Slone Infosystems coming with IPO to raise Rs 11.06 crore

Slone Infosystems

• Slone Infosystems is coming out with an initial public offering (IPO) of 14,00,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 79 per equity share. 
• The issue will open for subscription on May 3, 2024 and will close on May 7, 2024.
• The shares will be listed on NSE Emerge Platform.
• The share is priced at 7.90 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Jawa Capital Services.
• Compliance Officer for the issue is Riya Jain.

Profile of the company

Slone Infosystems is an IT hardware solutions Company, engaged in selling and renting of IT Equipment, and in providing IT Service Solutions in India. It deals in selling and renting of IT equipment like laptops, desktops, servers, work stations and also provide IT solution services like managing cloud servers, servicing of IT equipment to the corporates. It provides custom made solutions to its clients for their IT requirements. It procures IT equipment for its clients based on the requirement of the client and then either sells or rent the IT equipment to its clients based on their requirement. It provides flexibility and advantage to acquire the requisite equipment that its client needs to maximize their productivity without compromising their IT budget.

In addition, it also sells the used IT equipments to clients as per their requirements. Its Business operates in segments, viz.: Sale of Laptop, Computer & Computer Peripherals; Sale of other IT related products; IT Service solutions; and Rental Services. The Company has ISO 45001:2018 certification for OH&S Occupational Health & Safety Management System, ISO 27001:2013 certification for Information Security Management System, ISO 14001:2015 certification in Environmental Management System and ISO 9001:2015 certification in Quality Management System. 

Proceed is being used for:

• Capital expenditure towards purchase of Laptops, Desktops, SSD and RAM
• Repayment/prepayment of certain borrowings availed by the company 
• General corporate purpose

Industry overview

Electronics hardware industry is the world’s largest and fastest growing industry and is increasingly applications in all sectors of the economy. The domestic production of electronic items has increased from Rs 3,17,331 crore in 2016-17 to Rs 6,40,810 crore  in 2021-22, growing at a Compound Annual Growth Rate (CAGR) of 15%. India’s electronics production is expected to reach $300 Billion by 2026. Production Linked Incentive schemes for Phones, IT Hardware and Electronic Components have been successful in attracting global champions while providing a fillip to domestic companies and making them national champion companies with global aspirations. India Semiconductor Mission has been launched to enable India’s emergence as a global hub for electronics manufacturing and design. 

India is recognised as a global hub for IT services and has emerged as the world’s 3rd largest start-up ecosystem, having more than 100 unicorns. Emerging technologies like 5G, Internet of Things, Advance Data Analytics, Artificial Intelligence, Cloud computing, Augmented and Virtual Reality, 3D printing, robotics and blockchain etc. will redefine the future of technology led transformation. Several Centres of Excellence have been setup to promote innovation in these areas. Efforts are also on to enable Indian IT professional attain world class skills in these technologies through a Future Skills Programme.

Indian electronic manufacturing industry has undergone major transformation in the last couple of years with the host of initiatives and reforms. Government has taken several initiatives to promote electronics manufacturing and as a result, the electronic manufacturing is on high growth trajectory (domestic production of electronic items has increased from Rs. 3,17,331 crore in 2016-17 to Rs 6,40,810 crore in 2021-22, growing at a Compound Annual Growth Rate (CAGR) of 15%). The key drivers of growth are large domestic market, and availability of skilled talent and low-cost labour. 

Pros and strengths

Wide range of offerings with capability to provide customized and integrated IT solutions: It provides its customers a broad range of products including laptops, desktops, printers, servers and other peripherals like CCTV cameras, projectors, storage devices etc on rental basis. It understands the needs of the customers and based on their requirements it delivers them the best possible and most economical rental solution for their business. It helps its customer to choose from IT hardware equipments in different categories such as high configuration powerful equipment’s which are ideal for high level development, design and data processing or Economical Systems having standard configuration which are ideal for marketing, sales, finance and office activities or Customized Systems like assembled desktops as per specific requirements with customizable CPU, memory, storage, and graphics card capabilities.

Wide presence in domestic market with diverse base of customers: It has served clients across various industries and sectors including the logistics solutions, BPO, pharmaceuticals, ecommerce, education, IT, insurance, research, media & entertainment, recruitment, VFX & Digital solutions and many more. For F.Y. 2021-22, some of its esteemed customers include names such as Silicon Rental Solutions, Mangal Compusolution, Sidewalk Systems, Cemtrex Labs, Expert Infotech, and Hindustan Computers. Owing to its diverse client base, it has developed expertise over the certain industry specific-requirements such as the requisite technology level, IT hardware requirements that can effectively serve the client’s purpose.

Strong relationship with customers: Strong client relationship provides the foundation for its business. Its client includes small, mid-size and large corporate houses. Over the years, its relationship with its customers have expanded and the strength of its customer relationships is attributable to its ability to customize its offerings to customer specifications and requirements, as well as its track record of consistent delivery of quality and cost-effective services over the years. Its track record of delivering its suite of solutions backed by demonstrable industry and technology expertise, and sensitivity to its client’s feedback, has helped the company forge strong relationships with its major clients. It has a history of high client retention and derives a significant proportion of its revenues from repeat business built on its successful execution of prior engagements.

Risks and concerns

Delays or defaults in customer payments: It often commits resources to orders prior to receiving advances or other payments from customers in amounts sufficient to cover expenditures on orders as they are incurred. It may be subject to working capital shortages due to delays in customer payments. If the customer defaults in their payments on an order, or cancels their orders for which it has devoted significant resources or incurred expenditure, it could have a material adverse effect on its business, financial condition, results of operations and cash flows and could cause the price of its equity shares to decline. Hence, any last minute cancellations would also run the risk of not being able to sell those products to another customer. These events could have a material adverse effect on its revenues, results of operations and cash flows.

Do not enter into long term contracts with customer: Its business is dependent on its continuing relationships with its customers. It does not have written agreements with its clients and it undertakes the assignment based on orders received from them. These arrangements are solely based on either long-standing relationship with such customers or customers reputation. Its inability to enforce these oral arrangements/unavailable agreements on substantially the same terms as agreed, or at all, could adversely affect its business and results of operations. Any change in the buying pattern of its customers can adversely affect the business of the company.

Dependent on limited number of external suppliers: It does not manufacture any of the IT products that it provides on rental basis. It relies on the limited number of suppliers for purchasing the products, which in turn, rely on third-party suppliers for sourcing of products. Its reliance on a limited number of suppliers for its business exposes it to risks, that may include, but are not limited to, reductions, delay or failure on the part of its suppliers to deliver products in a timely manner, deterioration in the financial condition or business prospects of these suppliers, failure to negotiate favourable terms with its key suppliers, all of which could have a material adverse effect on the business, financial condition, results of operations and future prospects of the Company.

Outlook

Slone Infosystems is engaged in the business of providing IT hardware solutions. It deals in selling and renting of IT equipment like laptops, desktops, servers, work stations and also provide IT solution services like managing cloud servers, servicing of IT equipment to the corporates.  It provides custom made solutions to its clients for their IT requirements. It procures IT equipment for its clients based on the requirement of the client and then either sells or rent the IT equipment to its clients based on their requirement. On the concern side, it may has to confront pressures in respect of pricing; quality of Service etc. from the clients and such pressures may put strain on its profit margins, which may consequently affect the financial position of the Company. Competition emerges not only from the organized sector but also from the unorganized sector and from both small and big players. Its Competitiveness is also measured by the technology it adopts as the industry is rapidly growing in India. Its inability to compete with this intense competition; will have material adverse impact on the Company's financial position.

The company is coming out with an IPO of 14,00,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 79 per equity share to mobilize Rs 11.06 crore. On performance front, its total income increased by 15.73% from Rs 2,659.14 lakh for the Financial Year ended March 31, 2022 to Rs 3,077.40 lakh for the Financial Year ended March 31, 2023. There is a 94.90% increase in profit after tax during fiscal 2023 as compared to fiscal 2022. The profit after tax was Rs 74.66 lakh during fiscal 2023 and Rs 38.31 lakh during fiscal 2022. Meanwhile, the company constantly endeavors to improve its technical process, and will increase service activities to optimize the utilization of resources. It has invested significant resources and intends to further invest in its activities to develop systems and processes to ensure effective management control. It regularly analyzes its existing policies to be carried out for its technical and designing process which enables the company to identify the areas of bottlenecks and correct the same. This helps the company in improving efficiency and putting resources to optimal use.