Private market intelligence platform Tracxn Technologies will debut in the market on October 20 as the 22nd company to go listed this calendar year.
Given the muted response to the IPO, high valuations (not only FY22 basis but also on Q1FY23 basis), IPO being an entirely an offer-for-sale, and rising fears of global recession, the listing may be either at par or at a discount to the issue price of Rs 80 per share, experts said.
"Tracxn Technologies Ltd is expected to have a muted to negative listing owing to high valuations, less than stellar subscription numbers and the nature of the issue being offer for sale," Aayush Agrawal, Senior Research Analyst at Swastika Investmart said.
Tracxn has raised Rs 309 crore through its public issue. As it was a complete offer-for-sale, the selling shareholers (promoters as well as investors including Flipkart founders Binny Bansal and Sachin Bansal) received those funds after reducing issue expenses.
The price band was at Rs 75-80 per share for the public issue that was subscribed just 2.01 times during October 10-12, the lowest subscription amongst IPOs launched since August 2022.
The entry of qualified institutional buyers (QIBs) on the final day of subscription helped the IPO sail through as they have bought 1.66 times the allotted quota. Also 75 percent of the offer was reserved for QIBs, which experts feel the focus by the company may be on the long term investment.
Retail investors showed good interest in the IPO as they have subscribed 4.87 times the portion set aside for them, while non-institutional investors seemed to be less interested in the offer as they bought 80 percent shares of the reserved portion.
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Agrawal said that due to the rising interest rates globally and recessionary conditions in major markets like North America and Europe, the private equity markets, venture capital markets, investment banks, and family offices are witnessing a significant cutback in terms of activities and traction; additionally, M&A activities have been subdued.
The company will find it difficult to substantially grow its client base and topline in the coming years, he said.
Tracxn has 1,092 customers as of March FY22, up significantly from 855 in FY21, while at the end of June FY23 quarter, the customers base was at 1,139 against 946 in year-ago period.
Prashanth Tapse, Senior VP Research at Mehta Equities also said looking at lacklustre response from investors and high competition intensity in the sector, the listing can be below issue price, while Astha Jain, Senior Research Analyst at Hem Securities expects a flat listing tomorrow.
Even the grey market seems to be not in favour of the company's pricing as experts said Tracxn shares traded at 4-5 percent discount to the offer price, ahead of its listing. The grey market is an unofficial platform for trading in IPO shares and generally investors look at grey market to know about expected listing price.
Tracxn Technologies is one of the leading global market intelligence providers for private company data and as per Frost & Sullivan report, it ranks among the top five players globally in terms of number of companies profiled offering data of private market companies.
The total addressable market for private market data services is expected to grow at 12 percent CAGR in CY20-25 (resulting into market penetration of 65 percent in the next five years from current 50 percent), as per Frost & Sullivan.
It has an asset light business model and operates a software as a service (SaaS) based platform. It offers customers private company data for deal sourcing, identifying M&A targets, deal diligence, analysis and tracking emerging themes across industries and markets, competitor bench marking, company and sector specific reports & news events, etc, through their subscription-based platform -Tracxn.
The company recorded profit of Rs 0.8 crore on revenue of Rs 18.4 crore for the quarter ended June FY23 against loss of Rs 0.7 crore on revenue of Rs 14.97 crore in corresponding period last fiscal, which experts feel is likely to improve in future.
On the full year basis, the company has been posting losses though revenue has been scaling higher year-after-year. Loss for the year ended March FY22 stood at Rs 4.8 crore against loss of Rs 5.3 crore in FY21 and loss of Rs 5.4 crore in FY20, while its revenue from operations grew at a CAGR of 30.4 percent during FY20-FY22 with 70 percent of income from international operations, driven by rising customers base.
"The company reported a profit only in Q1FY23 (minor). With operating leverage kicking in, profitability is likely to improve, going forward," said ICICI Direct.
Private equity firms, venture capital firms and investment banking companies have been the biggest adopters of private data services. With growing users of private market data, the company is looking to capitalise on the opportunity by growing its customer base further. A good chunk of its business also comes from repeat business (74 percent retention) and the company is looking to capture that leg of growth as well, the brokerage said.
The pricing has largely been stagnant over the last three years but with scale benefits in the future, the brokerage believes it could be one of growth levers in the medium to long term.
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