Trust Fintech coming with IPO to raise upto Rs 63.45 crore

Trust Fintech

• Trust Fintech is coming out with initial public offering (IPO) of 62,82,000 shares of Rs 10 each in a price band Rs 95-101 per equity share.  
• The issue will open for subscription on March 26, 2024 and will close on March 28, 2024.
• The shares will be listed on NSE Emerge Platform.
• The face value of the share is Rs 10 and is priced 9.50 times of its face value on the lower side and 10.10 times on the higher side.
• Book running lead manager to the issue is Corporate Capital Ventures.
• Compliance Officer for the issue is Deshana Keval Joshi.

Profile of the company

Trust Fintech is a Nagpur based SaaS Product focused company which has carved a niche in providing Core Banking Software, IT Solutions, ERP Implementation and Customized Software Solutions Development, SAP B1 and Offshore IT services for the BFSI sector. TFL was founded by Hemant Chafale, Heramb Ramkrishna, Mandar Kishor Deo with a focus on delivering secured core banking solutions & world-class technology solutions to a virtually integrated banking and financial eco-system. The company has evolved in the last 25 years and adapted to the technological and market shifts to reach the current business model and product version. 

The company is consistently expanding its business footprints in India and Globally by adapting to ever-changing regulatory compliances for the global BFSI sector. It has invested in developing more than 10 banking related products for Commercial and Cooperative Banks and Financial Institutions, which comprise Core Banking Software, Loan Origination software, GST compliance software, Financial Accounting & Billing Software, GST Suvidha provider, SAP B1 Services (for Implementation, Support and Add-on Development), Various add-on modules for Statutory Report Generation, ATM Reconciliation, Anti-Money Laundering, Agency Banking, Mobile Banking leveraging end to end solutions to address the evolving needs of banking Solutions. Since it provides banking solutions, therefore all the product solutions are built by keeping in mind the RBI compliance requirements, which the banks have to follow and also the product is designed in configurable architect, which gives the flexibility to incorporate the changes which may be required to be complied by the banks, pursuant to the change in the policy and compliances as notified by the RBI. 

The company is majorly involved in the Implementation, and deployment of Core banking Software i.e. TrustBankCBS or MicroFinS. TrustBankCBS mainly serves the needs of medium to large banks & financial institutions and MicroFinS serves the needs of Small & growing Co-operative Societies, SACCOS & similar banking institutions. Its flagship product, TrustBankCBS, is a web-based software. It is available “on-premises with infrastructure” i.e. it offers the flexibility to the customer to deploy TrustBankCBS on their own premises with customized infrastructure. Alternatively, it is also available as off-the-shelf banking software solution in a 'Software as a Service' (SaaS) model. This covers bundled solutions of software and hosting infrastructure on a rental basis for those preferring a hassle-free.

Proceed is being used for:

• Setting up additional Development facility, instalment of fit outs and interior design works in Nagpur, Maharashtra. 
• Investment in procuring hardware and upgrading IT infra.
• Funding of expenditure related to enhancement, maintenance and upgrading existing Product.
• Meeting out the Global & Domestic Business Development, Sales and Marketing expenses for the company.
• General corporate expenses. 

Industry overview

The IT 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 7.4% of India’s GDP in FY22, and it is expected to contribute 10% to India’s GDP by 2025. As innovative digital applications permeate sector after sector, India is now prepared for the next phase of growth in its IT revolution. India is viewed by the rest of the world as having one of the largest Internet user bases and the cheapest Internet rates, with 76 crore citizens now having access to the internet.

According to National Association of Software and Service Companies (Nasscom), the Indian IT industry’s revenue touched $227 billion in FY22, a 15.5% YoY growth. According to Gartner estimates, 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 on investing internationally to expand their global footprint and enhance their global delivery centres. 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. The ER&D market is expected to grow to $42 billion by 2022.

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. The Indian IT & business services industry is expected to grow to $19.93 billion by 2025. Spending on information technology in India is expected to reach $144 billion in 2023. By 2026, widespread cloud utilisation can provide employment opportunities to 14 million people and add $380 billion to India's GDP. As per a survey by Amazon Web Services (2021), India is expected to have nine times more digitally skilled workers by 2025.

Pros and strengths

Strong and long-standing customer relationships: Its existing client relationships help it to get repeat business from its customers. Its client relationships also help it to cross sell its other products and services to them. Further, it has been mutually value creating, stable and long-term association with its customers through product, operational process & technology excellence offered by the company. This has helped it maintain a long-term working relationship with its customers and improve its customer retention strategy. Through these efforts, it aims to become the “first choice vendor” for all large and small BFSI companies for the services it offers. Having a 3 long-standing relationship with customers built on its successful execution of prior engagements.

Qality assurance and quality certification: Its Qality assurance team works upon the performance checks on the developments made by the Development team. Thorough and end to-end test cases are prepared, and examinations are done both on sandbox and production environment. Any bugs found while testing is reported back to the Development Team to redevelop and refine the product in such a way to provide User/client seamless experience. On receiving an assurance from all the stakeholders within the company, Development team takes the product live on Client production environment. Further, Client shall provide a Go-Live sign off.

Growing business through intellectual property capabilities: It regularly invests in the creation of new intellectual property. It has the copyright for its “TrustBankCBS”, “MicroFinS” “Trust Bank Software”, and ‘Power Plant Monitoring System (PPMS)’. Its efforts have resulted in the development of value-added products and services. It will continues to invest in intellectual property to build and offer systems that establish its credibility and technical expertise in new areas. It also will continue to monetise its investment in intellectual property by charging a premium for its services or by licensing its proprietary software solutions to its customers. It will seeks further growth by leveraging its software development capabilities through designing, developing and marketing proprietary niche software solutions in select international markets.

Risks and concerns

Dependent upon few clients: The Company is engaged in providing Core Banking Software, IT Solutions, ERP Implementation and Customized Software Solutions Development, SAP B1 and Offshore IT services for the BFSI sector. Its top ten clients contributed approximately 80.05 %, 82.10%, 78.78% and 86.87% of its revenue from operations based on Restated Financial Statements for the period ended September 30, 2023 and the Fiscals 2023, 2022 and 2021 respectively. The loss of a significant clients would have a material effect on its financial results. It cannot assure that it can maintains the historical levels of business from these clients or that it will be able to replace these clients in case it lose any of them. If any of its major clients becomes bankrupt or insolvent, it may lose some or all of its business from that client and its receivable from that client would increase and may have to be written off, impacting its income and financial condition.

Dependent majorly on two states: Its domestic Sales are dependent on the Top 2 States including Maharashtra and Karnataka. It generate almost i.e 73.52%, 87.06%, 85.71% and 88.63% of the Total Domestic Sales generated for the period ended September 30, 2023 and the Fiscals 2023, 2022 and 2021 respectively. Such concentration of revenue in only two states may have an adverse effect. Further, drastic change in Taxes and other levies imposed by State Government as well as other financial policies and regulations, Political and deregulation policies, if changed, could harm business and economic conditions.

Rely on limited number of suppliers: It is dependent on very limited number of suppliers for its business operations and the success of its business is accordingly significantly dependent on the company maintaining good relationships with its suppliers. Since it has no formal arrangements with its suppliers, they are not contractually obligated to continue their relation with the company. The loss of a significant supplier would have a material effect on it business operations. If any of it major supplier becomes bankrupt or insolvent, it may lose some or all of its business operations from that suppliers which ultimately can affect its business operations and profitability.

Outlook

Trust Fintech is a Nagpur based SaaS Product focused company which has carved a niche in providing Core Banking Software, IT Solutions, ERP Implementation and Customized Software Solutions Development, SAP B1 and Offshore IT services for the BFSI sector. Trust Fintech is a Nagpur based SaaS Product focused company which has carved a niche in providing Core Banking Software, IT Solutions, ERP Implementation and Customized Software Solutions Development, SAP B1 and Offshore IT services for the BFSI sector. On the concern side, it is dependent on very limited number of suppliers for its business operations and the success of its business is accordingly significantly dependent on the company maintaining good relationships with its suppliers. Besides, its domestic Sales are dependent on the Top 2 States including Maharashtra and Karnataka.

The company is coming out with an IPO of 62,82,000 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 95-101 per equity share. The aggregate size of the offer is around Rs 59.68 crore to Rs 63.45 crore based on lower and upper price band respectively. On performance front, total revenue has increased by Rs 470.19 lakh and 27.85% from Rs 1763.25 lakh in the fiscal year ended March 31, 2022 to Rs 2254.34 lakh in the fiscal year ended March 31, 2023. The increase in revenue is on account of increase in revenue from operations and increase in export sales. Net profit has increased by Rs 268.55 lakh and 200.93% from Rs 133.66 lakh in the fiscal year ended March 31, 2022 to profit of Rs 402.21 lakh in the fiscal year ended March 31, 2023. Meanwhile, it is planning to employ sales strategy to cater to the growing demand for innovative software solutions to BFSI organizations in India. It prioritizes customer-centric approaches, focusing on building strong relationships, understanding client needs, and delivering solutions that provide tangible value. Its sales and territory strategy is a dynamic and adaptive approach that aligns with the evolving needs of BFSI Segments across the country.