Paramatrix Technologies coming with IPO to raise Rs 33.84 crore

Paramatrix Technologies

• Paramatrix Technologies is coming out with an initial public offering (IPO) of 30,76,800 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 110 per equity share.
• The issue will open on August 27, 2024 and will close on August 30, 2024.
• The shares will be listed on SME Platform of NSE.
• The share is priced 11 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Inventure Merchant Banker Services.
• Compliance Officer for the issue is Shubhada Mahendra Shirke.

Profile of the company

Established in 2004, Paramatrix Technologies (formerly known as Paramatrix Technologies Private Limited) is an ISO 9001:2015 and ISO 27001:2013 certified company. It is a IT Software Services Company, focusing on making software applications and technology solutions for large enterprises and mid-size businesses. The company’s core competency lies in understanding its clients’ unique business processes, culture and their requirements across diverse industry segments and creating software applications and technology solutions, which works as an accelerator to enhance their operational efficiency and foster increased value production.

The company has successfully served clients in BFSI sector, Retail, Manufacturing, Sports, Pharmaceuticals, and Logistics. Paramatrix, backed by its promoters and employees, possesses extensive knowledge and expertise in Digital Transformation, development of software applications & implementation of technology solutions, covering various platforms and frameworks such as Microsoft.Net, Microsoft SQL, Microsoft Azure Cloud, AWS Cloud, Cross-Platform Mobile Application Development Technologies, Open-Source Technologies (Java, Python etc) and more. To serve customers better, Paramatrix has aligned and categorized Digital Transformation Services and Managed Services as its two focused service line pillars. With a unique blend of domain knowledge, technological expertise, and project management proficiency, the company is well-equipped to execute projects successfully.

Proceed is being used for:

• Capital expenditure for building its infrastructure
• Investment in its suite of accelerators to enhance its service offerings
• Geographical expansion in Middle East and East Asia
• General corporate purposes

Industry Overview

The Information Technology (IT) industry stands as the driving force behind the contemporary digital era, orchestrating an unprecedented technological revolution that has permeated every facet of its daily lives. In this intricate tapestry of innovation, the IT sector encompasses a vast array of disciplines, ranging from hardware and software development to cutting-edge technologies like artificial intelligence, cloud computing, and the Internet of Things. At its core, the IT industry is the engine propelling the evolution of global economies, reshaping business paradigms, and redefining the parameters of human connectivity. In an era where the convergence of computing power, data analytics, and connectivity is reshaping the world, the IT industry is not merely a collection of companies; it is an ecosystem of ideas, creativity, and problem-solving. 

Going digital has been India’s growing strength which has not only empowered India but also opened a plethora of related businesses & opportunities. India’s ambition of a trillion-dollar digital economy is expected to catapult it into the Top 5 global economies. The IT industry added 2.9 lakh new jobs taking the industry’s workforce tally to 5.4 million people in FY23. The market size of the IT industry is a testament to its pervasive influence on the global economy. As of the latest available data in 2023, the sheer scale of the industry is staggering, with trillions of dollars in valuation. This colossal valuation is fuelled by a myriad of factors, including the insatiable demand for digital solutions, the proliferation of smart devices, and the transformative impact of emerging technologies. The IT industry's economic footprint extends across diverse sectors, from finance and healthcare to manufacturing and entertainment. Hardware manufacturing, software development, IT services, and telecommunications collectively contribute to the industry's vast market presence. As businesses worldwide increasingly recognize the imperative of digital transformation, the IT industry's market size continues to expand, driven by a relentless pursuit of innovation and efficiency

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. 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

Understanding and catering to client's unique needs: The company takes the time to really get to know its clients. It makes an effort to understand what makes their business special and customise its services to meet their specific needs. This personalized approach ensures that its solutions are a perfect fit, addressing the individual challenges and goals of each client and helps it to get repetitive business from them.

Meaningful collaboration with clients and partners: The company works closely with its clients and partners in a way that goes beyond just getting the job done. Its collaborative approach involves active communication and involvement, ensuring that everyone is on the same page. This teamwork extends to its global network of partners, enhancing its capabilities and allowing it to deliver comprehensive solutions through shared expertise in the cost-efficient manner.

Trusted by leading brands present globally: The company has been serving various corporates globally having recognised brands and earned their trust because it consistently delivers high-quality solutions. Many of these corporates are its repeat customers over last few years and few of them forms part of its top 10 customers during last 3 years. Its services are trusted and relied upon by organizations worldwide, making it a partner of choice for their businesses operating in various industries and markets.

Risks and concerns  

Global operations expose a multitude of legal and regulatory requirements: As the company provides services to clients globally, including in regions such as the USA, UK, HK, Singapore, etc., the company is subject to a wide array of international legal requirements, which at times may be conflicting. These regulations span diverse areas, including import/export controls, content requirements, trade restrictions, environmental considerations (including electronic waste), tariffs, taxation, sanctions, government affairs, anti-corruption measures, whistleblowing, internal and disclosure control obligations, data protection and privacy, Labour relations, and specific regulatory demands tied to its clients’ industries. Failure to comply with these regulations in the course of its business could lead to various consequences such as fines, penalties, criminal sanctions against it or its officers, disgorgement of profits, business restrictions, and adverse effects on its reputation. Given the diverse legal systems across the countries in which it operates, local laws may not provide sufficient defense to uphold its rights. Furthermore, unethical acts by any of its employees, partners, or affiliated individuals could pose risks to its reputation and result in regulatory actions against it.

High working capital requirement: The company needs to continuously invest in people and infrastructure to grow its business. Its business requires significant amount of working capital and major portion of its working capital is utilized towards credit offered to its customers and payment of salaries to employees. Its trade receivables for the March 31, 2024 were Rs 449.80 lakh and its employee cost for March 31, 2024 were Rs 1,676.11 lakh. The company expects this to grow further in the coming years as it expands its business in new geographies and increase its business. The results of operations of its business are dependent on its ability to effectively manage its employee cost and trade receivables. To effectively manage its trade receivables, the company must be able to accurately evaluate the credit worthiness of its customers and ensure that suitable terms and conditions are given to them in order to ensure its continued relationship with them. A liquidity crunch may also result in increased working capital borrowings and, consequently, higher finance cost which will adversely impact its profitability.

The process of product development is expensive, time-consuming, and uncertain: The company’s product development entails a costly, intricate, and time-consuming process, necessitating a prolonged period for the realization of the investment made. It primarily focuses its investment and attention on product development and related opportunities. Investments in new technology and processes inherently involve uncertain outcomes, and the commercial success of its endeavors depends on various factors, including the level of innovation in the developed software products and services, as well as effective distribution and marketing strategies. The expenditure associated with these initiatives may negatively impact its operating results if not balanced by corresponding and timely increases in revenue. To maintain its competitive position in the market, the company must continue allocating a significant number of resources to its research and development department. The termination of a product in development, in which it has invested significant resources, may negatively impact its prospects, and fail to yield any return on investment. Consequently, this could adversely affect business, operating results, and financial condition.

Outlook

Paramatrix Technologies was founded in 2004 and offers software applications and technology solutions for large and medium-sized companies. The company uses its ‘PACE’ (Paramatrix Application Core Engine) framework to build and deploy digital applications much faster. Using this rapid application development framework as an accelerator the company can deliver Digital Application Development projects with savings of 20 to 60% in time and money depending on the project scale. On the concern side, the company’s global operations expose the company to a multitude of legal and regulatory requirements, some of which may conflict, and any infringement of these regulations could adversely affect its business. Moreover, failure to adapt to evolving customer needs and to embrace & develop new technologies could have detrimental effects on its business, financial standing, and operational results.

The company is coming out with a maiden IPO of 30,76,800 equity shares of Rs 10 each at a fixed price of Rs 110 per share to mobilize Rs 33.84 crore. On performance front, the revenue from operations for the FY 2024 is Rs 2,799.48 lakh as compared to Rs 2,836.48 lakh during the FY 2023 showing a decrease of 1.30%. Profit after tax decreased to Rs 413.17 lakhs for the FY 2024 from Rs 707.56 lakhs in FY 2023. Decrease is due to onetime other income recorded in FY 23, the company recorded PAT margin of 14.45% as against 21.23% for FY 2023. In the company’s Global Business Strategy, the company’s goal is to broaden its footprint, both in new industries and untapped geographical areas like Middle East and East Asia. It aims to expand and increase its presence among large corporate customer accounts. This includes bolstering its sales teams worldwide like UAE and Japan refining its marketing strategies, and forming strategic partnerships to extend its distribution channels. With regards to strategic partnerships, the company is actively pursuing opportunities to collaborate with key stakeholders in various markets, including Japan. These partnerships aim to strengthen its market position and capitalize on local market insights and expertise. The company is currently in discussions with local entities in Japan for outsourcing the work to offshore. The company is also participating in marketing events, trade shows, conferences, and seminars as part of its marketing strategy.