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The IPO for Bengaluru-based business intelligence and private market data provider Tracxn Technologies opened on October 10, 2022.
At the end of day-2, while the IPO has been subscribed 0.54 times overall, the retail portion has been subscribed 2.51 times. The IPO will be open till October 12, 2022.
The offer value is around ₹310 crore, and the offer price is in the range of ₹75-₹80 per share. This IPO is a complete offer for sale.
If you are keen on knowing whether you should subscribe on the last day, here are four things about this IPO:
1. Business
The way business is being done today is continuously evolving and becoming complex, with multiple variables at play. Therefore, accurate decision making has become more important than ever and many firms are now looking towards advanced tools to make this process effective. This is where ‘Business Intelligence’ comes into the picture, providing advanced inputs for decision making.
Tracxn Technologies is among the leading global market intelligence providers for data related to private companies.
The company, through its subscription-based platform, provides private company data for a wide range of applications from identifying M&A targets and deal diligence to analysis and tracking emerging themes across industries and markets.
It also has one of the largest coverages of private companies in emerging technology sectors including IoT, artificial intelligence, virtual reality, robotics, blockchain and electric vehicles. The company has profiled 18.39 lakh entities by June 30, 2022.
The subscription-based model provides access to single user, 3-users and 7-users. For more users, additional price has to be paid. The subscription can be quarterly or annual. The subscription ranges from $550- $2400 per month.
It covers companies across geographies and of its total clientele, 43.6 per cent is from India, 21.6 per cent from Americas, 10.4 per cent from Asia Pacific (excluding India) and 24.3 per cent from Europe, Middle East, and Africa.
2. Strengths
The company has an extensive database along with customised solutions and features allowing customers to source and track companies across sectors and geographies to address their requirements.
The Tracxn platform offers detailed coverage of company information that includes company profiles, funding rounds, capitalisation tables, financials and valuation, news, etc.
The customers of the company are mainly private market investors and investment banks, corporates, government agencies, academicians, etc.
The customer base of the company grew 30.42 per cent from 642 customer accounts at the end of March 31, 2020 to 1,092 customer accounts by March 31, 2022, and 1,139 customer accounts as of June 30, 2022.
Tracxn’s customer accounts are also diversified across geographies and no single country contributed to more than 31.60 per cent of total revenue from operations in the last three fiscals and the three months ended June 30, 2022.
Tracxn’s platform is based on a combination of technology and human analysts and can process vast amounts of data. The company claims that it has user-friendly and interactive interface coupled with a scalable back-end framework based on open-source technologies.
Due to its base in India, the company has cost advantages in comparison to its global peers and hence the pricing is competitive. The remuneration for services profession in India is $6,508 whereas in the US it is $59,616 per annum. The employee cost is around 80-85 per cent of total cost and therefore savings on this front is significant.
3. Financials and valuation
Tracxn Technologies reported ₹18.4 crore as revenue from operations and a net profit of ₹92 lakh for the quarter ended June 30,2022 against a revenue of around ₹14 crore and net loss in June 2021 quarter.
The revenue growth from FY20-FY22 has been decent with a CAGR of 19.3 per cent. The company has seen a rise in employee expense from FY20 onwards, a CAGR of 4.5 per cent (₹51.3 crore in FY20 to ₹58.5 crore in FY22) while it has managed to control other expenses in the same period.
The company has not been profitable in the past few years and therefore PE ratio cannot be used to value the company. On an EV (Enterprise value)/Sales basis, the valuation stands at 12.65x, based on FY22 sales.
The June 2022 EPS after annualising comes to ₹0.37 and the PE comes to around 217x at a price of ₹80 (upper band of offer).
4. What should investors do
In the present business scenario where the technology is playing an important role and the data being new oil, the prospects of the company look good. However, on the basis of the company’s growth in the past years, the IPO seems expensive.
Although the company was profitable in June 2022 quarter, one needs to wait and watch as to whether this trend can be sustained or not. The company does not have any listed peer in India and therefore it is difficult to compare its valuation or performance.
Risk averse investors can therefore avoid subscribing for now and wait for FY23 results to arrive at an investment decision.
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