Orient Technologies Company is coming up with its IPO fresh issue of Rs. 120.00 crores and offer for sale worth Rs. 94.76 crores totalling Rs. 214.76 crores, which will open on 21^st August 2024. The issue will close on 23^rd August 2024 and be listed on the exchange on 28^th August 2024. In this article, we will look at Orient Technologies Limited IPO Review and analyze its strengths and weaknesses. Continue reading to learn about the company.

Orient Technologies Limited IPO – About the Company

The company was incorporated in 1997. Orient Technologies is into IT solutions. They offer a range of services including IT-enabled services, IT infrastructure solutions, and cloud and data management services. The company collaborates with technology partners like Fortinet, Nutanix, and Dell to deliver customised solutions for clients across various industries.

Their client base includes public and private sector entities in banking, financial services, insurance (BFSI), healthcare, and government sectors. The company has shown steady financial growth over the past three fiscal years, with revenue increasing across all business segments. Their largest revenue contributor is the IT Infrastructure Products and Services segment.

The company is led by experienced promoters and has a strong management team. They have received several quality certifications and operate primarily in India, with offices in major cities and a branch in Singapore. As of June 30, 2024, they employed 1,482 permanent staff and had an order book of Rs. 101.20 crore. 

Orient has even ventured into DaaS (Device as a Service) providing computer devices attached to software through a pay-per-use model.  

About The Industry

The company operates in the IT services industry in India, experiencing steady growth. The government has allocated Rs. 21,385 crore to the IT ministry in the 2023-24 budget, a 29% increase from the previous year. This budget was focused on semiconductor manufacturing, digital payments, and electronics production. 

The domestic IT services market is projected to grow at a 7-9% CAGR over the next five years, reaching Rs. 2 lakh crore by fiscal 2028 on digital share. This is driven by a growth in digital transformation and the need for businesses to differentiate themselves using technology. The government’s Digital India initiative also presents opportunities for IT service providers in areas like e-governance and cloud platforms.

The data center industry in India is growing rapidly, with an expected CAGR of 30-35% between fiscal 2024 and 2027. This growth is fueled by increasing 5G rollouts, data consumption, and advancements in technologies like Big Data, IoT, AI, and Machine Learning. Government initiatives such as the data protection bill and data localization regulations are also contributing to this growth.

Orient Technologies Limited IPO – Financial Highlights

Orient Technologies reported revenue from operations of Rs. 602.89 crores in FY24, up 12.66% from Rs. 535.10 crores in FY23. Net Profits in FY24 were Rs. 41.44 crore, an improvement of 8.22% from Rs. 38.71 crore in FY23. There was an improvement in Other expenses and an increase in revenue which has contributed to its increase in net profit.

The earnings per share in FY24 was Rs. 11.80 per share which is a moderate increase of 7.86% from the previous year’s Rs. 10.94 per share. 

The Gross profit margin was 18.36% in FY24 and 19.17% in FY23. The margins after non-operating expenses which is PAT are maintained by more than 5%. The PAT margin was at a decent 6.87% in FY24, down from 7.16% in FY23.

The RoE stood at 34.36% in FY23 and 27.26% in FY24. There was a slight decrease in returns due to a higher increase in reserves compared to the profit increase. The company’s RoCE was 28.42% in FY24 compared to 31.45% in FY23.

They recognise revenue from operations under IT Infrastructure which contributes 51.84% to operating revenues, Cloud and Data Management services account for 25.43% and ITeS accounts for 22.06% in FY24. 

Orient Technologies Limited IPO – Key Players 

Orient Technologies listed peers are Dynacons Systems Solutions Limited, HCL Technologies Limited, Wipro Limited, LTIMindtree Limited, Allied Digital Services Limited, Dev Information Technology Limited, Tech Mahindra Limited, and Silicon Rental Solutions Limited. 

Compared to its peers, Orient’s EBITDA Margin is at the lower end of its peers. The peers range from 8% to 61% and Orient has 9.39% in FY24. Orient’s net profit margin stood at 6.87% compared to peers ranging from 4.61% to 20.39% in FY24.  Orient’s margin is at the lower end of its peers. 

The current ratio of Orient Technologies stood at 2.24 times compared to its peers range of 1.39 times to 4.04 times in FY24. Orient’s current ratio is on par with its peers.

Orient Technologies Net capital turnover ratio was 3.89 times which is comparatively better than its peers. The range stood at 2.12 times to 6.29 times. The company has debt service coverage ratio is better than its peers. 

Orient’s RoE stands higher and RoCE outperforms its peers excluding Dynacons. Overall, the company’s performance is on par with its peers, in some of the ratios the company outperforms and underperforms some of them.

Strengths of the Company

1. Mixed Customer Base: The company has built a diverse customer base across industries since 1997. They serve prominent public and private sector entities in banking, IT, healthcare, and government sectors. This wide customer base demonstrates their ability to meet varied client needs.
2. Diversified Product services: They offer many IT solutions including infrastructure which also involves Data centre solutions, IT-enabled services, and cloud management. The company’s product portfolio continues to expand, with recent additions in cyber-security solutions. This diverse offering allows them to cater to various client requirements.
3. Financial Performance: The company has experienced steady financial growth. Their revenue from operations grew at a CAGR of 13.57% between Fiscal 2022 and 2024. They have also maintained consistent profitability, and their ability to manage costs effectively.
4. Experienced Management: They have strong leadership with experienced promoters and a skilled management team. The company’s board includes industry experts who guide operations. This leadership strength contributes to their business growth and strategic decision-making.
5. Wider Presence: The company has a wide geographical presence in India with offices in major cities. They also have a branch in Singapore, indicating their potential for international expansion. This broad presence allows them to serve clients across different regions effectively.

Weaknesses of the Company

1. Reliance on Few Customers: The company relies heavily on a few customer industries for most of its revenue. This concentration makes them vulnerable to industry-specific downturns. A decline in key sectors could significantly impact their business and financial performance.
2. Long-Term Customer Contracts: They don’t have long-term contracts with customers. Most of their business comes through short-term purchase orders. This lack of long-term commitments could lead to unpredictable revenue streams and potential loss of key customers.
3. Higher level of outstanding receivables: The company has high levels of outstanding receivables. They extend credit to customers for 60 to 120 days. Any potential delays or defaults in receiving payments could affect their profits and cash flows.
4. Government Orders: A significant portion of their orders come from government entities through a tender process. They must compete on price, which might lead to lower profit margins if they need to reduce bids to win contracts.
5. Competitive IT Industry: Orient operates in a highly competitive IT industry. They face challenges from competitors with greater financial and technical resources. This competition could potentially reduce their market share and operating margins.

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Orient Technologies limited IPO – GMP

The shares of Orient Technologies Ltd’s price in the grey market were trading at a 26.70% premium as of August 19^th, 2024. The shares in Grey Market traded at Rs. 261. This gives it a premium of Rs. 55 per share over the cap price of Rs. 206.

Orient Technologies Limited IPO – Key IPO Information

Promoters: Ajay Baliram Sawant, Umesh Navnitlal Shah, Ujwal Arvind Mhatre, and Jayesh Manharlal Shah

Book Running Lead Manager: Elara Capital (India) Private Limited.

Registrar to the Offer: Link Intime India Private Limited.

The Objective of the Issue

1. Office premises at Navi Mumbai to be acquired which are situated in Plutonium Business Park, Trans Thana Creek Industrial Area, District Thane, and Navi Mumbai – Rs. 10.34 crore.
2. Equipment Purchase to set up National Operating Centre and Security Operation Centre at Navi Mumbai property.
3. Equipment purchase for devices to offer for Device as a Service (DaaS). (Rs. 79.65 crore for 2nd and 3rd capex plans)
4. General Corporate Purposes.

Conclusion

Orient Technologies Limited is into IT infrastructure and cloud management which is in the growth stage. The company is likely to benefit from this demand as many companies are storing their data and building infra to keep the data under cloud. Orient’s financials are strong and with capex plans, the company is poised to leverage on these initiatives. However, the increase in competition by other players with much more capabilities can pose a threat to the business. 

So what do you make of this company? Will it be able to increase its market share based on its competition with peers? What is your view? Let us know in the comments below.

Written by Santhosh

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