What you must know about Tridhya Tech IPO

Tridhya Tech Ltd, is an SME IPO on the NSE which is opening for subscription on 30th June 2023. The company, Tridhya Tech Ltd, was incorporated in 2018 to develop software products and solutions for clients. Tridhya provides IT consulting services to sectors and verticals like ecommerce, real estate, transport, logistics, insurance etc. In the realm of ecommerce, the company also provides enterprise content management solutions, bespoke web management, development of mobile apps, API development, support, front end design, graphical user interface (GUI) etc. 

It handles the complete life cycle of the software solution and takes ownership end to end. This includes the product concept, product design, architecture, coding, testing and even deploying the same in the test environment and also in the real live environment. It had recently acquired Concentric IT Services Private Limited, Basic Root Technologies Private Limited, and Vedity Software Private Limited. Tridhya also has a strong global presence with clients located in Australia, Canada, Estonia, France, Germany, Israel, Italy, Japan, Mauritius, the Netherlands, Qatar, Singapore, UK, UAE, the US etc. It also has a strong domestic franchise.

Key terms of the SME IPO of Tridhya Tech Ltd

Here are some of the highlights of the Tridhya Tech IPO on the SME segment of the National Stock Exchange (NSE).

• The issue opens for subscription on 30th June 2023 and closes for subscription on 05th July 2023; both days inclusive.
   
• The company has a face value of ₹10 per share and the issue price for the fresh issue portion, which is a book built issue, has a price band of Rs35 to Rs42.
   
• The company will issue a total of 62.88 lakh shares which at the upper band of ₹42 per share aggregates to a total fund raising via fresh issue of ₹26.41 crore.
   
• There is no offer for sale in this IPO, so the entire SME IPO of Tridhya Tech Ltd is equivalent to the size of the fresh issue of shares only.
   
• The company has allocated 50% of the issue size for the QIB investors, 35% for the retail investors and the balance 15% is allocated to HNI / NII investors.
   
• Like every SME IPO, this issue also has a marketing making portion with a market maker portion allocation of 315,000 shares. Econo Broking Ltd will act as the market maker to the issue providing two-way quotes to ensure liquidity on the counter.
   
• The company has been promoted jointly by Ramesh Marand, Vinay Dangar, and M/S Tridhya Consultancy. The promoter stake in the company stands currently at 80.8%. Post the IPO, being a fresh issue of shares, the promoter stake will be get diluted proportionately 58.98%.
   
• While Interactive Financial Services Ltd will be the lead manager to the issue, Link Intime India Private Limited will be the registrar to the issue.

The minimum lot size for the IPO investment will be 3,000 shares. Thus, retail investors can invest a minimum of ₹126,000 (3,000 x ₹42 per share) in the IPO. That is also the maximum that the retail investors can invest in the IPO. HNI / NII investors can invest in a minimum of 2 lots of 6,000 shares each. The table below captures the gist.

Key dates to be aware of in the Tridhya Tech Ltd IPO (SME)

The SME IPO of Tridhya Tech Ltd IPO opens on Thursday, June 30th, 2023 and closes on Monday July 05th, 2023. The Tridhya Tech Ltd bid date is from June 30th, 2023 10.00 AM to July 05th, 2023 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is the 05th of July 2023.

It must be noted that in ASBA applications, there is no refund concept. The total application amount is blocked under the ASBA (applications supported by blocked amounts) system. Once the allotment is finalized, only the amount is debited to the extent of the allotment made and the lien on the balance amount is automatically released in the bank account.

Financial highlights of Tridhya Tech Ltd

Financial numbers of the company are available in full only for the full fiscal year FY22 and for the year to December 2022. That is not comparable and data for previous years is not comparable. What stands out about the company is the huge spurt in borrowings in the latest year to ₹30.98 crore, which is rather surprising for a software company that is purely service drive and project driven. In FY23 alone, the debt has grown 4-fold, which has substantially increased the solvency risk for any investment in the company.

The profit margins on a net basis are fairly impressive at around 20% on a sustained basis, but that is common for many small sized IT companies. It is the huge surge in debt that is a concern for the company and does raise questions about its ability to service a debt of this size. In fact, in the latest period, the borrowings are nearly 50% more than the net worth of the company.

The weighted average EPS of the last 3 years is ₹5.67 which discounts the IPO upper band price at around 8 times. That is not much of a concern, although the levels of debt that we had mentioned before remains a major concern for the company. It must be noted here that the company is in the more generic software space where there is a lot of competition and the largely unorganized sector is also active in this space. Hence margins will also be under pressure. For investors, the big worry is the nature of the niche the company operates in and the level of debt. Investors must keep this two factors in mind before apply for the IPO.