Sahana System coming with an IPO to raise upto Rs 32.74 crore

Sahana System

• Sahana System is coming out with a 100% book building; initial public offering (IPO) of 2,425,000 shares of Rs 10 each in a price band Rs 132-135 per equity share.
• The issue will open for subscription on May 31, 2023 and will close on June 2, 2023.
• The shares will be listed on NSE Emerge Platform.
• The face value of the share is Rs 10 and is priced 13.20 times of its face value on the lower side and 13.50 times on the higher side.
• Book running lead managers to the issue are Unistone Capital and Interactive Financial Services.
• Compliance Officer for the issue is Khushbu Ankitkumar Dalwad.

Profile of the company

The company has been certified as CMMI Maturity Level - 3 in E-Commerce department by Equalitas Certifications Limited, a CMMI Institute Partner. The company is also recognized as a start up by the Department for Promotion of Industry and Internal Trade, Ministry of Commerce & Industry. The recognition certificate is valid for 10 years from the date of incorporation of the company till up to February 19, 2030. The Company is registered under ‘IT Services’ Industry and ‘Product Development’ sector.

The company is engaged in the business of offering IT related services including web app development, mobile application development, AI & ML development, ChatBot development, product prototyping, graphics designing, UI / UX design, SEO & ASO, digital marketing, website & application migration, cyber security and outsourcing of IT services. Some of the industries it caters to includes healthcare, surveillance, retail, education / e-learning, restaurants, banking, media & entertainment and fintech. It is also engaged in the trading of hardware instruments related to Franking Machines / Computers / LED / Laptops. 

Proceed is being used for:

• Meeting working capital requirement
• Installation of EV charging Station
• General corporate purpose
• Meeting the issue expenses 

Industry overview

The IT & BPM sector has become one of the most significant growth catalysts for the Indian economy, contributing significantly to the country’s GDP and public welfare. The IT industry accounted for 7.4% of India’s GDP in FY22, and it is expected to contribute 10% to India’s GDP by 2025. As innovative digital applications permeate sector after sector, India is now prepared for the next phaseof growth in its IT revolution. India is viewed by the rest of the world as having one of the largest Internet user bases and the cheapest Internet rates, with 76 crore citizens now having access to the internet.

India’s IT exports are expected to grow faster than the in the 2022-23 financial year, despite subdued sentiment and longer decision-making cycles leading to pronounced cost-optimisation measures. India’s GDP is estimated to grow at 7% during this year. 

India is the topmost offshoring 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 Indian IT & business services industry is expected to grow to $19.93 billion by 2025. Spending on information technology in India is expected to reach $144 billion in 2023. By 2026, widespread cloud utilisation can provide employment opportunities to 14 million people and add $380 billion to India's GDP.

Pros and strengths

End to end IT services: It provides end to end IT services to its customers that support their software applications and businesses throughout the full business life cycle. At each stage of the business life cycle, it offers services designed to address the customers’ specific needs as businesses move from different stages of maturity. These offerings are suitable for companies of all sizes. It considers that its end-to-end IT services and solutions enables it to grow its client relationships and scope of engagements, as well as in still its clients with confidence in its ability to address their diverse and dynamic business needs.

Leveraging the experience of promoter: Its Promoter, Pratik Kakadia is having experience in field of IT services which has contributed significantly to the growth of the company. Under his management, its business has grown and it has made a name of the company in the industry. Its management team is familiar with its business and understands its customers’ needs and requirements. They are committed to the development of its business and will continue to spearhead its Company’s business operations and future plans so as to ensure the continuing success of the company. 

Quality of services: The company has been accredited with ‘CMMI Maturity Level 3, ISO 9001 and ISO/IEC 27001’ certification for Design and Development of Application Software, Web Applications and Managed IT Services. It adheres to quality standards as per industry standards; hence it gets repetitive work order Marketing by Business Development Team Preliminary Requirement Process Estimation Process Time Proposal and negotiation Contract Sign off deploying of key resources & understanding the technology In-depth Study and Knowledge transfer as per client requirements Design and development of product Quality Assurance (QA) Testing User Acceptance Test Support (UATS) Project Sign off and Final Delivery Consultancy as per client requirement from its customers, as it is capable of meeting their quality standards at competitive costs, which enables it to sustain in the market.

Risks and concerns

Dependent on top ten numbers of customers: its top ten customers contribute to 82.00%, 91.46% and 74.33% of its revenue from operations for the financial year ended Financial Year 2023, Financial Year 2022, and Financial Year 2021 respectively. The loss of a significant client would have a material adverse effect on its financial results. It cannot assure that it can maintain the historical levels of business from these clients or that it will be able to replace these clients in case it lose any of them. Furthermore, major events affecting its clients, such as bankruptcy, change of management, mergers and acquisitions could adversely impact its business. If any of its major clients becomes bankrupt or insolvent, it may lose some or all of its business from that client and its receivable from that client would increase and may have to be written off, adversely impacting its financial condition and profitability.

High competition: Dynamic business environment which is filled with rapid change of technology, government policies, mounting competitive threats and constant new entrants into market, makes it challenging to sustain and handle the intricacies and provide competitive solutions to its clients. It face competition from domestic and international companies. It foresee this competition from organized and unorganized players to continue to grow as the demand for software development solutions increases.
Growing competition may result in a decline in its market share and may affect its margins which may adversely affect its business operations and its financial condition.

Success depend on key person and promoters: Its success depends heavily upon the continuing services of its promoter Pratik Kakadia who has control on the company. His experience and vision had played a key role in obtaining its current reputation and status in the market. It would also depend significantly on its senior managerial person for continuing its business operations successfully. If any member of the senior management team is unable or unwilling to continue in his present position, it may not be able to replace him easily or at all, and its business, financial condition, results of operations and prospects may be materially and adversely affected.

Outlook

Sahana System is engaged in the business of offering IT related services including web app development, mobile application development, AI & ML development, ChatBot development, product prototyping, graphics designing, UI / UX design, SEO & ASO, digital marketing, website & application migration, cyber security and outsourcing of IT services. On the concern side, it face competition from domestic and international companies. It foresees this competition from organized and unorganized players to continue to grow as the demand for software development solutions increases. 

The company is coming out with an IPO of 2,425,000 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 132-135 per equity share. The aggregate size of the offer is around Rs 32.01 crore to Rs 32.74 crore based on lower and upper price band respectively. On performance front, The company's total income is Rs 2,414.23 lakh, which is increased by 98.31% in compare to F.Y. 2021-22 total income of Rs 1,217.39 lakh which is largely attributable to procurement of new customers, which resulted in higher sales volume, increase of trading of Hardware items was increased by 52.97% to Rs 1,217.39 lakh in the F.Y 2022-23 from Rs 382.02 lakh in F.Y. 2021-22 and increase in sale of software services amounts to 47.03% to Rs 1,135.51 lakh in the F.Y 2022-23 from Rs 835.38 lakh in F.Y. 2021-22. The company’s PAT is Rs 639.64 lakh for the financial year 2022-23 in compared to Rs 141.18 lakh in financial year 2021-22. The PAT was 26.49% of total revenue in financial year 2022-23 compared to 11.60% of total revenue in F.Y. 2021-22. The profit is increased on account of increase in revenue from operations and due to decrease in total expense in FY 2022-23 as compared to financial year 2021-22.

Going forward, the company aims to continue to improve its operational effectiveness and efficiencies to achieve cost reductions including overheads. It plans to expand its service offerings as and when there exists an opportunity. It proposes to gain expertise in every new technology platform coming up in the market for value added services, cost-competitiveness, speed and easy to use. The company proposes to use innovative ideas and concepts to achieve performance parameters set by the clients in their day-to-day business processes. It intends to expand its international presence.