Diensten Tech coming with IPO to raise Rs 22.08 crore

Diensten Tech

• Diensten Tech is coming out with initial public offering (IPO) of 22,08,000 shares of Rs 10 each in a price band Rs 95-100 per equity share.  
• The issue will open for subscription on June 26, 2024 and will close on June 28, 2024.
• The shares will be listed on NSE Emerge Platform.
• The face value of the share is Rs 10 and is priced 9.50 times of its face value on the lower side and 10.00 times on the higher side. 
• Book running lead manager to the issue is Corporate Professionals Capital.
• Compliance Officer for the issue is Vibha Wadhva.

Profile of the company

Diensten Tech is into the business of Information Technology (IT) professional resourcing, IT Consultancy, IT Training and Software AMC. It connects its clients to individuals with a specific IT skill set, manage capacity across a team, or deliver in-house technology experts to take client project to full delivery. It is a next-generation IT consultancy service provider that helps enterprises reimagines their businesses for the digital age. It provides end-to-end professional solutions to make large companies and organizations more competitive by combining in-depth knowledge of a wide range of business sectors and innovative technologies with a fully collaborative approach. It is a lifelong learning partner for enterprises, helping them build skills in emerging technologies at scale. Its Corporate Training division helps build innovative learning modules for organizations in the workplace by structuring a smarter workforce, supporting changes and driving growth.

The company, with an expert panel reaches out to a wide range of IT support and consultancy services related to IT Skilled Staffing Solutions, IT Training, Development and Capacity Building. Its trained employee base whom it hires, trains and deploys on its client sites based on type of agreements with them it has a strong national presence. It has been providing technical consultancy, training, software services and other services to large corporates of the country, multinational companies, small and medium enterprises of diversified sectors. 

It started its business under the name of JKT Consulting with consulting services in the area of SAP Software/ SAP Training Centres and Domain Consulting Services. From the year 2014-15 onwards, it started shifting its business focus towards Information Technology Consultancy, Training, Software Sale, Software AMC and related services as its core business. To further strengthen the said domain, the Company entered into a Business Transfer Agreement dated April 30, 2022 with JK Technosoft. Pursuant to this Agreement, it has acquired Professional Services & Training (PS & T) business from JK Technosoft Limited with effect from April 01, 2022.

Proceed is being used for:

• Payment of liability raised against outstanding payment of consideration for ‘Professional Services and Training Division’ business acquired from J K Technosoft, vide Business Transfer Agreement Dated April 30, 2022. 
• Meeting out the Working Capital requirements of the Company; 
• Meeting out the General Corporate Purposes; and 
• Meeting out 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 phase of 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.

According to the National Association of Software and Service Companies (Nasscom), the Indian IT industry’s revenue touched $227 billion in FY22, a 15.5% YoY growth and was estimated to have touched $245 billion in FY23. In 2022, the Indian domestic IT & Business Services market was valued at $13.87 billion and recorded a 7.4% year-over-year (YoY) growth as compared to 7.2% in 2021. IT spending in India is expected to increase to $110.3 billion in 2023 from an estimated $81.89 billion in 2021. The Indian software product industry is expected to reach $100 billion by 2025. Indian companies are focusing on investing internationally to expand their global footprint and enhance their global delivery centres.

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 $144 billion in 2023. By 2026, widespread cloud utilisation can provide employment opportunities to 14 million people and add US$ 380 billion to India's GDP.  As per a survey by Amazon Web Services (2021), India is expected to have nine times more digitally skilled workers by 2025.

Pros and strengths

Qualified and professional employee: Its manpower is a prudent mix of the experienced and young people which gives it the dual advantage of stability and growth, execution of services within time and quality. Its human capital is one of the most valuable assets of the company as their technical know-how and skill sets position it at a competitive advantage over its competitors in providing some of its services.

Strong relationship with customers: Its success lies in the strength of its relationship with its customers who have been associated with the company for a long period. Its team through their vast experience and good rapport with clients owing to timely and quality delivery of service plays an instrumental role in creating and expanding a work platform for the Company. To retain its customers, its team regularly interacts with them and focuses on gaining an insight into the additional needs of such customers.

Experienced & skill management team: It has experienced & skill management team to motivate the sub-ordinates & staff to step towards their achievements & organizational goals. With their efficient management skills & co-ordination with sub-ordinate, they are always working as a catalyst to encourage the entire team for the development & nourishment of the organization.

Risks and concerns

Dependent on top ten customers: Its top ten clients contribute around 88% of its revenues for the financial period ended December 31, 2023. Any decline in its quality standards, growing competition and any change in the demand for its services by these customers may adversely affect its ability to retain them. It cannot assures that it shall generate the same quantum of business, or any business at all, from these customers, and loss of business from one or more of them may adversely affect its revenues and profitability. However, the composition and revenue generated from these clients might change as it continues to add new clients in normal course of business.

Dependent on stability of policies and economic condition of USA: The performance and growth of its business is necessarily dependent on the stability of policies and economic conditions of USA, which may be materially and adversely affected by political instability or regional conflicts, a general rise in interest rates, inflation, change in government policies, taxation, and economic slowdown elsewhere in the world or otherwise. Economic growth is affected by various factors including movements in key imports global economic uncertainty and liquidity crisis, volatility in exchange currency rates and annual rainfall which affects agricultural production. Any continued or future slowdown in the economy of USA or a further increase in inflation could have a material adverse effect on its services and, as a result, on its business and financial results.

Disruption in information technology systems: It depends extensively on the capacity and reliability of its information technology systems, which are subject to damage or incapacitation by natural disasters, human error, power loss, sabotage, computer viruses, hacking, acts of terrorism and similar events or the loss of support services from third parties. Considering the nature of its business and the industry in which it operates, it is imperative for it to have a robust information technology platform. If its data capturing, processing and sharing cannot be integrated and/ or it experiences any defect or disruption in the use of, or damage to, its information technology systems, it may adversely affect its operations and thereby its business and financial condition.

Outlook

Diensten Tech is into the business of Information Technology (‘IT’) professional resourcing, IT Consultancy, IT Training and Software AMC. It connects its clients to individuals with a specific IT skill set, manage capacity across a team, or deliver in-house technology experts to take client project to full delivery. It is a next-generation IT consultancy service provider that helps enterprises reimagines their businesses for the digital age. On the concern side, its business is dependent on the decisions and actions of its customers, and there are a number of factors relating to its clients that are outside its control that might result in the termination or surrender of their service contract or the loss of a client. Its business may be adversely affected if any of its contracts are terminated by its customers.

The company is coming out with an IPO of 22,08,000 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 95-100 per equity share. The aggregate size of the offer is around Rs 20.98 crore to Rs 22.08 crore based on lower and upper price band respectively. On performance front, its revenue from operations increased to Rs 3,760.31 lakh fiscal year ended March 31, 2023 as compared to Rs 76.53 lakh for fiscal year ended March 31, 2022. Net Profit has increased by 1,007.75% from profit of Rs 1.45 lakh in the fiscal year ended March 31, 2022 to profit of Rs 16.06 lakh in the fiscal year ended March 31, 2023. Meanwhile, apart from expanding business and revenues, it has to look for areas to reduce costs and achieve efficiencies in order to remain a cost competitive company. It is always in search of new and innovative concepts as per the needs of its clients but while in the process it make sure of the fact that it performs the given task at the lowest possible cost through effective supervision and planning at back office.