CapitalNumbers Infotech IPO analysis

CapitalNumbers Infotech IPO (initial public offering) will open for subscription on January 20, 2025, and close on January 22, 2025. Below is a breakdown of the SME (small and medium enterprise) company's strengths, weaknesses and growth prospects to help investors make an informed decision. CapitalNumbers Infotech IPO in a nutshell Quality: During FY22-24, CapitalNumbers Infotech reported a three-year average ROE and ROCE of nearly 37 and 48 per cent, respectively. Growth: During FY22-24, its revenue and profit after tax grew by nearly 19 and 28 per cent per annum, respectively. Valuation: At the upper price band of Rs 263, the stock will be valued at a P/E and P/B ratio of around 25 and 4 times, respectively. Overview: Rising expenditure on IT infrastructure globally is expected to help CapitalNumbers Infotech scale up its business. However, factors such as low entry barriers and stiff competition may pose hurdles. About CapitalNumbers Infotech CapitalNumbers Infotech is a digital consulting and IT engineering company that provides software development solutions to other businesses. It primarily caters to international clients, with most of them coming from the US and UK. Presently, the company has a customer base of over 1,000 clients spread globally. As of H1FY25, CapitalNumbers Infotech had around 250 active clients across various industries, including e-commerce, retail, healthcare, etc. Strengths of CapitalNumbers Infotech Wide customer base: CapitalNumbers Infotech boasts a large clientele of over 1,000 customers (as of H1 FY25). Of these, 250 are active clients. Weaknesses of CapitalNumbers Infotech Revenue concentration: CapitalNumbers Infotech derives 50 and 20 per cent of its revenue only from the US and UK markets, respectively. Thus, a slowdown in their economies can negatively impact the company's financials. Highly competitive industry: Since CapitalNumbers Infotech operates in an industry with low entry barriers, it faces stiff competition from both new and established players, making it difficult for the company to consolidate its position in the market. IPO details Total IPO size (Rs cr) 169 Offer for sale (Rs cr) 85 Fresh issue (Rs cr) 85 Price band (Rs) 250-263 Subscription dates January 20-22, 2025 Purpose of issue To fund inorganic growth Post-IPO M-cap (Rs cr) 642.4 Net worth (Rs cr) 165.5 Promoter holding (%) 73.6 Price/earnings ratio (P/E) 24.9 Price/book ratio (P/B) 3.9 Key financials Metrics 2Y CAGR (%) FY24 FY23 FY22 Revenue (Rs cr) 19.3 98.2 92.8 69 EBIT (Rs cr) 24.7 32.6 23.2 21 PAT (Rs cr) 27.6