Orient Technologies IPO Launch: Key Insights, Subscription Status, and Investment Outlook

The highly anticipated Orient Technologies IPO kicks off today, August 21, offering investors a chance to buy into the rapidly growing IT solutions provider based in Mumbai. The initial public offering (IPO) will remain open for subscription until August 23. Ahead of its debut, Orient Technologies secured ₹64.43 crores from anchor investors and set a price band of ₹195 to ₹206 per equity share.

Key Details of Orient Technologies IPO

Orient Technologies Ltd., founded in 1997, specializes in a broad range of IT services, including IT infrastructure, IT-enabled services (IteS), cloud solutions, and data management. The IPO aims to further the company’s expansion, especially in its international operations, which currently remain relatively modest despite a presence in Singapore.

The total IPO is valued at ₹214.76 crores, comprising a fresh issue of ₹120 crores and an offer-for-sale (OFS) of 46 lakh equity shares by the company’s promoters, including Ajay Baliram Sawant, Umesh Navnitlal Shah, Ujwal Arvind Mhatre, and Jayesh Manharlal Shah. The net proceeds from the IPO will be used to support general corporate purposes, capital expenditure, and the acquisition of an office building in Navi Mumbai.

The public issue has been divided into three segments: 50% of the shares are reserved for qualified institutional buyers (QIBs), 15% for non-institutional investors (NIIs), and 35% for retail investors.

Subscription Status and Grey Market Premium (GMP)

As of the first day of bidding, the IPO has seen a subscription of 31% overall. The retail portion was subscribed by 53%, the NII segment by 19%, while the QIB portion has yet to see significant action. The subscription data suggests a promising start, especially among retail investors.

In the grey market, Orient Technologies shares are trading at a premium of ₹30 above the issue price, indicating strong demand. With an IPO price of ₹206 at the upper end of the band, the estimated listing price could be around ₹236, a 14.56% increase. The grey market premium (GMP) has fluctuated over the past 13 sessions, ranging from ₹0 to ₹55, but the recent trend points towards a strong listing potential.

Financial Performance and Valuation

Orient Technologies has shown a consistent upward trajectory in its financial performance, with revenue, EBITDA, and profit after tax (PAT) growing at a compound annual growth rate (CAGR) of 13.7%, 12.9%, and 11.2%, respectively, between FY2022 and FY2024. The company’s expansion in its product range and customer base has driven this growth.

At the upper price band, the price-to-earnings (P/E) ratio for the company, based on FY24 earnings, stands at 17.46x. This is considerably lower than the industry average P/E ratio of 29.87x, making the IPO appear attractively priced compared to its peers. For instance, companies like Dynacons Systems & Solutions Ltd and LTIMindtree Ltd have P/E ratios of 29.47 and 34.56, respectively, while Tech Mahindra Ltd stands at 55.17.

Expert Reviews: Should You Subscribe?

StoxBox: Prathamesh P Masdekar, a research analyst at StoxBox, recommends subscribing to the IPO, citing the company’s consistent financial performance and its strategy to expand its product and services portfolio, both domestically and internationally. He believes the IPO is fairly valued at a P/E of 20.7x, offering a reasonable entry point compared to industry peers.

Master Capital Service Ltd: This brokerage highlights the company’s recent venture into “Device as a Service” (DaaS), which aligns with the growing trend of subscription-based models in the IT industry. The firm’s strategy to expand its global footprint and enhance its service offerings makes it a compelling investment for those with a medium- to long-term horizon.

Important Dates and Listing

The share allocation basis for Orient Technologies is expected to be finalized by August 26, with refunds and share deposits into demat accounts occurring on August 27. The shares are anticipated to list on both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) on August 29.

Final Thoughts

Orient Technologies’ IPO presents an interesting opportunity for investors, particularly those looking for exposure to the growing IT services sector in India. The company’s solid financial performance, coupled with its strategic initiatives to broaden its market presence, makes it a worthwhile consideration for both retail and institutional investors. The strong grey market sentiment further bolsters the case for a favorable listing.

However, as always, potential investors should consult with financial advisors and consider their own risk tolerance before making any investment decisions.