Trident Techlabs
- Trident Techlabs is coming out with an initial public offering (IPO) of 45,80,000 equity shares of face value of Rs 10 each in a price band Rs 33-35 per equity share.
- The issue will open on December 21, 2023 and will close on December 26, 2023.
- The shares will be listed on NSE Emerge platform.
- The share is priced 3.30 times of its face value on the lower side and 3.50 times on the higher side.
- Book running lead manager to the issue is GYR Capital Advisors.
- Compliance Officer for the issue is Iram Naaz.
Profile of the company
Trident Techlabs offers custom-built technology solutions to corporates in the aerospace, defence, automotive, telecom, semiconductor and power distribution sectors. It has two business verticals i.e. Engineering Solutions and Power System Solutions. It delivers winning business outcomes through its deep industry experience and a 360-degree view of “Business through Technology” helping clients in creating successful and adaptive businesses.
The company’s Engineering Solutions portfolio of products and related services encompass a diverse spectrum of solutions viz. system-level electronics design, chip-level electronics design, embedded design, hydraulics/ pneumatics system, system modeling, reliability and quality, design automation, power electronics, PCB designing and electromagnetic simulations. Its design services include consulting and engineering services that help companies innovate better, with services spanning the entire product development lifecycle, including strategy and user research, design and engineering, pre-launch testing and post-launch maintenance, and service delivery and optimization.
The company’s Power Solutions portfolio of products and related services help power distribution utilities who face new challenges due to the ever-changing nature of the industry and the increasing pressure on network reliability. Power distribution utilities need to constantly focus on (i) maximizing the capacity of aging transmission infrastructure; (ii) managing increasing amounts of intermittent, renewable generation; and (iii) deployment of Smart Grid technologies leading to increasing complexity in transmission investment decisions. The company’s Power Systems Solutions division has developed expertise in the areas of transmission planning and operations, power distribution solutions, integration and energy storage solutions, substation design solutions and power cable ampacity solutions. The company’s solutions and services dwell on the latest technology to enable clients in maximizing the reliability of their electric power facilities in the most economical manner. Tangible schemes for improved management of transmission networks and optimized strategies for future financial investments are prepared using its customized solution based on power distribution network analysis software.
Proceed is being used for:
- Funding the working capital requirements of the company
- General corporate purposes
Industry Overview
Power demand, which is closely linked to the gross domestic product (GDP) growth, has historically lagged GDP growth by 1-2 percentage points but has bucked the trend in fiscals 2021, 2022 and 2023. Fiscal 2023 saw a 9.6% increase in power demand despite a high base of 8.18% in fiscal 2022. Along with extreme seasonal vagaries, GDP grew at 7.2% in fiscal 2023 which accelerated power demand as this also came on a higher base of 9.1% in fiscal 2022. Governments outlay for the power sector has increased by 24% for fiscal 2024 over the revised estimates of fiscal 2023 whereas infrastructure related spending has increased by 17% as per the latest union budget. Infrastructure linked capex, strong economic fundamentals along with expansion of the power footprint via strengthening of transmission and distribution (T&D) infrastructure coupled with major reforms initiated by the central government for improving the overall health of the power sector, particularly that of state distribution utilities, are expected to improve the quality of power supply, thereby spurting power demand.
Power demand intensified in the first quarter of fiscal 2023 owing to record high temperatures raging through the nation, apart from continued momentum in economic activity. Consequently, power demand registered a more than 9% on-year growth fiscal 2023 despite a high base in two consecutive years. Going forward, power demand is expected to grow by 3-6% in fiscal 2024 over a high base in the previous three fiscals. Power demand is expected to outgrow at a healthy CAGR over the long term with the growth trajectory sustaining above long-term historical growth rate of 5% over the next five years.
Over the next six years, investments in generation will be led by renewable energy (RE) capacity additions, followed by investments in conventional generation and flue-gas desulphurization (FGD) installations, indicating a shift in investment flow towards enhancing clean energy supply. Capacity addition from RE sources is expected to be 165-170 GW over fiscals 2024 to 2029, and 29 GW from conventional sources over the same period. Investments in RE capacity, which are expected to triple over the next six years, in line with capacity additions, will constitute over 77% of overall generation investments. Investments in the segment will be bolstered by conventional generation investments over the next six years as new coal-based plants will be set up to meet the fast-growing peak load demand and increased installation of emission controlling FGD equipment in thermal stations. Total generation investments are expected to grow 145%-150% over fiscals 2024 to 2029 compared with fiscals 2018 to 2023.
Pros and strengths
Strong relationship with a diverse customer base: The company’s Engineering and Power Systems Solutions help it to engage with its clients in a more holistic manner. This enables it to embed itself within the institutional framework of its clients and helps in customer- retention, which leads to repeat business from them. The company’s wide client base, spread across different technology sectors like aerospace, defence, automotive, telecom, semiconductor and power utilities, motivates it to come up regularly with customer-specific products, tools and services across disparate applications. Further, it also provides comprehensive implementation and service support which ensures that it caters to end-to-end needs of its clients, which it considers to be one of the factors that enables it to attract new clients.
Strong and customer centric support services: The company provides strong and customer centric support services to its clients through bespoke trainings programs for its clients’ engineers to assure them of optimal return on their investment in its software. The company gives its clients the option of short-term and mid-term handholding for their engineers to facilitate elaborate application of the software to the intended objectives. It also supports the client in preparing study reports on the performance of their electric power installations and scope for improvement in its performance through various measures.
360-degree knowledge and experience of various industries: For high end engineering and technology industries like aerospace and defence, automotive, telecom, medical, semiconductor and power distribution which there are various sub-parts to the final product of such entity which are executed by various agencies or companies including its. The company provides skilled and trained manpower for specific sub-parts of their final product to these entities like government research organisations who execute these projects on a turnkey basis. Subject to the requirement of the customer, the company studies the requirements of the customer and the skills of its employees for deployment, which in the case of government research organisations are mostly at their locations.
Risks and concerns
Maximum revenue comes from few clients: The company’s business and revenues are substantially dependent on a few clients who have implemented its Engineering and Power Systems Solutions. The company’s top 5 clients contributed 69.32%, 86.73%, 57.21% and 41.63% of its aggregate revenues for the period ended on October 31, 2023 and financial year ended March 31, 2023, 2022 and 2021, as per its restated consolidated financial statements. It does not enter into long term contracts with its client and most of the solutions and services provided are project specific and last only upto the completion of the project. Where required, it also provides back-up support services to the engineers and technicians of the client once the project goes on stream or to the next level of activity of the specific project. As its business is currently concentrated with a select number of clients, any adverse development with such customers, including because of any dispute with, or disqualification by such major customer, may result in its experiencing significant reduction in its cash flows. If its clients are able to fulfil their requirements by employing any of its competitors, the company may lose a significant portion of its business.
Exposed to payment delays or defaults by clients: The company is exposed to payment delays and/or defaults by its clients. Its financial position and financial performance are dependent on the creditworthiness of its clients. As per its business network model, it supplies products directly to clients without taking any advance payment or security deposit against the orders placed by them. Such delays in payments may require the company to make a working capital investment. The company cannot assure that payments from all or any of its clients will be received in a timely manner or to that extent will be received at all. If a client defaults in making its payments on an order on which the company has devoted significant resources, or if an order in which it has invested significant resources is delayed, cancelled or does not proceed to completion, it could have a material adverse effect on the company’s results of operations and financial condition.
Inventory management: The company’s business model requires it to maintain a certain level of inventory to meet the present and future orders. If it underestimates the orders that it may receive it may experience inventory shortages and a loss of opportunity. Similarly, an over estimation of orders may result in over stocking leading to increased holding costs. Therefore, any mismanagement on its part to determine the optimum inventory levels may impact its operations and cause it to incur losses.
Outlook
Trident Techlabs provides technology-based solutions to the aerospace, defense, automotive, telecommunications, semiconductor, and power distribution industries. The company’s core competency is driven by robust processes and quality standards. It intends to leverage this expertise and provide engineering solutions to potential clients in defence and other non-defence sectors. The company’s domain expertise helps it to understand the customer’s requirements in a timely manner thereby leading to time and cost efficiencies for all parties in the development process. On the concern side, the company’s business is dependent on a few of its clients who contribute to majority of its revenues from operations. Any loss of business from them may adversely affect revenues and profitability.
The issue has been offered in a price band of Rs 33-35 per equity share. The aggregate size of the offer is Rs 15.11 crore to Rs 16.03 crore based on lower and upper price band respectively. On performance front, the total income of the company for fiscal year 2023 was Rs 6,824.16 lakh against Rs 2987.80 lakh total income for Fiscal year 2022, an increase of 128.40%. This increase was due to sale of Enterprise solution in the market. Moreover, profit after tax for the Fiscal 2023 was at Rs 554.81 lakh against profit after tax of Rs 64.49 lakh in fiscal 2022, a 760.30% increase. This was due to significant increase in turnover in comparison to previous year, which has led to a steep increase in its profit margins.
Going forward, the company has been successfully serving for the past several years clients, both in India and overseas, like South-East Asia, Middle East, China, Bangladesh and Sri Lanka amongst others. It plans to now build on this goodwill and reputation that has been created over the years to further deepen its international presence in countries based in the Middle East and North Africa. Corporates in these regions look upon India for technology related solutions due to the high skill and quality of its engineers and their availability at a globally competitive price. The company intends to build its presence in these regions and be a part of the technology revolution that is currently underway in these regions which has for decades relied on fossil fuel for their growth and development.
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