the company is an Indian SaaS company, its platform Tracxn serves customers globally. Its ability to develop and deploy the platform in India provides it with significant cost advantages. Service providers, especially those operating out of regions like India have cost advantage as their pricing is much more competitive than their global competitors. Private market service providers who have strong presence in Asian region (in terms of workforce) have a natural cost advantage than those who have majority of their workforce in North American or European region. Its business is technology driven, asset light and scalable, as evident by its employee benefit expenses, depreciation and amortization expenses and other expenses that have remained relatively unchanged despite significant increase in its revenue from operations in recent years.
Risks and concerns
Face competition: The market for private market data platforms is competitive and characterized by rapid changes in technology, customer requirements, industry standards and frequent new product introductions and improvements. It anticipate continued challenges from current competitors, which in many cases are more established and enjoy greater resources than it, as well as by new entrants into the industry. If it is unable to anticipate or effectively react to these competitive challenges, its competitive position could weaken, and it could experience a decline in its growth rate or revenue that could adversely affect its business and results of operations. Its competitors include, among others, other private market data service providers such as Crunchbase, CBInsights, PrivCo and Pitchbook whose databases included approximately 0.8 million, 0.5 million, 0.8 million and 3.4 million private companies, respectively, as of the second quarter of 2022.
The company may be required to raise additional funds through equity or debt in the future: The company’s strategy to grow its business may require it to raise additional funds for its working capital or long-term business plans. It cannot assure that such funds will be available on favourable terms or at all. Any debt financing may increase its costs. Its financing agreements may contain terms and conditions that may restrict its ability to operate and manage its business, such as terms and conditions that require it to maintain certain pre-set debt service coverage ratios and leverage ratios and require it to use its assets, including its cash balances, as collateral for its indebtedness. If it is unable to raise additional funds on favourable terms or at all as and when required, its business, financial condition, results of operations, cash flows and prospects could be adversely affected. It may also be required to finance its growth, whether organic or inorganic, through future equity offerings, which may lead to the dilution of investors’ shareholdings in it.
Requires continuous innovation: The market for private market data requires continuous innovation. It is highly competitive, rapidly evolving, and fragmented. There are evolving customer requirements and strategies, and frequent introductions of new technologies and new products and services. Many prospective customers have invested substantial resources to implement, and gained substantial familiarity with, competing solutions and therefore may be reluctant or unwilling to migrate from their current solution. Many prospective customers may not appreciate differences in quality between its products and services and those of lower-priced competitors, and many prospective and current customers may not learn the best ways to use its products and services, making them less likely to subscribe to them or renew their subscriptions. New technologies and products may be or become better or more attractive to current or prospective customers than its products and services in one or more ways.
Do not have any insurance coverage for systems and operations: The company has obtained a health insurance policy for its employees. Further, it has obtained a directors and officers’ liability insurance. It has also obtained a public offering of securities insurance. However, there can be no assurance that its current insurance policies will insure it fully against all risks and losses that may arise in the future. Further, there can be no assurance that any claim under the insurance policies maintained by it will be honoured fully, in part or on time. It is subject to numerous obligations in its contracts with customers using its platform and services, as well as vendors and other entities with whom it does business. It may breach these commitments, whether through a weakness in its procedures, systems, and internal controls, negligence, or through the wilful act of an employee or contractor. Its lack of insurance or existing insurance policies may be inadequate to compensate it for the potentially significant losses that may result from claims arising from breaches of its contracts, as well as disruptions in its services, failures or disruptions to its infrastructure, catastrophic events and disasters, or otherwise.
Outlook
Founded in 2013, Tracxn Technologies provides market intelligence data for private companies. The company's extensive global database and customized solutions and features allow its customers to source and track companies across sectors and geographies to address their requirements. The company is ranked among the top five players globally in terms of the number of companies profiled offering data on private market companies across sectors and geographies. The company has an asset light business model and operate a Software as a Service (SaaS)-based platform, Tracxn, that 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 May 31, 2021. The company offers private company data to its customers for deal sourcing, identifying M&A targets, deal diligence, analysis, and tracking emerging themes across industries and markets, among other uses, through its Tracxn platform. On the concern side, the company may not compete successfully against its current or potential competitors. If it is unable to compete successfully, or if competing successfully requires it to take costly actions in response to the actions of its competitors, its business, financial condition and results of operations could be adversely affected. Besides, if the company is unable to increase its sales and marketing efforts or successfully develop new features, integrations, and capabilities to enhance its platform to meet requirements of its customers, in a timely manner or at all, its business, results of operations, and financial condition may be adversely affected.
The issue has been offered in a price band of Rs 75-80 per equity share. The aggregate size of the offer is Rs 290.04 crore to Rs 309.38 crore based on lower and upper price band respectively. On performance front, total income increased by 16.89% from Rs 557,417.59 thousand in Fiscal 2021 to Rs 651,579.57 thousand in Fiscal 2022. The company recorded a restated loss for the year of Rs 48,476.71 thousand in Fiscal 2022 compared to a restated loss for the year of Rs 53,476.60 thousand in Fiscal 2021. Meanwhile, the company intends to expand its sales team to continue to focus on customer acquisition. It acquires new leads through a combination of inbound and outbound sales effort. Its endeavour will be to continue to grow its account base through referrals from its existing customers. As the company looks to expand its operations, it intend to have additional sales and marketing representatives in geographies outside India to target new customers in such geographies. It also intend to follow a three-pronged approach that includes growing the number of users within an account, generating additional data downloads and adding more Customer Accounts or different teams within an organization.
