The initial public offering (IPO) of global market intelligence provider Tracxn Technologies opened on Monday, October 10 and will end today, October 12.
The company has fixed its IPO prices in the range of ₹75-80 per equity share and aims to generate ₹309.38 crore from its public offer. The public issue is a book build issue and it is 100 percent offer for sale (OFS) in nature. The company has no peer in the listed space.
The company will not receive any proceeds from the issue and the entire sum will go to the selling shareholders. The objectives of the offer are to achieve the benefits of listing the equity shares on the stock exchanges and the sale of shares by the selling shareholders in the offer.
The IPO of Tracxn Technologies, a global market intelligence provider, has garnered bids for 54 percent or 1.15 crore shares against an IPO size of 2.12 crore shares on October 11, the second day of bidding.
Retail investors bought 2.6 times of the allotted quota, while non-institutional investors have bid for 25 percent or 14.74 lakh of the number of shares allotted to them. Qualified institutional buyers have not started bidding yet.
About Tracxn Technologies
Founded in 2013, Tracxn Technologies provides market intelligence data for private companies. The company has an asset-light business model and operates a Software as a Service (SaaS) based platform, Tracxn. The company supplies its products to customers in over 25 countries covering five continents i.e., North America, Europe, Asia, South America and Africa.
The company also said that it has been incurring losses in the last three years. However, it turned into profits for the quarter ending June 2022.
Brokerage firms, thus far, remain cautious of the issue, with some suggestions to avoid it.
Let's see what the brokerages have to say:
Choice Broking: Avoid
According to the brokerage, at the higher end of the price band, Tracxn is demanding an EV/Sales multiple of 12.3x, which seems to be stretched for a loss-making operation. Considering the high attrition rate in the IT-enabled sector and the already double-digit attrition level of Tracxn, Choice is cautiously optimistic about the company’s efforts in bringing down employee costs. Also, partial/full exit by PE investors raises concerns about the long-term potential growth outlook, it added. Thus considering the above observations, it assigns an “AVOID” rating for the issue.
Reliance Securities: Avoid
"Tracxn is one of the leading players in the market of providing intelligence data for private companies. It is backed by experienced promoters, a management team, and marquee investors. The in-house developed, scalable, and secure technology platform and diverse, longstanding and growing global customer base put the company in a good position. However, the aggressively priced IPO hardly leaves anything meaningful on the table for the investors over the medium term," said the brokerage.
Anand Rathi: Avoid
At the upper end of the IPO price band, Tracxn Technologies Ltd. is offered at a P/S of 12.6x as on FY22 & P/B of 2.3x as on June 30, 2022, with a post-issue market capitalization of ₹802.5 crore, noted the brokerage.
Tracxn Technologies Ltd is one of the leading global providers of differentiated private market data and intelligence in a highly competitive industry, however, the company reported negative EBITDA in the previous three financial years. We give the IPO an "Avoid" rating, it said.
Swastika Investments: Avoid
According to the brokerage, the company is a leading global market intelligence provider for private company data and has witnessed strong growth in its top line in the previous three years due to the technology and startup boom during the pandemic and robust M&A activities. Nevertheless, the company faces significant competition from private players such as Crunchbase, CBInsights, and free online and offline sources of information on companies & businesses, it noted.
Also, due to the rising interest rates globally and recessionary conditions in major markets, 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, it pointed out. Thus it is believed that the company will find it difficult to substantially grow its client base and top line in the coming years. Finally, the exorbitant valuation of Price to Sales of 12.5x make it very difficult to recommend this issue. Thus it has assigned Avoid Rating for this issue.
Let's look at some contrarian views now
Arihant Capital: Subscribe for long term
"The company is a leading global player, ranking amongst the top 5 in its segment. With cost arbitrage advantages, high operating leverage, a strong technology platform, and comprehensive data coverage strengthening Tracxns position. It has achieved breakeven and reported gains in Q1FY23. The stock is currently valued at P/S of 12.7x to its FY22 sales of ₹63.43 crore, the issue is fairly priced and we recommend that investors subscribe for the long term," it said.
Hem Securities: Subscribe for long term
The company is a leading global provider of differentiated private market data and intelligence and has a diverse, longstanding and growing global customer base, said the broekrage. Tracxn with its scalable and secure technology platform conceptualized and developed in-house has significant cost advantages from India-based operations along with experienced promoters, board of directors and senior management team, backed by marquee investors, it pointed out. Hence, it recommends a “Subscribe” on the issue for the long term.