What you must know about the SME IPO of Systango Technologies

Systango Technologies Limited is an IT services company incorporated in the year 2004 with an operating history of nearly 2 decades. The company offers software solutions that essentially enable companies to design, implement and manage their own customized digital platforms. It is a platform that is not only user friendly but also amenable to the application of data mining and advanced analytics. Some of the platforms designed by Systango Technologies Limited include Web2, Web3, and an array of mobile applications. Systango caters to a range of sectors including hospitality, PropTech, Financial services with focus on Fintech, fantasy sports and other sectors that use extensive data.

Some of the key IT solutions provided by Systango Technologies Ltd include website development and mobile app development. In fact, the company has the capability to offer solutions for iOS and Android applications. In addition, the company also offers Web3 development, DeFi (Decentralized finance), Data Engineering, blockchain implementation, Cloud computing and also covers digital Marketing. The company, in short, provides end to end solutions for digital enablement and digital transformation of companies. Such an effort allows their client companies to effectively implement innovations in their system and allows them to easily adapt to the complex needs of the new-age digital world.

Understanding NSE-Emerge IPO issue of Systango Technologies Ltd

The total size of Systango Technologies IPO is not yet known since the IPO price is yet to be finalized and is expected to happen over the weekend. What we know is that a total of 38.688 lakh shares will be offered as part of the fresh issue on the NSE Emerge segment. The stock has a face value of Rs. 10 and the market maker portion will be 1.968 lakh shares. While Hem Securities Ltd will be the lead manager to the IPO, Bigshare Services Private Limited will be the registrar to the issue. What we know is that it will be a book built issue so there will be a price band decided instead of a price point and the actual issue price will be discovered through the building of the book.

As per the terms of the offer, 50% of the net offer is reserved for the qualified institutional buyer (QIB), 15% for the HNI / NII investor while the balance 35% is reserved for the retail investors. The issue opens for subscription on 02nd March 2023 and closes for subscription on 06th March 2023 (both days inclusive). The basis of allotment will be finalized on 10th March 2023 and the refunds will be initiated on 13th March 2023. In addition, the demat credits are expected to happen on 14th March 2023 and the stock will list on 15th March 2023 on the NSE SME segment. This is the segment, in contrast to the mainboard, where IPOs of small and medium enterprises (SMEs) are incubated.

App industry overview where Systango Technologies operates

The Indian IT sector continues to grow at a rapid pace, picking up export momentum from $196 billion in FY21 to $227 billion in FY22, despite global headwinds. The IT sector alone accounts for 51% of India’s exports of services. India has also emerged as a massive start-up hub in the world incubating over 2,500 start-ups and 42 new unicorns, taking the total number of unicorns to well above the 100 mark.

Let us turn to the specific mobile app business opportunity where Systango Technology operates. For mobile app development, India has the advantage of growing demand, global footprint and competitive advantage. The combine of analytics, mobile, cloud infrastructure, artificial intelligence, machine learning and blockchain offers the biggest opportunity matrix and that is the matrix that Systango is positioned in.

Quick look at the financials of the IPO of Systango Technologies Ltd

The table below captures the key financials of Systango Technologies for the last 3 completed financial years. Just for the purpose of understanding, the 6 months data till September 2022 has been annualized for FY23, to give a comparative picture.

Data Source: Company DRHP filed with SEBI (# - annualized 6 months data)

There are few key takeaways from the financials of Systango Technologies Ltd. Firstly the profit growth and the sales growth have been impressive over the last 3 years. The company has maintained operating profit margins consistently in the range of 20% to 25% which is at par with what most of the top rung IT companies in India are earning. Above all, the ROE and the ROCE promise to be robust, even after the equity dilution assumed in the fresh issue of shares in the IPO.

As of the close of FY22, Systango Technologies Limited derived the bulk of revenues (67.39%) from the US, followed by 15.28% from the UK and 7.62% from Canada. In terms of break up of revenues by business verticals as of FY22, the company derived 31.8% from the IT sector, 15.9% from fantasy sports, 14.2% from the fintech sector and 11.1% from the hospitality sector.