Kandarp Digi Smart BPO coming with an IPO to raise Rs 8.10 crore

Kandarp Digi Smart BPO

• Kandarp Digi Smart BPO has come out with an initial public offering (IPO) of 27,00,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 30 per equity share.
  
• The issue opened on September 16, 2022 and will close on September 20, 2022.
  
• The shares will be listed on NSE Emerge Platform.
  
• The share is priced 3 times higher to its face value of Rs 10.
  
• Book running lead manager to the issue is Beeline Capital Advisors.
  
• Compliance Officer for the issue is Niharika Gupta. 
  

Profile of the company

Kandarp Digi Smart BPO is engaged in BPO services specializing in the area of support services solutions. The company provides wide ranges of support services such as Call Centre, Contact Point Verifications, Site Visits, Document check/Pickup, E-KYC, Skip Tracing, Employee Back Check, Staffing Solutions, Payroll Management, Payment Collections (soft), AMC Booking Services etc. to its clients and specializes in providing End to End solutions to customers/clients. The company’s services are focussed towards delivering outstanding results for its clients. It adapt its outstanding services to cater to the specific needs of business and assist in achieving your business goals.

The company is an ISO 9001:2015 certified company for Quality Management Services in field of Banking Verifications, Credit and Risk Control/ Pick-Up Activities, Call Center and Audit. It is always committed to fulfil the requirements of its clientele according to their needs. In order to meet these requirements, it has adapted to best measure in the industry for support services. The company carry out extensive research, training and upgradation of technology to maintain the standard and quality of its services. It is providing services that ensures customer satisfaction. It has long-term and stable relationships developed over the years with its key customers through the quality of services it provide.

The company is in the current line of business for more than 20 years and the client lists includes various banks, insurance companies, financial service companies, etc. Also, it help its clients with its voice support services, field support services and Back Office Processing Services to provide a comprehensive range of services across all industry sectors to clients who are in need of specialist assistance. The company’s services can be tailored to meet the needs of each client. It makes sure that it gives its clients with the best so that they can meet the different challenges presented by business environment. It strives to use innovative strategies in order to ensure its client is exposed to the top-tier talent.

Proceed is being used for:

• Meeting working capital requirement.
  
• General corporate purpose.
  
• Meeting issue expenses.
  

Industry overview

The global sourcing market in India continues to grow at a higher pace compared to the IT-BPM industry. 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 IT industry accounted for 8% of India’s GDP in 2020. According to STPI (Software Technology Park of India), software exports by the IT companies connected to it, stood at Rs 1.20 lakh crore ($16.29 billion) in the first quarter of FY22. The IT & business service industry’s revenue was estimated at $6.96 billion in the first half of 2021, an increase of 6.4% YoY. The export revenue of the IT industry is estimated at $150 billion in FY21. According to Gartner estimates, IT spending in India is estimated to reach $93 billion in 2021 (7.3% YoY growth) and further increase to $98.5 billion in 2022. The BPM sector in India currently employs >1.4 million people, while IT and BPM together have >4.5 million workers, as of FY21. India's software services exports (excluding exports through commercial presence) increased by 4% in FY21 compared with FY20 and are estimated at $133.7 billion during 2020-21.

Indian software product industry is expected to reach $100 billion by 2025. Indian companies are focusing to invest internationally to expand global footprint and enhance their global delivery centres. In line with this, in February 2021, Tata Consultancy Services announced to recruit 1,500 technology employees across the UK over the next year. The development would build capabilities for TCS to deliver efficiently to the UK customers. As of FY21, the IT industry employed 4.5 million people. 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. Indian IT's core competencies and strengths have attracted significant investment from major countries. The computer software and hardware sector in India attracted cumulative foreign direct investment (FDI) inflows worth $74.12 billion between April 2000 and June 2021. The sector ranked 2nd in FDI inflows as per the data released by Department for Promotion of Industry and Internal Trade (DPIIT).

Pros and strengths

Distribution network: The company’s distribution Network having locations all over India covering most part of India and providing services across all cities of India. It enables it to cater to a diverse mix of customers including Banks, corporate, small and medium enterprises (SMEs). Its large geographic coverage and operational network also ensures that to deliver expertise service to its customer. This will also enable it to further integrate its operations, increase cost efficiencies and increase turnover of the Company. It also gives stability to processes, clients, employees. However, its experience plays a key role is such expansion and client acquisition.

Existing client relationship: The company has earned reputation based upon which it has been successful in retaining its reputed banks. It constantly tries to address customer needs around services offered by it in field of Data processing service and management consultancy services. Its existing customer relationships help it to get repeat business from its customers. This has helped it maintain a long-term working relationship with its customers and improve its customer retention strategy. Its existing relationship with its customers represents a competitive advantage in gaining new customers and increasing its business.

Diversified customer base: The company serves a diverse mix of end markets across several industry sectors such as banks, financial institutions, and other sectors. In its business, it serves a number of customers with variety of services such as back-office support, field support and voice support services. Since it cater 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 and increases service cost.

Risks and concerns

Significant ongoing funding requirements: The company’s major fund based financial assistance has been sanctioned by the bank, i.e., the HDFC Bank Limited on the security of assets. The company is dependent on HDFC Bank for its Working Capital requirement and any default under such arrangement with such lender may create problem for operation of the Company, which may affect the financial stability of the Company. At the same time this may result into difficulty in arranging for funds for re-payment and may also affect the financial position of the Company. If the company is unable in the future to generate sufficient cash flow from operations or borrow the necessary capital to fund its future requirements, it will be forced to limit its growth. In addition, it may not be able to service its existing customers or to acquire new customers. The inability to raise additional capital on acceptable terms could have a effect on its business, results of operations and financial condition.

Require certain approvals and licenses: The company is governed by various laws and regulations for its business and operations. It is required, and will continue to be required, to obtain and hold relevant licenses, approvals and permits at state and central government levels for doing its business. The approvals, licenses, registrations and permits obtained by it may contain conditions. Additionally, it will need to apply for renewal of certain approvals, licenses, registrations and permits, which expire or need to update pursuant to change in name and conversion of company from private to public Company. While it has obtained a significant number of approvals, licenses, registrations and permits from the relevant authorities. There can be no assurance that the relevant authority will issue an approval or renew expired approvals within the applicable time period or at all. Any delay in receipt or non-receipt of such approvals, licenses, registrations and permits could result in cost and time overrun or which could affect its related operations.

Dependent on skilled personnel: The company’s services are manpower intensive and it engages a considerable number of skilled personnel every year to sustain its growth. Further, the company spends significant time and resources in training the manpower it hire. Its success is substantially dependent on its ability to recruit, train and retain skilled manpower. High attrition and competition for manpower may limit its ability to attract and retain the skilled manpower necessary for its future growth requirements. It cannot assure that skilled manpower will continue to be available in sufficient numbers suitable to its requirements or that it will be able to grow its workforce in a manner consistent with its growth objectives, which may affect its business, financial condition, results of operations and prospects.

Outlook

Incorporated in 2001, Kandarp Digi Smart BPO is engaged in BPO services specializing in the area of support services solutions. The company provides a wide range of support services such as Call Centre, Contact Point Verifications, Site Visits, Document check/Pickup, E-KYC, Skip Tracing, Employee Back Check, Staffing Solutions, Payroll Management, Payment Collections (soft), AMC Booking Services etc. to its clients and specializes in providing End to End solutions to customers/clients. The company has been in the current business line for more than 20 years and the client lists include various banks, insurance companies, financial service companies, etc. The company also helps clients with voice support services, field support services and Back Office Processing Services to provide a comprehensive range of services across all industry sectors to clients who need specialist assistance.  On the concern side, the company is yet to apply for registration of its trademark in connection with the protection of intellectual property rights. The registration of any intellectual property right is a time-consuming process, and there can be no assurance that any such registration will be granted.

The company is coming out with a maiden IPO of 27,00,000 equity shares of Rs 10 each at a fixed price of Rs 30 per share to mobilize around Rs 8.10 crore. On performance front, revenue from operations had increased by 22.98% from Rs 1041.19 lakh in Fiscal 2021 to Rs 1280.45 lakh in Fiscal 2022. The change was primarily due to increase in sales. After accounting for taxes at applicable rates, the company reported a net profit of Rs 94.04 lakh in Fiscal 2022 as compared to a net profit of Rs 10.56 lakh in Fiscal 2021. The increase in Profit is due to increase in Revenue. Meanwhile, the company 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. It continue to focus on enhancing operational controls and cost efficiencies through optimal service quality & cost management. Its ability to provide timely Completion of Service and quality service is key to its reputation and further expansion of its business.