Orient Technologies

IT infrastructure provider

The IPO is to fund purchase of office space and equipment

Established in 1997, Orient Technologies (OTL) is an information technology (IT) solutions provider of products and solutions for specific areas within its business verticals. The business verticals include IT infrastructure comprising data center solutions and end-user computing; IT-enabled (ITeS) managed services, multi-vendor support services, IT facility management services, network operations center services, security services, and renewals; and cloud and data management services focused on migration of workload from data centers to cloud.

OTL provides service models such as infrastructure as a service (IaaS), platform as a service (PaaS) and software as a service (SaaS). The business operations involve technologically advanced solutions obtained from collaboration with a wide range of technology partners including Dell International Services India Private Limited (Dell), Fortinet, Inc. (Fortinet) and Nutanix Netherlands B.V. (Nutanix). The collaborations enhance the ability to design and innovate products and provide solutions tailored to specific customer requirements.

End-to-end technology and technology related services are offered to public and private sector entities across industry verticals such as banking, financial services, and insurance (BFSI), IT, ITeS, and healthcare and pharmaceutical due to deep domain knowledge across industry sectors and technology expertise across traditional and new-age technologies. Some of the notable clients include Bluechip Corporate Investment Centre Private Limited;Tradebulls Securities Private Limited; Vasai Janata Sahakari Bank Limited; Vasai Vikas Sahakari Bank Limited; Integreon Managed Solutions India Private Limited; Coal India; Mazagon Dock Shipbuilders; The Joint Commissioner of Sales Tax(GST Mahavikas),Mumbai; and D’Décor Exports Private Limited.

Leading certifications earned underscores the commitment to quality and security. These include CMMI Level 3, ISO 9001, ISO 27000 among others.

The headquarters are in Mumbai, with branch offices across India including Navi Mumbai, Pune, Ahmedabad, New Delhi, Bengaluru and Chennai. There is an office in Singapore.

Object of the offer

The IPO consists of a fresh issue of Rs 120 crore and 46,00,000 equity shares through offer for sale.

At the higher price band, the promoter shareholding will reduce to 73.21% from 97.96%.

The net proceeds will be used towards acquisition of office premise at units no 1201, 1202, 1203, and 1204, respectively, situated at Plutonium Business Park, Trans-Thana Creek Industrial Area, Turbhe MIDC, District Thane, Navi Mumbai;funding capital requirements for purchase of equipment for setting up of network operating center (NOC) and security operation center (SOC) at the Navi Mumbai property; purchase of equipment and devices to offer devise-as-a-service (DaaS)offering; and general corporate purposes.

Strengths

Marquee customers across public and private sector entities across diverse customer industries such as BFSI, IT, ITeS, and healthcare and pharmaceutical.

A wide range and diversified bouquet of product and service offerings serviced by three verticals: IT Infrastructure, ITeS, and cloud and data management services.

Strong geographic footprint across India, enabling effectively serving clients in different regions and expanding market reach. There is also international presence with an office in Singapore.

Led by experienced and technically qualified promoters including Ajay Baliram Sawant, Jayesh Manharlal Shah,Ujwal Arvind Mhatre andUmesh Navnitlal Shah. They have co-founded, conceptualized, incubated and nurtured the business and continue to be actively engaged in the operations. Each of them brings a different set ofoperational strengths and are backed by an experienced senior level of management team with varied backgrounds.

Is adopting a new line of business i.e devices as a service IT lifecycle.

management.

Weaknesses

The IT solutions industry is highly competitive, with numerous players ranging from global giants to niche providers.

Rapid advancements in technology could pose a risk.

Overly dependent on few clients, earning 38.1%, 32.4% and 39.1% of the total revenues from its top 10 clients in FY2024, FY2023 and FY2022, respectively. Any loss of such customers or a significant reduction in revenue contribution by such customers will have a material impact on the business.

Heavily dependent on a few vendors and suppliers. Does not enter long- term supply contracts or arrangements with the vendors. Any loss of such vendors and suppliers may have a material impact on the operations.

Incurred negative net cash from operating activities, investing activities and financing activities in the past. Any negative net cash in operating activities and investing and financing activities may have an adverse impact on the growth prospectus.

Employee benefit expense is one of the larger components of the fixed operating costs. An increase in the employee benefit expenses may affect the margins and reduce profitability.

A significant proportion of orders are from government-related entities. These are awarded through the process of tender. The performance will be affected if bids are not won or contracts bagged at a lower value.

Is a potential target for cyber attack.

Valuation

Sales were up by 12.7% to Rs 602.89 crore in FY 2024.The OPM increased by 30 bps, leading to OP rising by 16.4% to Rs 56.62 crore. OI decreased by 42.5% to Rs 3.97 crore. Interest cost jumped13.4% to Rs 2.05 crore. Depreciation went up102.7% to Rs 3.63 crore. Profit before tax stood at Rs 54.91 crore as against Rs 51.95 crore in FY2023. Net profit stood at Rs 41.45 crore as against net profit of Rs 38.30crore.

At the higher price band of Rs 206, the offer is made at a P/E of 20.7 times FY2024 EPS (EPS of Rs 10.0).

Listed industry peers are Sonata Software, Allied Digital Services and Dev Information Technology. Sonata Software trades at 57.5 times its P/ TTM EPS, Allied Digital Services 23.9 times its P/TTM EPS,and Dev Information Technology 24.0 times its P/TTM EPS.