eMudhra IPO: All You Need To Know
eMudhra IPO opens on May 20 and closes on May 24.
eMudhra Ltd. will launch its Rs 251.8-crore initial public offering on Friday even amid a spike in global volatility on account of the Russia-Ukraine crisis, resurgence of Covid-19 cases in China and inflation pressures.
India’s largest certifying authority will issue fresh shares worth Rs 161 crore, according to its red herring prospectus. The IPO will also comprise an offer for sale of 1.61 crore shares by the promoter group and other selling shareholders. The OFS is worth Rs 251.8 crore at the upper end of the price band of Rs 243-256 apiece.
The issue together will comprise 20.8% of the post-issue equity capital.
Issue Details
Issue opens on: May 20.
Issue closes on: May 24.
Price band: Rs 243-256 apiece.
Issue size: Rs 412.80 crore.
Face value: Rs 10 apiece.
Lot size: 58 equity shares and multiples.
Listing on: BSE and NSE.
Lead Managers: IIFL Securities, Yes Securities, Indorient Financial Services
Use of Proceeds
The company plans to use the proceeds from the fresh issue to:
Repay or prepay certain borrowings: Rs 35 crore.
Fund working capital requirements: Rs 40.22 crore.
Purchase of equipment for proposed data centers: Rs 46.36 crore.
Fund expenditure relating to product development: Rs 15.03 crore.
Fund U.S. subsidiary, eMudhra INC: Rs 15.26 crore.
The proceeds from the offer for sale will not come to the company.
Business
eMudhra had a 37.9% share in the digital signature certificates market in fiscal 2021, up from 36.5% a year ago.
The company provides digital trust services and enterprise solutions to individuals and organisations operating in various industries.
As part of its digital trust services, it issues a range of certificates, including individual and organisational, SSL/TLS and device certificates (used in IoT use cases), to build a digital trust backbone.
The enterprise solutions vertical offers a diverse portfolio of digital security and paperless transformation solutions, complementing its digital trust services business, to customers engaged in different industries.
It provides a wide spectrum of services and solutions from issuance of certificates as a certifying authority to offering identity, authentication and signing solutions to individuals and enterprises.
Its retail customer base grew from 58,872 as of March 2019 to 115,905 at the end of March 2021.
The enterprise customer base grew from 249 in March 2019 to 518 at the end of March 2021. As on Dec. 31, it catered to 143,406 retail customers and 626 enterprises.
Revenue from operations from top five enterprises rose from 12.14% in fiscal 2019 to 23.67% in fiscal 2020.
The company spends a little over 2% on R&D and is expected to launch three products in the next six-eight months.
Financials
The company has witnessed margin expansion in the last three years.
Peers
eMudhra does not have any listed peer in India. Globally, it faces competition from large companies such as Adobe and Docusign.
Risks
The commercial success is largely dependent upon ability to successfully anticipate market needs and utilise and manage research and development resources to upgrade and enhance existing solutions and develop and introduce new solutions that meet the end users’ needs on a timely basis.
Intend to expand business operations to geographical areas in which the company will have limited operation history. It cannot assure that expansion plans will be profitable or that such expansion will not adversely affect business, results of operations and financial condition.
One of the objects of the offer is to invest in eMudhra INC, its U.S. arm to augment its business development, sales, marketing and other related costs for future growth. The expenditure proposed to be incurred is subject to external factors and uncertainty of the outcome of such expenditure.
It proposes to use Rs 46.36 crore of the net proceeds of the offer towards purchase of equipment and funding of other related costs for data centres proposed to be set up in India and overseas locations. For the data centres proposed to be set up in overseas locations, it is yet to identify locations, purchase real estate or enter into long-term leasehold arrangements or rental agreements at locations suitable for setting up and operating proposed data centres.
It is highly dependent on technology in carrying out business activities and it forms an integral part of business
It is dependent on one channel partner for a significant portion of revenues and a loss of such partner could adversely affect business, financial condition and results of operations.
It relies on data centres for efficient functioning of technology platform, and any interruption or delay in service from these facilities could impair the delivery of technology platform and digital products and adversely impact business and results of operations.