eMUDHRA Ltd IPO

Published by Sharekhan Education | May 20, 2022

eMUDHRA Ltd IPO

Amit Pathak | Sharekhan Education

About IPO:
Issue size: ₹ 412 Cr
Price Band: ₹243 – ₹256
The issue opens on: Tuesday, 20th May’2022
The issue closes on: Thursday, 24th May’2022

Company Overview:

eMudhra is a licensed certifying authority that issues digital signature certificates to individuals for ITR filings, banking, etc. The company also provides various enterprise solutions and services around digital signatures like authentication solutions, paperless office solutions, and solutions for securing data in transit. It has a leadership position with a market share of 37.9% in the digital signature certificate market space. It has issued more than 50 million digital signature certificates since its inception.

Objectives of Issue: 

The IPO is an offer for sale (OFS) and a fresh issue. The company will use proceeds from the fresh issue  for setting up data centers, product development, funding working capital requirements, and repaying debt.  Investors have to make a minimum application for 58 shares and in multiples thereon. Post allotment, the company will  list shares on NSE and BSE. Listing of the equity shares will result in the enhancement of the brand name.

Industry Overview: 

North America is the largest Digital Security and Paperless Transformation market space. Increasing threats to data security and the trend of working from home have opened up new opportunities in this space. Digital identity is foundational to the growth of enterprises in the era of digital transformation because it enables them to create frictionless user experiences that are both simple and secure. Enterprises are looking for one-stop-shop providers who manage all layers of identity, authentication, and authorization to support data privacy and confidentiality.

Competitive Strengths:

The Company is a one-stop-shop solution provider of Digital Trust Services, Digital Security Solutions, and Paperless Transformation Solutions. They are the only Indian company to be accredited by Webtrust that makes eMudhra’s digital signature certificates directly recognized by browsers across the world. It has a strong digital signature certificate expertise, and is the only Indian company to be directly recognized by renowned browsers and document processing software companies such as Microsoft, Mozilla, Apple, and Adobe. They are the only Indian company to be admitted as a member of the European Cloud Signature Consortium, as well as Certifying Authority / Browser Forum, a global forum that governs the use of SSL/TLS certificates.
They have a diverse, longstanding, and growing customer base. Its enterprise solution has a cost advantage over its competition supported by low payroll costs incurred in India. They also offer their services and digital products to various government agencies and state governments and thereby is a key player in enabling paperless transactions as part of Digital India.

Key Concerns:

The Company is licensed by the Controller of Certifying Authorities (CCA) and operates under the guidelines set by the Information Technology Act. The license is valid till October 2023 and exposes the business to regulatory risk. It is exposed to risks related to technological changes and cyber security. The company’s scale of operations remains moderate restricting the financial and operational flexibility to an extent.

Financials:

The company’s retail customers grew from 58,872 to 115,905 and its enterprise customers grew from 249 to 518 over FY19-21. Its revenues from operations grew at a CAGR of 13.8% over FY19-21. Its EBITDA grew at a CAGR of 12.3% and profit after tax grew at a CAGR of 20.6% over the same period. For the last three fiscals, the company reported an average RoE of 18%. At the upper price band of Rs 256, the issue is priced at 49 times P/E (9M Annualized FY22). We maintain a positive view of the company.

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