CE Info Systems, a provider of advanced digital maps, geospatial software, and location-based IoT technologies in India, will float its Rs 1,39-crore public offering on Thursday. The issue will close on December 13.
Incorporated in 1995, the company has built maps for more than 6 million km, covering 98.5 percent of India’s road networks under the MapmyIndia brand. It also caters to the international market under the Mappls brand.
It provides products, platforms, application programming interfaces (APIs) and solutions across a range of digital map data, software and IoT.
About the Issue
The public issue is entirely an offer-for-sale of 1,00,63,945 equity shares by selling shareholders, including investor Qualcomm Asia Pacific Pte Ltd. The offer for sale amounts to Rs 1,039.6 crore, but the company will not receive any funds from the IPO as all the money will go to selling shareholders.
The price band for the offer has been fixed at Rs 1,000–1,033 per equity share of a face value of Rs 2 each. Investors can bid for a minimum of 14 equity shares and in multiples of 14 equity shares thereafter. Retail investors can invest a minimum of Rs 14,462 for one lot, and their maximum investment would be Rs 1,88,006 for 13 lots.
The allotment of shares will be finalised by December 16. While the unsuccessful investors will get their refunds by December 17, the successful ones will get shares in their demat accounts by December 20. Trading in the equity share on the BSE and NSE will start from December 21.
What Brokerages Say
Brokerages have given a thumbs-up to the issue due to the fact that the company has strong fundamentals with consistent financials, a profitable business model, exponential growth prospects and it is almost a zero-debt company.
The company is in a good stead to leverage its leadership position in India. “With acquisition of new customers and with cross-sell and upsell opportunity to existing customers, we feel, the company has the potential to show good growth ahead,” said Nirmal Bang Equity Research in its report.
The company has high operating leverage with relatively low variable and high fixed cost, which will enable the company to grow profitability faster than the revenue growth. “The same is visible in the first six months of the current fiscal when the EBITDA margin stood at 45.2 percent, indicating higher sales leading to higher profitability,” Nirmal Bang said.
On the flipside, company faces risks from its dependence on few key customers since its top 25 customers contributed 80 percent of its revenues in FY21. Also, its inability to maintain or update its map database, or errors in map database could harm the ability to sell its products and services. The company is debt free with operating cash flows of Rs 83.2 crore in FY21 which indicate lower working capital requirement by the company.
“ROE for FY21 stood at 16.6 percent and at the upper price band of Rs 1033, CE Infosystems is offered at a PE of 58.8x annualised EPS for the first half of FY22 that we feel attractive,” added the brokerage, recommending the investors to subscribe to the issue.
Anand Rathi Research while highlighting the risks said that the automotive sector plays a key role in a part of its business and any adverse changes in the sector can hamper the business of the company. The company relies heavily on telecommunications and information technology systems to operate its business and any interruption or breakdown in such systems could impair its ability to effectively operate their platforms or provide its products and services.
The brokerage added that at the upper end of the price band, the issue is priced at a P/BV of 13.54x, based on its NAV of Rs 76.28 as of September 30, 2021. The company has an average RoNW at 12.86 percent for the last three years. The total Indian addressable market of digital maps and location based intelligence services, is expected to grow to $7.74 billion in 2025 at around 15.5 percent CAGR from 2019 to 2025.
“MapmyIndia is all set to capitalise the exponential growth opportunity being the market leader and an early mover,” said Anand Rathi Research in its report. “The valuation seems to be marginally rich, hence we recommend a ‘subscribe-long term’ rating to this IPO.”
Brokerage firm Marwadi Financial Services assigned a ‘subscribe’ rating to the IPO as it is available at a reasonable valuation considering the future growth potential.
“The company’s significant clientele and rising market share makes it a good bet for long-term investment,” said Dr Ravi Singh, Vice-President and Head of Research, ShareIndia. He advises that investors may look to subscribe the IPO for the long term and keep a close watch on the future valuations.
Anchor Investors
The company has mobilised Rs 311.88 crore from 34 anchor investors on December 8, a day before the issue opening, by allocating 30,19,183 equity shares to anchor investors at a price of Rs 1,033 per equity share.