Started in 1996, Softech Engineers Limited is a software product innovation company which caters to the Architecture, Engineering and Construction ('AEC') verticals. Company is partnering the government in its mission - 'Ease of Doing Business' by associating itself as a 'Smart City Solution Provider' meeting the requirements of the automation in Architecture, Engineering & Construction (AEC) verticals using its expertise in IT. Company has been specialising in developing product for e-governance and construction ERP products for smart city projects, municipal corporations, urban local bodies, development authorities and work organisations. Company also offers 2D and 3D CAD based intelligent and machine learning driven technology which eliminates entire human intervention along with providing Cloud Technology enabled products offered as "SaaS". SEL started by launching its first product - STRUDS in the year 1996, which was used for Structural Analysis and Designing. In the year 2000, it launched another product, ESRGSR, which was also used on the same line. Both its products viz., STRUDS and ESRGSR were acquired in year 2011 by CSC (UK) Limited. SEL had launched two new products viz., PWIMS and AutoDCR which have been the flagship products of Company since its launch in the year 2004 and 2005 respectively. PWIMS provides a complete online solution to Public Works Department (PWD) for e-procurement and work management. AutoDCR is a software for automation of building permits approvals which issued by the government authorities in scrutinising and automating the building permits based on the CAD based building plan which works on an online system and environment. Company in year 2010 launched, OPTICON which caters to the needs of construction contractors and real estate companies by helping them in cost estimating, construction management and overall automation. SEL got another VC funding round from Rajasthan Venture Capital Fund in the year 2014 which acquired 26.77% stake in Company. SEL has strategic business alliances with key organisations such as - Microsoft and Autodesk. Company has a human capital asset of 433. Company earns its revenue based on License fees, BOT model, servicing and support fees, one time set-up fees, Annual Maintenance Contract and continuous development fees. As per financial performance, SEL has posted total income/net profits of Rs. 21.96 cr. / Rs. 0.98 cr (FY13), Rs. 25.68 cr. / Rs. 2.54 cr. (FY14), Rs. 35.94 cr. / Rs. 2.12 cr. (FY15), Rs. 44.33 cr. / Rs. 3.81 cr. (FY16) and Rs. 47.12 cr. / Rs. 6.17 cr. (FY17). For period upto 31.10.18 of FY18 it has earned net profit of Rs. 2.60 cr. on a turnover of Rs. 23.75 cr. It suffered a setback for FY15 in bottom line. For last three fiscals it has posted an average EPS of Rs. 6.99 and an average RoNW of 16.77%. Issue is priced at a P/BV of 1.71 on the basis of its NAV of Rs. 46.80 as on 31.10.17. If we annualise latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 17 against industry average of 21. As per offer documents, it is considering Ramco Systems, Ceinsys Tech Ltd, Cyber Tech and Newgen Software as its listed peers that are trading at a P/Es of around 96, 13, 29 and 32 (as on 20.04.18). Thus issue pricing appears reasonable. On merchant banker's front, this is 70th IPO from Pantomath in last four fiscals. Last 10 listings opened at a premium ranging from 1.6% to 20% on the offer price on the day of listing. This is the 6th IPO from SIDBI in last four fiscals and out of last 5 listings, 1 opened at discount, 1 just around par and the rest with a premium ranging from 12.5% to 20% on the day of listing. As per financials, company's performance is good, RoNW is 16.77% and issue is reasonably priced as per latest earnings. Government is pushing for automated systems in PWD departments and this may help it to grow at good speed. So we give SUBSCRIBE rating to this SME IPO as per current market situation.
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