SA Tech Software India coming with IPO to raise Rs 23.01 crore

SA Tech Software India 

• SA Tech Software India is coming out with initial public offering (IPO) of 39,00,000 shares in a price band Rs 56-59 per equity share.
• The issue will open on July 26, 2024 and will close on July 30, 2024.
• The shares will be listed on NSE Emerge Platform.
• The face value of the share is Rs 10 and is priced 5.60 times of its face value on the lower side and 5.90 times on the higher side.
• Book running lead manager to the issue is GYR Capital Advisors 
• Compliance Officer for the issue is Arnika Choudhary.

Profile of the company

SA Tech Software India  (SAT) centered in Pune and Bengaluru, is an IT consulting Subsidiary Company of foreign body corporate SA Technologies Inc, USA promoted by Mr. Manoj Joshi and Ms. Priyanka Joshi; some diligent promoters who have more than two decades of experience in Information Technology. It is an AI-driven IT consulting company, offering scalable IT outsourcing solutions and Global Development Centers (GDCs) that enhance business agility and efficiency. Its services range from individual support to largescale enterprise transformations, providing the flexibility to scale from 1 to 1000 professionals as needed. Its GDCs drive innovation and R&D, deliver cost-efficient solutions, ensure stringent quality assurance, and provide 24/7 operations. 

The company has experience of catering to global as well as domestic customers since more than a decade. The company has entered into a Service Partnership with its holding Company to cater to the needs of foreign clients. It services to a diverse portfolio of clients ranging from small to Enterprise ones, offering products and digital solutions. With the benefit of global presence, it brings together diverse teams from different parts of the world with multiple skills to collaborate in real time and solve complex technological problems for its clients.

It has a diversified global presence across USA and Canada because of its Parent and Group Companies. It has had long lasting relationships with some of its clients who have shown deeper trust in its services. Due to the long- standing relationships with some of its enterprise clients, it has been able to garner the trust of other clients and has provided a balanced mix of stability and growth with revenue stability and further growth opportunities. 

Proceed is being used for:

• Prepayment or repayment of all or a portion of certain outstanding borrowings availed by the company
• Funding the working capital requirements of the company
• General corporate purposes 

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 government has been supportive of setting up global capability centres, providing various incentives and initiatives to attract foreign investment. The government has set up special economic zones (SEZs) where companies can set up their GCCs and have access to various tax incentives and other benefits. The government has also implemented policies to promote innovation and research and development, which has helped captive centres in India to develop cutting-edge technologies and services.

Pros and strengths

Scalable Business Model: It designs, develops, deploys and maintain IT solutions for end user utilities and pre-compiled application stack. Its deep expertise in system design and architecture has helped it innovate and build bespoke solutions. Further, its proprietary designs are cloud native which, in addition to technological benefits, are capable of catering to the evolving needs of Clients.

Customer- Centric Approach: There is a significant opportunity within its current client base to increase the use of its solution offerings and further develop deeper, long-term strategic engagements. It prioritizes understanding and aligning with each client's unique business objectives. Its customer-centric approach ensures that its solutions are tailor-made to meet and exceed its clients' expectations, fostering long-lasting partnerships built on commitment and trust.

Marque set of clients: It has a diversified global presence across USA and Canada because of its Parent and Group Companies. As of September, 2023 it has served some of the big clients across different parts of the world. It has had long lasting relationships with some of its clients who have shown deeper trust in its services. Due to the longstanding relationships with some of its enterprise clients, it has been able to garner the trust of other clients and has provided a balanced mix of stability and growth with revenue stability and further growth opportunities.

Risks and concerns

Does not entered into any long-term contracts with customers: It presently does not have any long-term or exclusive arrangements with any of its customers. It cannot assure that it will be able to sell the services it has historically supplied to such customers. In the event its competitors’ services offer better margins to such customers or otherwise incentivize them, there can be no assurance that its customers will continue to place orders with the company.

Business derives a major portion of its revenue from users in India & Overseas: A major portion of its income from operations is from sales to users in India & overseas. It cannot assures that it can maintain the historical levels of orders from its users and dealers or that it will be able to find new customers or dealers in case it loses any of them. Further, major events affecting its customers includes dealers, such as adverse market conditions, regulatory changes, adverse cash flows, change of management, mergers and acquisitions by customers could adversely affect its business. If any of its customers including dealers become bankrupt or insolvent, it may lose some or all of its business from that customer and its receivables from that customer may have to be written off, thus impacting its cash flows and financial condition.

Working capital requirements: Its business requires significant amount of working capital and major portion of its working capital is utilized towards employee cost. As on June 30, 2024, it has Rs 861.29 lakh outstanding working capital loan. Its growing scale and expansion may result in increase in the quantum of current assets. Its inability to maintain sufficient cash flow, credit facility and other sourcing of funding, in a timely manner, or at all, to meet the requirement of working capital or pay out debts, could adversely affect its financial condition and result of its operations. Further, it has high inventories and outstanding amount due from its debtors which may adversely affect its cash flows and its business operations.

Outlook

SA Tech Software India centered in Pune and Bengaluru, is an IT consulting Company promoted by its diligent promoters who have more than two decades of experience in Information Technology. It services to a diverse portfolio of clients ranging from small to enterprise ones, offering products and digital solutions. With the benefit of global presence, it brings together diverse teams from different parts of the world with multiple skills to collaborate in real time and solve complex technological problems for its clients. On the concern side, it operates in an intensely competitive industry that experiences rapid technological developments, changes in industry standards, and changes in customer requirements. Its competitors include large IT consulting firms, captive divisions of large multinational technology firms, large Indian IT services firms, in-house IT departments of large corporations, in addition to numerous smaller local competitors in the various geographic markets in which it operates.

The company is coming out with a maiden IPO of 39,00,000 equity shares of Rs 10 each. The issue has been offered in a price band of Rs 56-59 per equity share. The aggregate size of the offer is around Rs 21.84 crore to Rs 23.01 crore based on lower and upper price band respectively. On performance front, the revenue from operations of the company for fiscal year 2024 was Rs 7,188.22 lakh against Rs 5,639.31 lakh for Fiscal year 2023. An increase of 27.47% in revenue from operations. Profit after tax for the Fiscal year 2024 was at Rs 368.86 lakh against profit after tax of Rs 108.59 lakh in fiscal year 2023. An increase of 239.68%. Meanwhile, the focus of its strategy is to build capacity and capabilities necessary to develop and increase the value of the business by growth across multiple dimensions, including strengthening its relationships with its existing clients, expansion of its digital engineering and embedded capabilities, strengthening its service delivery.