Silicon Rental Solutions coming with an IPO to raise upto Rs 21.15 crore

Silicon Rental Solutions

• Silicon Rental Solutions is coming out with an initial public offering (IPO) of 2712000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 78 per equity share.
  
• The issue will open on September 28, 2022 and will close on September 30, 2022.
  
• The shares will be listed on SME Platform of BSE.
  
• The share is priced 7.80 times higher to its face value of Rs 10.
  
• Book running lead manager to the issue is Hem Securities.
  
• Compliance Officer for the issue is Himanshi Tiwari.
  

Profile of the company

The company is an IT equipment outsourcing company, engaged in providing end to end IT equipments on a rental and returnable basis in India. It provides laptops, desktops, printers, servers and other peripherals like CCTV cameras, projectors, storage devices etc. on rental basis mainly to small, medium and large corporate. Based on the client’s IT requirements, the company offer them tailor-made rental schemes that suit their requirements. By providing the IT rental services to its customers, it provides them with the flexibility and advantage to acquire the requisite equipments that they need to maximize their productivity without compromising their IT budget. In addition, it also sells the used IT equipments to clients as per their requirements. In Fiscal 2022, revenue generated from rental services and sale of used IT equipments represented 92.81% and 7.19% of the total revenue in such period, respectively.

The rapidly transforming technology and increased digitalization has made a robust IT infrastructure mandatory for companies to operate efficiently. Many enterprises face challenges to optimize the IT framework according to the requirements of their business due to budget limitation, lack of knowledge or other issues. It supports enterprises by providing them with the required IT products and equipments of major brands for short period of time ranging from 1 day to longer period upto 36 months based on the customer requirements. For providing seamless services to its customers and to cater its customer’s diverse requirements it carry stocks of latest models of Laptops, desktops, Servers, Mac books, and other IT equipments and also provide them the choice of equipment’s from all major brands like HP, Dell, Lenovo, Apple, Asus, Intel, AMD, Gigabyte, Sonicwall, Dlink, Cisco etc.

Proceed is being used for:

• Meeting capital expenditure requirements relating to IT equipments.
  
• Prepayment or repayment of all or a portion of certain outstanding borrowings availed by the company.
  
• General corporate purpose.
  
• Issue expenses.
  

Industry overview

The Indian Information Technology/ Information Technology Enabled Services (IT/ITeS) industry is a global powerhousetoday, and its impact on India has been incomparable. It has contributed immensely in positioning the country as a preferred investment destination amongst global investors and creating hug job opportunities in India, as well as in the USA, Europe and other parts of the world. In the last decade, the industry has grown many fold in revenue terms, and relative share to India’s GDP is around 8 percent in FY2020-21(E). India is the topmost off-shoring 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 country's cost competitiveness in providing IT services, which is approximately 3-4 times cheaper than the US, continues to be its Unique Selling Proposition (USP) in the global sourcing market. Indian IT-ITeS industry offers cost-effectiveness, great quality, high reliability, speedy deliveries and, above all, the use of state-of-the-art technologies globally.

The Indian IT/ ITeS industry has a leading position globally and has been progressively contributing to the growth of exports and creation of employment opportunities. India’s IT-BPM industry (excluding e-commerce) is expected to grew by 2.3% to reach at $194 billion, including exports of $150 billion in FY2020-21 (E). The IT-ITeS Industry has also created large employment opportunities and is estimated to employ 4.47 million professionals, an addition of 1,38,000 people over FY 2019-2020. Women employees account for 36% (1.4 million) share in total industry employee base. The Ministry of Electronics and Information Technology is coordinating strategic activities, promoting skill development programmes, enhancing infrastructure capabilities and supporting R&D for India’s leadership position in IT and IT-enabled Services. The IT industry accounted for 8% of India’s GDP in 2020. India’s IT industry is expected to contribute 10% to India’s GDP by 2025. The computer software and hardware sector in India attracted cumulative foreign direct investment (FDI) inflows worth $ 81.31 billion from April 2000-December 2021. The sector ranked 2 nd in FDI inflows as per the data released by Department for Promotion of Industry and Internal Trade (DPIIT). Computer software and hardware make up 14.19% of the cumulative FDI inflows.

Pros and strengths

Wide range of offerings with capability to provide customized and integrated IT solutions: The company 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 deliver 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. For catering the needs of its customers it is required to maintain a large base of IT hardware including desktops, laptops, printers, scanners etc. Its vast portfolio and its services increase the scope of customers and its ability to cater to a diversified clientele base.

Wide presence in domestic market: For F.Y. 2021-22, the company has served over 275+ clients in India located at over 16 states and 3 Union Territories of India. 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 Tata Motors Insurance Broking, Reliance Broadcast Network, Mahindra Integrated Business Solutions, Bewakoof Brands, Grab a Grub, Epicenter Technologies and Sitel India. 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. This domain intelligence coupled with its understanding of the IT hardware engineering and latest technology helps it delivers a viable and affordable IT system for its clients.

Strong relationship with customers: Strong client relationship provides the foundation for the company’s business. Its client includes small, mid-size and large corporate houses. Over the years, its relationship with its customers have expanded and this 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 it forge strong relationships with its major clients. It has a history of high client retention and derive a significant proportion of its revenues from repeat business built on its successful execution of prior engagements.

Risks and concerns

Significant increase in repair and maintenance costs of IT equipments: The company is required to incur significant repair and maintenance expenditure in respect to the IT equipments, the cost of which it may be unable to recoup. While using the IT equipments, its customers face technical or operational issues such as failure of motherboard/RAM in desktops or laptops, which is required to be resolved by its customer support team in a timely and efficient manner. For Fiscal 2022, its repair and maintenance cost for IT equipments were Rs 91.56 lakh. Any significant rise in repair and maintenance expenses, beyond its budget and without corresponding revenue, could increase costs and adversely affect its results of operations and financial condition. In addition, it may be unable to cure the faults or respond in a timely manner due to inadequacy of resources or any other operational issues, which may result in adversely affecting client relationships leading to termination of agreements/arrangements, non-renewal of agreements, or delay or withholding/ deduction of payments due under such agreements. 

Geographical concentration: The company generate major domestic sales through its customers situated in Maharashtra. For Fiscal 2022, its revenue from Maharashtra region represented 87.26% of the total revenue for such fiscal year. Such geographical concentration of its business in this region heightens its exposure to adverse developments related to competition, as well as economic and demographic changes in this region, which may adversely affect its business prospects, financial conditions and results of operations. Further, as the company enter into new markets and geographical areas, it is likely to compete with not only national players, but also the local players, who might have an established local presence, and are more familiar with local business practices and have stronger relationships with local customers, relevant government authorities, suppliers or are in a stronger financial position than it, all of which may give them a competitive advantage over it.

Operate in highly competitive and fragmented industry: The company faces significant competition and if it fails to compete effectively, its business, prospects, financial condition and results of operations will be adversely affected. The market for its products is competitive on account of existence of both the organized and unorganized players. Competition occurs generally on the key attributes such as quality of services, customer support network, pricing and timely delivery. Competition based on pricing terms in the IT rental industry is intense. It expects that the level of competition will remain high, which could potentially limit its ability to maintain or increase its sales and profitability. Its continued success depends on its ability to compete effectively against its existing and future competitors. With the potential influx of new competitors, its ability to retain its existing clients and to attract new clients is critical to its continued success.

Outlook

Incorporated in 2016, Silicon Rentals Solutions is an IT equipment outsourcing company, engaged in providing end-to-end IT equipment on a rental and returnable basis in India. The company provides laptops, desktops, printers, servers and other peripherals like CCTV cameras, projectors, storage devices, etc., mainly to small, medium and large corporate. The company supports enterprises by providing them with the required IT products and equipment of major brands for a short period ranging from 1 day to a longer period up to 36 months based on the customer requirements. The company provides IT renting services to the client base present in almost 16 states and 3 Union Territories across India. It also has a trained and dedicated team of engineers who are capable of providing the support and maintenance of the hired equipment. On the concern side, the company requires certain statutory and regulatory permits, licenses and approvals to operate its business. Though it has obtained those permits and licenses which are adequate to run its business, it cannot assure that there is no other statutory/regulatory requirement which it is required to comply with. Besides, the company operates in IT equipments rental industry, it is usually prone to risk relating to theft, breakage or damage of the rented IT equipments or any of its parts, installed at the client premises, which can be difficult to detect, deter and prevent, and could subject it to financial losses and impact its business and financial conditions.

The company is coming out with a maiden IPO of 2712000 equity shares of Rs 10 each at a fixed price of Rs 78 per share to mobilize around Rs 21.15 crore. On performance front, the company’s total income has increased significantly by 79.40% to Rs 2,467.91 lakh in financial year 2021-2022 from Rs 1,375.65 lakh in financial year 2020-2021. It also recorded increase of 176.10% in Profit for the Year for the financial year 2021- 2022 was Rs 764.54 lakh as compared to Rs. 270.39 lakh in financial year 2020-2021. Meanwhile, the company intends to acquire customers that can provide higher value business, through a combined means of marketing strategies and service offerings enhancement to improve its services to its customers, and to attract customers who can provide to it higher margin. To expand its presence in Tier 2 and Tier 3 cities, it intends to scale its infrastructure in these cities through direct renting or through arrangements with service providers in these cities.