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Tracxn Techno IPO review (Avoid)

Review By Dilip Davda on Oct 6, 2022

•    TTL is one of the leading market intelligence-providing platform.
•    It ranks among the top five global players in this segment. 
•    The company incurred annual losses till FY22.
•    Based on Q1 of FY23 earnings, the issue is greedily priced.
•    It's a pure long-term story as it has to wipe out carried-forward losses.

PREFACE:
It is surprising that this company has given its financial data in Rupees Thousands instead of the normal practice generally followed for Rupees Millions. It appears to be just an eyewash. The company has been incurring annual losses till FY22 and has turned the corner in Q1 of FY23. Considering its carried forward losses, it may take some time to start servicing the equity capital. Thus it's a pure long-term story. Its valuations based on Q1 of FY23 are much greedier as it heavily discounts all near-term positives. Thus this is a pure long-term story for investors having surplus funds and patients. Though the company has a few renowned investors, they got shares at a very cheap value and some of them are fully or partly exiting. If the company has started earning profits, why are they exiting? In this case, they could have waited for one more year for a better valuation as TTL has just started reporting profits.  Retail investors should not get carried away with just a 10% quota for them.   

ABOUT COMPANY:
Tracxn Technologies Ltd. (TTL) is among the leading global market intelligence providers for private company data and ranks among the top five players globally in terms of the number of companies profiled offering data of private market companies across sectors and geographies (Source: Company Commissioned F&S Report). 

It has one of the largest coverage of private companies in emerging technology sectors including IoT, artificial intelligence, virtual reality, robotics, blockchain, and electric vehicles (Source: Company Commissioned F&S Report). TTL has an asset-light business model and operates a Software as a Service ("SaaS")-based platform, Tracxn, that scanned over 662 million web domains, and profiled over 1.84 million entities across 2,003 Feeds categorized across industries, sectors, subsectors, geographies, affiliations, and networks globally, as of June 30, 2022. 

TTL's platform has 3,271 Users across 1,139 Customer Accounts in over 58 countries, as of June 30, 2022. Its Customers include a number of Fortune 500 companies and/or their affiliates. The company offers customers private company data for deal sourcing, identifying M&A targets, deal diligence, analysis, and tracking emerging themes across industries and markets, among other uses, through its subscription-based platform, Tracxn. It launched the platform in Fiscal 2015 with a particular focus on the global emerging technology sector, providing users with detailed profiles of companies including detailed information on funding rounds and acquisition-related information, taxonomy and market maps, global competitor benchmarking, financial information, valuation, and capitalization tables, employee count, investor profiles, competitor mapping, information about founders, key team and board member, company and sector-specific reports and news events. As of June 30, 2022, it has 808 full-time employees on its payroll. 

TTL has since then expanded coverage to include 18 data modules and over 1.84 million entities, as of June 30, 2022. Its extensive global database of entities coupled with customized solutions and features allows customers to source and track companies across sectors and geographies to address their requirements. TTL is among the few private market data service providers in the world to have a proprietary taxonomy for technology sector companies and prepare market maps (Source: Company Commissioned F&S Report).

ISSUE DETAILS/CAPITAL HISTORY:
To avail listing benefits and provide an exit to some of its stakeholders, TTL is coming with a secondary (i.e. Offer for sale) IPO of 38672208 equity shares of Re. 1 each via book building route with a price band of Rs. 75 to Rs. 80 per share. It mulls mobilizing Rs. 309.38 cr. at the upper cap of the IPO price. The minimum application to be made is for 185 shares and in multiples thereon, thereafter. The issue opens for subscription on October 10, 2022, and will close on October 12, 2022. Post allotment, shares will be listed on BSE and NSE. The issue constitutes 38.55% of the post-issue paid-up capital of the company. It has allocated 75% for QIBs, 15% for HNIs, and 10% for Retail investors. 

The sole Book Running Lead Manager (BRLM) for this issue is IIFL Securities Ltd. and Link Intime India Pvt. Ltd. is the registrar to the issue. 

Having issued initial equity at par, TTL issued/converted further equity capital in the price range of Rs. 45.00 to Rs. 678.25 per share of Re. 1 between December 2013 and December 2021. It has also issued bonus shares in the ratio of 52 for 1 in August 2021, and 52 for 1 bonus shares issued to SCI Investments against the conversion of their preference shares in December 2021. Thanks to premiums collected on fresh equity issues and on the conversion of CCPs, etc., which helped them to issue bonus shares as well as a positive NAV. 

The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. 0.02, Rs. 1.58, Rs. 8.49, Rs. 18.22, Rs. 21.96, Rs. 29.87, Rs. 37.36, and Rs. 40.32 per share. Thus promoters/selling stakeholders have received shares at much cheaper valuations.

This IPO is being an Offer for Sale, TTL's current paid-up equity capital of Rs. 10.03 cr. will remain the same. Based on the upper cap of IPO pricing, the company is looking for a market cap of Rs. 802.48cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, TTL has posted a turnover/net profit - (loss) of Rs. 6.31 cr. / Rs. - (54.03) cr. (FY20), Rs. 55.74 cr. / Rs. - (5.35) cr. (FY21), and Rs. 65.16 cr. / Rs. - (4.85) cr. (FY22). For Q1 of FY23, it reported a net profit of Rs. 0.84 cr. on a turnover of Rs. 19.08 cr.

For the last three fiscals, TTL has reported an average negative EPS of Rs. - (1.67) and an average negative RoNW of - (26.42%). The issue is priced at a P/BV of xx based on its NAV of Rs. 2.29 as of June 30, 2022, as well as a post-IPO basis as it's a pure secondary offer.  

Though based on its last three fiscals average losses, the issue is priced at a negative P/E, if we attribute annualized FY23 earnings, then the asking price is at a P/E of 240 making it an exorbitantly priced issue from a loss-carrying company. 

COMPARISON WITH LISTED PEERS:
As per the offer document, TTL has no listed peers to compare with. 

DIVIDEND POLICY:
The company has not paid/declared any dividend for the reported periods of the offer document. It will adopt a prudent dividend policy post-listing, based on its financial performance and future prospects. 

MERCHANT BANKER'S TRACK RECORD:
The BRLM associated with this issue has handled 33 issues in the past three years, out of which 13 issues closed below the offer price on the listing date.


Conclusion / Investment Strategy

TTL has posted annual losses till the last fiscals. Its financial data in Rupees Thousand appears to be an eyewash. Based on FY23-Q1 earnings, the issue is greedily priced discounting all near-term positives. This being a pure long-term bet, investors may wait to buy at a discount post-listing as it may take some time to wipe out carried forward losses. There is no harm in skipping this pricy bet.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Oct 6, 2022

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at its own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

Email: dilip_davda@rediffmail.com

Tracxn Technologies IPO FAQs

  1. 1. Why Tracxn Technologies IPO?

    The initial public offer (IPO) of Tracxn Technologies Limited offers an early investment opportunity in Tracxn Technologies Limited. A stock market investor can buy Tracxn Technologies IPO shares by applying in IPO before Tracxn Technologies Limited shares get listed at the stock exchanges. An investor could invest in Tracxn Technologies IPO for short term listing gain or a long term.

  2. 3. Tracxn Technologies IPO what should investors do?

    Tracxn Technologies IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Tracxn Technologies IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.

  3. 4. Is Tracxn Technologies IPO good?

    Our recommendation for Tracxn Technologies IPO is to avoid.

  4. 5. Is Tracxn Technologies IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the Tracxn Technologies IPO.

  5. 6. When will Tracxn Technologies IPO allotment status?

    The Tracxn Technologies IPO allotment status will be available on or around Oct 17, 2022. The allotted shares will be credited in demat account by Oct 19, 2022. Visit Tracxn Technologies IPO allotment status to check.

  6. 7. When will Tracxn Technologies IPO list?

    The Tracxn Technologies IPO will list on Thursday, October 20, 2022, at BSE, NSE.

2 Comments

2. Krishan     Link|Oct 11, 2022 12:39:47 AM
Thanks Sir your detailed analysis. Your are helping most of people who are visiting here.
1. Venkat Prasanna     Link|Oct 9, 2022 2:33:41 PM
It's very RARE to see Dilip ji's avoid rating for a main board IPO. Thank you for taking time to review each and every IPO (and debt offering as well!)