Orient Technologies IPO analysis

Orient Technologies IPO will open for subscription on August 21, 2024 and close on August 23, 2024. We break down the IT solution provider's strengths, weaknesses, and growth prospects to help investors make an informed decision. Orient Technologies IPO in a nutshell Quality : Its three-year average ROE and ROCE were 34.9 per cent and 38.3 per cent, respectively during FY22-FY24. Growth : Its revenue and net profit grew 13.6 and 11.2 per cent per annum, respectively, during FY22-FY24. Valuation : Post the IPO, the stock will be valued at a P/E and P/B of 20.7 and 2.9 times, respectively. Overview: Indian businesses, from startups to large corporations, are seeing robust growth. This necessitates IT services that will help businesses integrate their operations quickly and at lower costs. This will keep the demand for IT services buoyant, benefiting players like Orient Technologies . However, there is stringent competition amid a slowdown in developed economies that risks affecting growth. The slowdown may force large IT players to divert their focus to the domestic market, further increasing competition. About Orient Technologies Incorporated in 1997, Orient Technologies is an IT solutions provider with expertise across three major segments. First is IT infrastructure services, where the company sets up and manages data centres, computers, servers and storage solutions for its clients. Next is the IT Enabled Services (IteS) segment, where the company operates and provides integrated solutions to clients who, for instance, may need multiple software from different vendors. The last segment is cloud and data management, which provides services that help businesses manage their database and software online. Strengths of Orient Technologies Solid demand for cloud services: The company's cloud and data management services segment is its fastest-growing vertical, whose revenue has grown impressively by 63 per cent per annum during FY22-FY24. This segment accounted for nearly 26 per cent of the company's FY24. Customer retention: Although the company doesn't enter into any long-term contracts, it has still been serving its top 10 clients for an average of 10 years. Some of its marquee clients include Coal India and Mazagon Dock. The company has not lost any of its key customers during FY22-FY24. Weaknesses of Orient Technologies Domestic IT service market: Most of its revenue (99 per cent) is sourced from domestic clients. India's IT services market operates in a high-risk, low-return environment. According to Nasscom, about 40 -45 per cent of the IT service market was unorganised in FY21. This demonstrates high competition with lower billing rates, along with long tender and bidding processes for government contracts. This is why large players such as TCS, Infosys, Wipro, and HCL Tech focus more on global markets. Orient Technologies IPO details Total IPO size (Rs cr) 215 Offer for sale (Rs cr) 95 Fresh issue (Rs cr) 120 Price band (Rs) 195-206 Subscription dates Aug 21 to Aug 23 2024 Purpose of issue To acquire new offices and equipments Post-IPO M-cap (Rs cr) 857.8 Net worth (Rs cr) 295.3 Promoter h