ITCONS E-Solutions coming with an IPO to raise upto Rs 8.67 crore

ITCONS E-Solutions

• ITCONS E-Solutions is coming out with an initial public offering (IPO) of 17,00,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 51 per equity share.
• The issue will open on February 28, 2023 and will close on March 02, 2023.
• The shares will be listed on SME Platform of BSE.
• The share is priced 5.10 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Finshore Management Services.
• Compliance Officer for the issue is Pooja Gupta.

Profile of the company

ITCONS E-Solutions is in the business of providing human resource services to both public and private organizations mostly in organized sector in diverse roles and responsibilities since 2007, having its Registered office situated at New Delhi and Corporate Office at Noida. The company’s services primarily include Manpower Supply/Recruitment Services and Manpower Sourcing / Staffing Services.

Incorporated in 2007, the company has grown to more than 800 staff team (including contractual employees). It has well-known and reputed clients from the Information Technology, Staffing & Recruitment, Food, FMCG space amongst others, which include MNCs as its clients. Presently its Manpower Supply Services account for a majority of its revenues, and Manpower Souring Services contributes to rest of its revenues. Both the business lines broadly fall within the scope of staffing services and accordingly, audited segment-wise breakup is not required.

Proceed is being used for:

• Meeting the working capital requirements of the company
• Meeting the issue expenses
• General corporate purpose

Industry Overview

Staffing industry added new employment at a sharp 21.9% YoY 2021 22, compared to a 3.6% new employment generated in the previous year. With robust employment demand seen from across sectors, 100 + members of Indian Staffing Federation employ 1.26 million flexi workforce (March 2022). The new employment generated was at a much sharper growth rate than even pre pandemic years. Staffing members at ISF added 2.27 lakhs new formal workforce in 2022.

General Staffing Industry nett new employment grew at 21 %, adding 1.57 lakhs new formal workforce, from the year before at 18.1%. General Staffing Industry was primarily driven by demands from FMCG, E commerce, Manufacturing, Healthcare, Retail, Logistics, Banking, Energy etc. IT Staffing Industry witnessed a sharp jump with 30.7% growth adding further new employment, then the year before at 14.1%. The demands were driven primarily with the digital adoption across sectors A few promising impact sectors to continue will be Fintech, IT, Infra, etc.

IT staffing industry post Q 2 also started witnessing a stabilisation in the demand, with Q4 bringing a sharp response from geopolitical scenario developing across the world from the Ukraine war, impact of global financial markets among others. Overall, the Staffing Industry continued a stable Quarter on Quarter (Net employment) growth at 4.2% in Q4FY22. Staffing industry is poised to continue its contribution in the formal employment growth, as demand is seen to be moving at a stable rate.

Pros and strengths

Diverse range of service offerings: The company has a diverse range of service offerings to cater to IT Staffing, General Staffing, Re-badging, Recruitment Process Outsourcing, Pass through Services, Payroll Services, Managed Services, Product Installation & Servicing Solution and Permanent Hiring services in order to address the varied and expanding requirements of its clients. Its range of offerings help its clients to achieve their business objectives and enable it to obtain additional business from existing clients as well as address a larger base of potential new clients.

Cost competitive solutions: The company offers a combination of solutions to its clients, which include the Hire-Train-Deploy model and graduate hire programs. The company’s service capabilities and cost competitiveness are one of the reasons, why clients like to engage with it over other service providers.

Strong customer relations with top clients: The company has excellent relations with many of its clients. The company has several contracts from top named/marquee clients which run for a period ranging between 1-3 years. The same is based on its past work record, domain expertise it develops and the quality resources it deploys for its clients with acceptable turn-around times.

Risks and concerns 

Significant revenue comes from certain large clients: The company has in the past derived, and it will continue to derive, a significant portion of its revenue from certain large clients. For the year ended March 31, 2020, March 31, 2021 and March 31, 2022 it derived revenue from operations of Rs 751.58 lakh, Rs 743.31 lakh and Rs 1364.98 lakh, respectively, from its top five clients, representing approximately 90.14%, 89.32% and 75.61%, respectively, of its total revenue from operations. Any downsizing by these clients may reduce their spending on the services provided by it. Further, there are a number of factors outside its control that might result in the loss of a client, including financial difficulties for a client; change in strategic priorities, resulting in a reduced level of spending on staffing solutions; a reduction in staff wages; a demand for price reductions; and a change in strategy by moving more work in-house or to its competitors. The loss of any one or more of large clients could have an adverse effect on its business, profits and results of operations.

Maximum revenue comes from IT sector: The company’s revenue from Information & Technology (IT) Sector, contributes 65.98%, 60.51%, 63.16% and 60.58% of its revenue from operation for the six months’ period ended September 30, 2022 and for the financial year ended March 31, 2022, March 31, 2021 and March 31, 2020, respectively. Any decline in its quality standards, growing competition and any change in the demand for its services in these sectors may adversely affect its ability to retain clients from these sectors. It cannot assure that it shall generate the same quantum of business, or any business at all, from these sectors, and loss of business from any one or both sectors may adversely affect its revenues and profitability. However, the composition and revenue generated from these sectors might change as it continues to add new clients in normal course of business. It intends to retain its customers by offering solutions to address specific needs in a proactive, cost effective and time efficient manner. This helps it in providing better value to each customer thereby increasing its engagement with its new and existing customer base that presents a substantial opportunity for growth.

Substantial portion of revenue comes from Indian clients: The company has derived a substantial portion of its revenue from services offered to clients based in India. If the economic conditions of India become volatile or uncertain or the conditions in the financial market were to deteriorate, especially in recent times due to the COVID-19 pandemic, or if there are any changes in laws applicable to its services and operations or if any restrictive conditions are imposed on it or its business, the pricing of its services may become less favourable for it. Further, its clients located in these geographies may reduce or postpone their spending significantly which would adversely affect its operations and financial conditions. Any reduction in spending on third party logistic services may lower the demand for its services and negatively affect its revenues and profitability.

Outlook

ITCONS E-Solutions is a New Delhi-situated company engaged in the business of providing human resource services. The company offers its services mainly in the organized sector to both public and private organizations. It has been developing its service offering so as to support its clients in their end-to-end HR needs through its services. On the concern side, a significant portion of the company’s business is attributable to certain large clients and any deterioration of their financial condition or prospects may have an adverse impact on its business. Further, if it fails to expand the size of its business with its existing clients or expand to new clients, or if it loses its large clients, its business, revenue, profitability and growth will be adversely affected. Moreover, its revenue from Information & Technology sector contribute significantly to its revenue from operation. Any loss of business from any one or both sectors may adversely affect its revenues and profitability.

The company is coming out with a IPO of 17,00,000 equity shares of Rs 10 each at a fixed price of Rs 51 per share to mobilize Rs 8.67 crore. On performance front, the revenue from operation and other income of the company has been increased to Rs 1820.36 lakh in FY22 as against Rs 842.48 lakh in the FY21. This increase was mainly due to its association with new clients with better profit margin. Moreover, the restated Profit after Tax for FY22 has been increased to Rs 119.11 lakh as against Rs 7.53 lakh in the FY21.

Going forward, the company’s focus has been on providing services primarily to MNCs and also to domestic homegrown companies and with an eye to grow inorganically as also organically. Moreover, the company’s goal is to enrich its existing relations with its clients and also acquire clients in diverse verticals. The company’s strategy is to work closely and entrench with top IT captive & multinational accounts and penetrate them closely, rather than working with more accounts and along-with provide value addition to existing customers on engagement models like ODC contracts, SOW model, BOT model and few other cost-effective models, thereby leveraging the same to new customers.