IPO listed on 28 Aug'24
Orient Technologies Ltd
Minimum Investment
₹ 14,832 / 72 shares
Grey market premium
₹ 30 (15% premium)
Issue price
₹ 206
Listing price
₹ 288
Listing gains
82 (40%)
Listing on
Aug 28, 2024
Our Verdict:
Neutral
- Orient Technologies Ltd (OTL) has been in the business of IT solutions for over 25 years, yet its profits remain modest. Despite this, with the burgeoning data center market in India, there is a potential for substantial growth. As of June 2024, the firm’s order book is valued at Rs 101 crore.
- OTL is venturing into the Device-as-a-Service (DaaS) market, which is currently in its nascent stages and highly fragmented in India. It remains uncertain whether this new venture will be successful.
- From a valuation standpoint, the IPO is attractively priced with a Price-to-Earnings (P/E) ratio of 21x based on FY24 earnings. Additionally, a grey market premium (GMP) of 15% indicates the possibility of a positive debut on the bourses.
- Despite strong industry tailwinds, much hinges on the company’s ability to leverage these opportunities effectively. Therefore, investors should monitor the company's capital expenditure plans and financial outcomes over the next two quarters before making an investment commitment for the long term.
About the company
Founded in
4 Jul'97
Managing director
Ajay Sawant
- OTL is an IT solutions provider specializing in IT infrastructure, IT-enabled services (IteS), cloud and data management. It provides a comprehensive suite of services that include data center solutions, managed services, multi-vendor support, and cloud migration. The firm is currently broadening its offerings to encompass IT facility management, network operations centres (NOC), cybersecurity, data management, and DaaS services.
- OTL serves a diverse range of industries, such as banking, financial services and insurance, pharmaceuticals, and healthcare. Its clientele includes notable names like Bluechip, Jyothy Labs, Tradebulls, Coal India, and Mazagon Dock.
STRENGTHS
- Consistent Growth: OTL has maintained a steady growth rate, with operating revenue showing a compound annual growth rate (CAGR) of 14% from FY22 to FY24. During this period, both EBITDA and net profit have also expanded, growing at a CAGR of 11%.
- Impressive Return Metrics: OTL boasts impressive return ratios, with a Return on Equity of 27.26% and a Return on Capital Employed of 28.42% as of FY24.
- Pro-Shareholder Initiatives: OTL has distributed dividends over the past three years: 2.23% in FY22, 22.86% in FY23 and 17.14% in FY24. A dividend policy was established in October 2023, reflecting the company's solid financial standing and positive outlook.
RISK FACTORS
- Customer Concentration: OTL relies significantly on a small group of clients, with its top 10 clients contributing 38%, 32%, and 39% of total revenues in FY24, FY23, and FY22, respectively. The loss of such clients or a reduction in their revenue contribution could materially affect the company’s financial health.
- High Debt Levels: OTL is burdened with significant debt, totaling Rs 22 crore as of June 2024. This indebtedness subjects them to various risks that could negatively affect their business operations and financial health.
- Cash Flow Concerns: OTL has experienced negative net cash flows from investing, and financing activities in the past. Continued negative cash flows could negatively impact its operational capabilities and future growth.
- Dependency on Government Contracts: A significant portion of OTL’s orders come from government-related entities, secured through competitive bidding. The firm’s performance could suffer if it fails to win bids or secures contracts at reduced values.
Issue details
Issue type
Mainstream
Issue size
₹ 214.76 crore
Fresh Issue
₹ 120 crore
OFS
₹ 94.76 crore
Price range
₹ 195 - 206
Lot size
72 shares
Issue Objective
OTL intends to utilise the proceeds from the net issue towards for the following purposes:
- Purchase of an office premise in Navi Mumbai;
- Covering capital expenditure needs, including (i) acquiring equipment to establish a Network Operating Centre (NOC) and Security Operation Centre (SOC) in Navi Mumbai; (ii) buying equipment and devices to provide DaaS offerings; and
- General corporate purposes.
Dates
Bidding open
21 Aug'24
Bidding close
23 Aug'24
Allotment date
26 Aug'24
Refund date
27 Aug'24
Listing
28 Aug'24
IPO Reservations
Qualified institutional buyers
<50%
Non-institutional investors
>15%
Retail individual investors
>35%
Read the Offer Document
© 2024 by Liquide Solutions Private Limited, SEBI Registered Research Analyst (Registration number - INH000009816)
This document has been issued by Liquide Solutions Private Limited for information purposes only. It does not have regard to specific investment objectives, financial situation and the particular needs of any specific person who may receive this document. Investors should seek personal and independent advice regarding the appropriateness of investing in any of the funds, securities, other investment or investment strategies that may have been discussed or referred herein and should understand that the views regarding future prospects may or may not be realized. In no event shall Liquide Life Private Limited and / or its affiliates or any of their directors, trustees, officers and employees be liable for any direct, indirect, special, incidental or consequential damages arising out of the use of information / opinion herein.