Trafiksol ITS Technologies coming with IPO to raise Rs 44.87 crore

Trafiksol ITS Technologies

• Trafiksol ITS Technologies is coming out with an initial public offering (IPO) of 64,10,000 equity shares in a price band Rs 66-70 per equity share.  
• The issue will open on September 10, 2024 and will close on September 12, 2024.
• The shares will be listed on SME Platform of BSE.
• The face value of the share is Rs 10 and is priced 6.60 times of its face value on the lower side and 7.00 times on the higher side.
• Book running lead manager to the issue is Ekadrisht Capital.
• Compliance Officer for the issue is Dipak Kumar Pandey.

Profile of the company

The company was incorporated on March 05, 2018, under the provisions of the Companies Act, 2013 vide Certificate of Incorporation issued by the Registrar of Companies, Central Registration Centre, with an object of providing comprehensive solutions for Intelligent Transportation Systems and Automation, including software development, consultancy, and supply services. Its offerings encompass ready-made and customized software solutions, operating systems, business applications, and computer games across all platforms. Its consultancy services focus on analyzing user needs and problems to deliver tailored software solutions, including made-to-order software and ongoing maintenance. The company excels in every aspect of Intelligent Transportation Systems, spanning from initial requirements assessment and solution identification to seamless implementation, business integration, and system fine-tuning. With a wealth of expertise and adaptable strategies, it assists its clients in revitalizing and reshaping their enterprises for unparalleled success. Later on, company was converted into public limited company, the name of the Company was changed to ‘Trafiksol ITS Technologies Limited’ and fresh Certificate of Incorporation dated May 18, 2024 was issued by the Registrar of Companies, Central Processing Centre.

TrafikSol ITS Technologies has garnered a robust standing for providing top-tier industrial services to clientele throughout India. The company distinguishes itself by adeptly harmonizing business strategies with personnel and procedures, thereby guaranteeing that clients' strategic planning and execution yield favorable outcomes for their organizations. With an extensive array of consulting and design offerings, the company specializes in the design, administration, and incorporation of Intelligent Transportation Systems (ITS) for roads and tunnels. Its solutions are characterized by their security, resilience, and scalability, custom-crafted to precisely match the distinct requirements of clients in the domains of road infrastructure, tunnel management, and urban environments.

The company is a specialized EPC (Engineering, Procurement, and Construction) contractor that undertakes a variety of projects in fields such as Advanced Traffic Management Systems (ATMS), Toll Management Systems (TMS), and Tunnel Management Systems. As an EPC contractor, Trafiksol provides a full spectrum of services that encompass the design, engineering, procurement, and construction of large-scale infrastructure projects. This comprehensive approach ensures that all phases of the project are seamlessly integrated and managed by a single entity. Additionally, Trafiksol often handles the commissioning phase, ensuring that all systems are fully operational and meet the specified requirements before project completion. This turnkey solution is designed to streamline project execution, minimize risks, and deliver high-quality, efficient infrastructure solutions tailored to meet the specific needs of their clients.

Proceed is being used for:

• Purchase of software
• Repayment/prepayment, in part or full, of certain of its borrowings
• Meeting working capital requirements
• General corporate purpose

Industry Overview

India has the second-largest road network in the world, spanning a total of around 6.7 million kilometres (kms). This road network transports 64.5% of all goods in the country and 90% of India’s total passenger traffic uses road network to commute. Road transportation has gradually increased over the years with improvement in connectivity between cities, towns and villages in the country. 

India's road network has grown 59% to become the second largest in the world in the last ten years. India has nearly 66.71 lakh km of total road network and the National Highways network alone stood at 146,145 km in CY 2023. India had a total of 97,830 km of National Highways in 2014-15 which has expanded to 146,145 km by December 2023. In FY24 (until November), cumulatively 5,248 km of National Highways have been constructed. A total of 202 national highway projects worth Rs 79,789 crore ($9.59 billion) are at the implementation stage in the country and are 6,270 km in length.

The Union Minister of State for Road, Transport and Highways has stated that the Government aims to boost corporate investment in roads and shipping sector, along with introducing business-friendly strategies, which will balance profitability with effective project execution. The Government, through a series of initiatives, is working on policies to attract significant investor interest. A total of 600 plus sites are planned to be awarded by 2024-25 of which 144 Wayside Amenities (WSAs) have already been awarded. In the next five years, National Highway Authority of India (NHAI) will be able to generate Rs 1 lakh crore ($14.30 billion) annually from toll and other sources. 

Pros and strengths

Deployment agnostic: Its cutting-edge platform has been meticulously designed to cater to diverse client requirements, ensuring flexibility and agility at every stage. With a view to providing seamless integration and a superior user experience, it has ensured that its platform is highly deployable across a wide range of options, including cloud, on-premises and hybrid models. Its platform has been tailored to align with the regulatory and compliance requirements of central banks, offering a truly agnostic solution that can be easily adapted to local guidelines. Whether it is cloud-based, on-premises, or a hybrid deployment that its clients seek, it can seamlessly integrate, provide the flexibility and scalability its clients need to thrive in the digital era.

Established relationships with customer base: It strives to improve its performance and ability to build longstanding relationships with its customers. This has been made possible by virtue of its adaptability to changing customer needs and its ability to service product lines right through their life cycle. Its product portfolio has helped it forges strong relationships with its major clients. It has established and will continue to focus on strengthening longstanding relationships with well-known customers across various industries that it caters to. It has a number of companies as its customers across industry vertical, thus indicating the quality of its client base. The varied applications of its products have helped it builds a wide customer base across many end-use industries.

Ability to achieve financial closure for projects: Commercial operation of a project is typically commenced only upon achieving financial closure and its ability to achieve financial closure for its projects is demonstrated by the number of projects completed by it over the past years. It finances the payments to be made to the authorities for its projects by way of fund based as well as non-fund based loan facilities from banks/financial institutions. Its ability to obtain adequate financing for its projects provides it with increased availability of funds for its business development and other expansion activities. 

Risks and concerns  

Not entered into any long-term contracts with customers: It does not have any long-term contracts with its customers and it provides services on basis of regular work order with its customers which could adversely affect the business of the company. It caters its services on an order to order basis. Its customers can terminate their relationship with it by giving notice and as such terms and conditions as mutually agreed upon, which could materially and adversely impact its business. Although it has satisfactory business relation with its customers and has received business from them in the past and will regularly receive the business in future also but there is no certainty that it will receive business in future from them and may affect its profitability.

Dependent on road projects: Its business is substantially dependent on road projects in India undertaken or awarded by governmental authorities and other entities funded by the Government of India or State Governments. It currently derives almost all of its revenues from EPC contracts entered with Companies who in turn enter into contract with a limited number of government entities. These include NHAI, MSRDC, RIDCOR, RSRDC, MJPRCL and HRBC. There can be no assurance that the Government of India or the State Governments will continue to place emphasis on the road infrastructure sector. In the event of any adverse change in budgetary allocations for infrastructure development or a downturn in available work in the road infrastructure sector or de-notification of toll collection resulting from any change in government policies or priorities, its business prospects and its financial performance, may be adversely affected.

High working capital requirements: The company is engaged in EPC business of providing advanced IT solutions for Advanced Traffic Management, Toll Management, Tunnel Management and so on. For the FY 2023-24 the company’s net working capital requirement is Rs 3,967.24 lakh as against the Rs 1,478.76 lakh as on March 31, 2023. If it is unable to effectively manage its working capital requirements, it may adversely affect its growth, profitability, and overall business operations.

Outlook

Trafiksol ITS Technologies is engaged in the business of offering a comprehensive range of consulting and design services. The company specializes in Road and Tunnel ITS design, management, and integration. It provides secure, resilient, and scalable industrial solutions tailored to meet the specific needs of its clients in the areas of Road, Tunnel, and Cities. Moreover, the company offers customized ITS design solutions, including procurement, supply, installation, testing, and commissioning. The company specializes in the entire lifecycle of Intelligent Transportation Systems, from requirements analysis and solution selection to implementation, business transition, and systems optimization. On the concern side, it faces significant competition from larger multinational corporations (MNCs) that have the financial strength to secure contracts by offering prices that would be unsustainable for smaller firms. These MNCs can afford to take on projects at lower margins or even at a loss, leveraging their extensive resources and diversified revenue streams to absorb the financial hit. This competitive disadvantage may lead to a loss of potential contracts, negatively affecting its financial condition and overall results of operations.

The company is coming out with a maiden IPO of 64,10,000 equity shares of Rs 10 each. The issue has been offered in a price band of Rs 66-70 per equity share. The aggregate size of the offer is around Rs 42.31 crore to Rs 44.87 crore based on lower and upper price band respectively. On performance front, total income for the financial year 2023-24 stood at Rs 6,608.50 lakh whereas in Financial Year 2022-23 the same stood at Rs 3,675.00 lakh representing an increase of 79.82%. The main reason of increase was increase in the volume of business operation of the company. Moreover, its profit after tax for the year increase by 153.07% from net profit of Rs 477.85 lakh in financial year 2022-23 to net profit Rs 1209.30 lakh in financial year 2023-24. Meanwhile, its defense segment is dedicated to enhancing the capabilities of defense organizations through reliable and innovative solutions. It ensures operational readiness in defense aviation by providing a wide range of critical aircraft spares. Its maritime support services, including deep-sea system deployment and maintenance, are designed to meet the rigorous demands of naval operations. For ground support, it delivers essential equipment and maintenance services to keep systems operational and ensure mission readiness. By integrating advanced technologies and strengthening cybersecurity measures, it enhances decision-making and operational effectiveness in defense applications.