Vertexplus Technologies coming with an IPO to raise upto Rs 14.20 crore

Vertexplus Technologies

• Vertexplus Technologies is coming out with a 100% book building; initial public offering (IPO) of 14,79,600 shares of Rs 10 each in a price band Rs 91-96 per equity share.
• The issue will open for subscription on March 2, 2023 and will close on March 6, 2023.
• The shares will be listed on NSE Emerge Platform.
• The face value of the share is Rs 10 and is priced 9.10 times of its face value on the lower side and 9.60 times on the higher side.
• Book running lead manager to the issue is Beeline Capital Advisors.
• Compliance Officer for the issue is Akshita Goyal.

Profile of the company

The company is an ISO 9001:2015 and ISO/IEC 27001:2013 certified Information Technology company engaged in consulting, outsourcing, infrastructure and digital solutions and services. It collaborates with companies to fulfil their ever-evolving Information Technology needs and support their business with its enabling solutions to strengthen their current capabilities and build pathways for sustainable growth. The company has experience across various industry sectors.

The company endeavors to bring together creativity and knowledge with positive business strategy to furnish the requirements of diverse customers with an inclusive range of products and services which are comprehensive and cost effective so that the client can focus on their core-competencies to improve or expand their businesses. It has worked for numerous industries, realized their true potential and scale to global recognition.

The company powers up enterprises to think beyond the ordinary through an integrated, intelligent, technology stack that automates the processes and accelerates the operations. From small programming assignments, to an intensely complex project, or a niche solution, it is fully equipped to develop dynamic, integrated applications & systems that enable business to succeed, scale, expand along the measures it set for current and envision for ahead.

Proceed is being used for:

• Meeting working capital requirements.
  
• General Corporate Purposes.
  
• Meeting the issue expenses.

Industry overview

The IT & BPM sector has become one of the most significant growth catalysts for the Indian economy, contributing significantly to the country’s GDP and public welfare. The IT industry accounted for 8% of India’s GDP in 2020, and it is expected to contribute 10% to India’s GDP by 2025. India’s rankings improved four places to the 46th position at the 2021 edition of the Global Innovation Index (GII). 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. The Indian IT industry’s revenue touched $227 billion in FY22, a 15.5% YoY growth. IT spending in India is expected to increase to $101.8 billion in 2022 from an estimated $81.89 billion in 2021. Indian software product industry is expected to reach $100 billion by 2025. Indian companies are focusing to invest internationally to expand their global footprint and enhance their global delivery centres.

The data annotation market in India stood at $250 million in FY20, of which the US market contributed 60% to the overall value. The market is expected to reach $7 billion by 2030 due to accelerated domestic demand for AI. Exports from the Indian IT industry stood at $149 billion in FY21. Export of IT services has been the major contributor, accounting for more than 51% of total IT export (including hardware). BPM and Engineering and R&D (ER&D) and software products export accounted for 20.78% each to total IT exports during FY21. ER&D market is expected to grow to $42 billion by 2022. The IT industry added 4.45 lakh new employees in FY22, bringing the total employment in the sector to 50 lakh employees.

India is the topmost offshoring destination for IT companies across the world. Having proven its capabilities in delivering both on-shore and off-shore services to global clients, emerging technologies now offer an entire new gamut of opportunities for top IT firms in India. Indian IT & business services industry is expected to grow to $19.93 billion by 2025. In November 2021, Piyush Goyal, Minister of Commerce and Industry, Consumer Affairs, Food and Public Distribution and Textiles, lauded the Indian IT sector for excelling its competitive strength with zero government interference. He further added that service exports from India has the potential to reach $1 trillion by 2030.

Pros and strengths

Global delivery network: The company comprehend global industry practices & business trends as it is already serving its clients coming from India and all parts of the world. It is constantly adopting new technologies to further augment its global business expansion and client acquisition from all over the world.

Existing client relationship: The company has earned reputation based upon which it has been successful in retaining its reputed clients. The company constantly try to address customer needs around services offered by it in field of consulting, outsourcing, infrastructure and digital solutions. Its existing customer relationship helps it to get repeat business from its customers. This has helped it to maintain a long-term working relationship with its customers and improve its customer retention strategy. Its relationship with the existing customers represents a competitive advantage in gaining new customers and increasing its business.

Diversified customer base and revenue sources: The company serves a diverse mix of end markets across several industry sectors. In its business, it serves a number of customers with variety of services. Since it caters to a diverse customer base, it has historically been able to pass a significant portion of increases in operating costs such as infrastructure cost, and other operating expenses through review.

Risks and concerns

Maximum revenue comes from top ten customers: The company’s top ten customers have contributed 99.81%, 99.20%, 99.60% & 98.80% of its revenues for the period ended September 30, 2022, March 31, 2022, March 31, 2021, March 31, 2020 based on Restated Standalone 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 customers might change as it continues to add new customers in normal course of business. Since its business is concentrated among relatively few significant customers and also its major portion of sales is from one single customer, it could experience a reduction in its results of operations, cash flows and liquidity if it loses one or more of these customers or the amount of business it obtains from them is reduced for any reason, including but not limited on account of any dispute or disqualification.

Substantial amount of outstanding indebtedness: As of September 30, 2022, the company’s long-term borrowings were Rs 41.87 lakh & short-term borrowings were Rs 318.74 lakh and it will continue to incur additional indebtedness in the future. In the event it breaches any financial or other covenants contained in any of its financing arrangements or in the event it had breached any terms in the past which is noticed in the future, it may be required to immediately repay its borrowings either in whole or in part, together with any related costs. If the lenders of a material amount of the outstanding loans declare an event of default simultaneously, the company may be unable to pay its debts when they fall due.

Intense competition: The company operates in a competitive industry that experiences rapid technological developments, and changes in customer requirements. Its competitors include the big Global System Integrators, mid-sized, and several smaller local competitors in the various geographic markets in which it operates. It may face competition from companies that grow in size or scope as the result of strategic mergers or acquisitions, which may result in larger competitors with significant resources that benefit from economies of scale and scope. Such events could have a variety of negative effects on its competitive position and its financial results, including reducing its revenue, increasing its costs, and lowering its gross margin percentage.

Outlook

Vertexplus Technologies is an ISO 9001:2015 and ISO/IEC 27001:2013 certified Information Technology company. The company is engaged in consulting, outsourcing, infrastructure, and digital solutions and services. Over the years, the company has gained experience across various industries and sectors. The company collaborates with companies to fulfill their ever-evolving Information Technology needs and support their business with its enabling solutions to strengthen their current capabilities and build pathways for sustainable growth. On the concern side, the company’s top ten customers contribute majority of its revenues from operations. Any loss of business from one or more of them may adversely affect its revenues and profitability. Moreover, the company has a substantial amount of outstanding indebtedness, which requires significant cash flows to service and are subject to certain conditions and restrictions in terms of its financing arrangements, which restricts its ability to conduct its business and operations in the manner it desires.

The company is coming out with an IPO of 14,79,600 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 91-96 per equity share. The aggregate size of the offer is around Rs 13.46 crore to Rs 14.20 crore based on lower and upper price band respectively. Minimum application is to be made for 1200 shares and in multiples thereon, thereafter. On performance front, revenue from operations increased by 6.22% from Rs 1963.93 lakh in Fiscal 2021 to Rs 2086.02 lakh in Fiscal 2022. The change was primarily due to increase in sales. Moreover, after accounting for taxes at applicable rates, the company reported a net profit of Rs 186.05 lakh in Fiscal 2022 as compared to a net profit of Rs 104.98 lakh in Fiscal 2021.

Going forward, the company’s goal is to build long-term sustainable business relationships with its customers to generate increasing revenues. It plans to continue to expand the scope and range of current services provided to its existing customers by continuing to build its expertise and extending its capabilities. Leveraging its market skills and relationships is a continuous process in its organization and the skills that it imparts in its people give excellence to customers. It aims to do this by leveraging its marketing skills and relationships and further enhancing customer base.