Updater Services Limited (UDS) coming up with Initial Public Offering (IPO), scheduled for subscription from September 25, 2023. Company revenues grew significantly in the last few years, however margins are on declining mode. In this article we would provide Updater Services IPO details, Key IPO Dates, Size, Price Band, Positive Factors, Risk Factors and thorough review and analysis.
Updater Services IPO – Key Details
| IPO Opening Date | 25-Sep-23 |
| IPO Closing Date | 27-Sep-23 |
| IPO Listing Date | 09-Oct-23 |
| Issue Type | Book Built Issue IPO |
| Face Value | Rs 10 per equity share |
| IPO Price band | Rs 280 to Rs 300 per equity share |
| Lot Size | 50 Shares |
| Listing at | BSE and NSE |
| Total Issue Size | Rs. 640 Crores |
| Fresh issue | Rs. 400 Crores |
| OFS | Rs. 240 Crores |
IPO Timelines
| IPO Opens on | 25-Sep-23 |
| IPO Closes on | 27-Sep-23 |
| Basis of Allotment | 04-Oct-23 |
| Initiation of Refunds | 05-Oct-23 |
| Credit of Shares to Demat | 06-Oct-23 |
| Listing Date | 09-Oct-23 |
| Cut-off time for UPI mandate confirmation | 27-Sep-23 |
About Updater Services Limited
Updater Services Limited offers facility management and business support services in the Business-to-Business (B2B) sector.
With a presence in India and overseas, it serves a wide range of customers, including global and Indian corporations like Procter & Gamble, Aditya Birla Fashion and Retail, Microsoft, Hyundai, and Saint-Gobain.
The company operates in two main segments:
- IFM & Other Services and
- BSS
These segments encompass services like production support, engineering, hygiene, warehousing, staffing, audit, employee background checks, and more
Financial Insights into Updater Services
| Financial Year ending / Period ending (Amt in Crores) | |||
| Particulars | FY21 | FY22 | FY23 |
|---|---|---|---|
| Assets | 579.49 | 874.57 | 1,216.95 |
| Revenue | 1,216.35 | 1,497.89 | 2,112.09 |
| Profit After Tax | 47.56 | 57.37 | 34.61 |
| Net Worth | 285.26 | 340.43 | 380.89 |
| Total Borrowing | 11.61 | 58.68 | 176.54 |
IPO Objectives
Updater Service IPO Size is Rs 640 Crores which has both Offer for Sale and Fresh Issue.
- Under OFS, the amount goes to selling share holders and company would not get anything.
- Fresh issue would be utilized for the following:
- Repayment and /or prepayment of certain borrowings availed by the company.
- Funding the working capital requirements.
- Pursuing inorganic initiatives.
- General corporate purposes
Valuation of Updater Services IPO
- Its IPO price band is Rs 280 to 300 per share
- If we consider last year FY23 EPS of Rs 6.7, P/E ratio works out to be 45x
- If we consider last 3 years weighted EPS of Rs 8.23, P/E ratio works out to be 36x
- The listed peers like TeamLease Services Ltd trading at P/E 41x (Highest) and SIS Limited is trading at P/E of 20x (Lowest) and industry average P/E is 27.6x. Hence, the IPO Price band at P/E of 36x to 45x is overpriced.
Positive Aspects of Updater Services IPO
Investors should also consider these positive aspects when evaluating this IPO:
- Diverse Service Portfolio: Updater Services offers a wide range of services, making it a one-stop solution for businesses. This diversification can lead to stability and growth opportunities.
- Strong Client Base: The company serves a diverse clientele, including prominent global and Indian companies, indicating its ability to secure and maintain valuable contracts.
- Widespread Network: With a vast network of over 4,000 locations, Updater Services has a broad geographical reach, providing a competitive advantage.
- Financial Growth: The company has shown consistent revenue growth over the years, which indicates a healthy financial performance.
- Low Debt: With a debt-to-equity ratio of 0.46, Updater Services has a relatively low debt burden, which can contribute to financial stability.
Risks to Consider in this IPO
Here’s a summary of the risks associated with the Updater Services IPO:
- Declining profits: Company margins have declined in FY23 compared to previous quarters. There is no guarantee that profits can improve in future.
- Valuation Uncertainty: The IPO price is determined based on various factors and assumptions, and it may not accurately reflect the market price after listing. Investors should be cautious about potential price fluctuations.
- No Proceeds from Offer for Sale: The company will not receive any proceeds from the Offer for Sale.
- Auditor’s Qualifications: The statutory auditors have included certain qualifications and observations in their reports for the financial years ending March 31, 2022 and 2023, which could indicate financial and accounting concerns.
- Regulatory Concerns: The company received foreign direct investment in the past, and any actions by regulatory authorities could have implications for its business.
- Goodwill and Intangible Assets: Updater Services has seen an increase in goodwill and intangible assets. If the cash-generating ability declines, it could lead to impairment of goodwill and affect the profit and loss statement.
Updater Services IPO Review – Is it good or bad for investment?
- Investing in Updater Services IPO offers potential benefits such as a diverse service portfolio with multiple revenue streams, a strong and diversified client base, a widespread network for market reach, consistent financial growth, experienced promoters, and a low debt-to-equity ratio, which can enhance financial stability.
- On the other side, potential drawbacks include declining margins, valuation uncertainty, as IPO pricing may not reflect market realities, no direct proceeds for the company from the Offer for Sale, auditor qualifications raising financial concerns, operational and regulatory risks, and the risk of goodwill and intangible asset impairment, which can affect profitability. The IPO price is over priced.
While investors can go through the Updater Services IPO RHP for all risk factors, they should think whether they should invest in IPO which has high valuation. The ideal price could be 35% to 40% lower than the current issue price (considering industry average P/E and based on FY23 EPS). I may be wrong.
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