IPO Analysis

IPO: Updater Services

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Updater Services IPO: Everything you need to know

Updater Services, India's leading business services platform, has launched its IPO (initial public offering). Here's a breakdown of the company's strengths, weaknesses and growth prospects to help investors make an informed decision.

In a nutshell

  • Quality : Updater Services' three-year average ROE and ROCE are 13.8 and 19 per cent, respectively. It also reported positive cash flow from operations in the last three financial years. However, the trade receivables constituted around 35 per cent of its total assets in FY23.
  • Growth : The company grew its topline by 22.6 and 41.5 per cent in FY22 and FY23, respectively, mainly due to higher service demand. Moreover, in the last two years, the company acquired majority stakes in Denave India (54 per cent in FY22) and Athena BPO (57 per cent in FY23), further contributing to its growth.
  • Valuation : The stock has a price at a P/E and P/B of 55.9 and 2.6 times respectively, compared to its peers' median and average of 29.9 and 3.6 times, respectively.
  • Overview : Outsourcing various non-core business activities by companies to third parties is rapidly evolving. The main aim is to optimise the costs, free up internal resources and focus on core operations. These will act as a significant driver of growth for the integrated facilities management and business support services industry and help the company scale up further. Additionally, an increasing preference towards a safe, clean and secure environment will further support soft (housekeeping, disinfection, etc.) and hygiene services (air fresheners, washroom hygiene solutions, etc.). However, the business must monitor its high trade receivables and an aggressive inorganic growth strategy.

About Updater Services

Incorporated in 2003, Updater Services is India's leading business services platform offering integrated facilities management (IFM) and business support services (BSS). As per a Frost & Sullivan report, it is the second-largest player within the IFM segment, offering soft services, production services, engineering services and others. Within the BSS segment, Updater Services provides benefits like audit & assurance, employee background verification checks, sales enablement and mailroom management through its subsidiaries Matrix, Denave, Athena and Avon.

Strengths of Updater Services

  • It is India's second-largest player in the IFM market, contributing more than 70 per cent of the revenue in FY23.
  • Within the BSS segment, its subsidiary Matrix holds 19.2 and 5.4 per cent market share (FY23) in audit & assurance and employee background verification services, respectively.
  • It has long-standing relationships of over 10 years with prominent clients such as Hyundai, Saint-Gobain and P&G (as of June 2023).

Weaknesses of Updater Services

  • Trade receivables constitute around 35 per cent of the total assets in FY23. Thus, any uncertainty concerning default or delay in payment can impact the business's operations.
  • It has a very high attrition rate of 78 per cent in FY23.
  • The company has primarily grown through acquisitions. While it has not encountered significant hurdles, an overly ambitious investment could trouble the company.

IPO details

Total IPO size (Rs cr) 640
Offer for sale (Rs cr) 240
Fresh issue (Rs cr) 400
Price band (Rs) 280-300
Subscription dates September 25-27, 2023
Purpose of issue To repay debt, fund working capital and acquisitions


M-cap (Rs cr) 2001
Net worth (Rs cr) 781
Promoter holding (%) 58.5
Price/earnings ratio (P/E) 55.9
Price/book ratio (P/B) 2.6

Financial history

Key financials 2Y growth (% pa) FY23 FY22 FY21
Revenue (Rs cr) 31.7 2099 1484 1210
EBIT (Rs cr) 4.3 56 62 51
PAT (Rs cr) -10.9 36 55 45
Net worth (Rs cr) 381 340 285
Total debt (Rs cr) 220 71 16
EBIT is earnings before interest and taxes
PAT is profit after tax

Key ratios

Ratios 3Y average (%) FY23 FY22 FY21
ROE (%) 13.8 9.4 16.2 15.8
ROCE (%) 19 14.2 20.2 22.6
EBIT margin (%) 3.7 2.6 4.2 4.2
Debt-to-equity 0.6 0.2 0.1
ROE is return on equity
ROCE is return on capital employed
EBIT is earnings before interest and taxes

Risk report

Company and business

  • Are Updater Services' earnings before tax more than Rs 50 crore in the last 12 months?
    Yes. The company's profit before tax for FY23 was Rs 54 crore.
  • Will Updater Services be able to scale up its business?
    Yes. The integrated facilities management and business support market has grown primarily due to outsourcing activities to third parties to optimise costs, free up internal resources and focus on core operations. These will help the company to scale up its operations.
  • Does Updater Services have recognisable brands with client stickiness?
    Yes. It is a recognisable brand in the industry, and some of its clients, like Hyundai, Saint-Gobain, and P&G, have been associated with it for over 10 years (as of June 30, 2023).
  • Does the company have a credible moat?
    No. Although Updater Services is a well-known company, it operates in a highly fragmented and competitive market.


  • Do any of the company's founders still hold at least a 5 per cent stake? Or do the promoters have over a 25 per cent stake in the company?
    Yes. The promoters' stake will be 58.5 per cent post-IPO.
  • Do the top three managers have over 15 years of combined leadership at Updater Services?
    Yes. Mr Raghunadana Tangirala, promoter, chairman and MD, has been associated with the company since its inception.
  • Is the management trustworthy? Is it transparent in its disclosures, which are consistent with SEBI guidelines?
    Yes. No information to suggest otherwise.
  • Is the company's accounting policy stable?
    Yes. No information to suggest otherwise.
  • Is Updater Services free of promoter pledging of its shares?
    Yes. Updater Services is free of promoter pledging of its shares.


  • Did the company generate a current and three-year average return on equity of more than 15 per cent and a return on capital employed of more than 18 per cent?
    No. The company's three-year average ROE and ROCE are 13.8 and 19 per cent respectively. In FY23, the company's ROE and ROCE were 9.4 and 14.2 per cent, respectively.
  • Was the company's operating cash flow positive during the last three years?
    Yes. The company reported positive cash flows in each of the last three years.
  • Is the company's net debt-to-equity ratio less than one?
    Yes. The company's net debt-to-equity ratio, as of March 2023, stood at 0.1 times.
  • Is Updater Services free from reliance on extensive working capital for day-to-day affairs?
    No. It has substantial working capital requirements and funds its needs through loans.
  • Can the company run its business without relying on external funding in the next three years?
    No. In the last few years, the company has aggressively grown inorganically through acquisitions. Moreover, the firm has further plans to expand similarly and may, thus, raise additional funds.
  • Is Updater Services free from meaningful contingent liabilities?
    No. Contingent liabilities as a percentage of equity is 17.4 per cent.


  • Does the stock offer an operating earnings yield of more than 8 per cent on its enterprise value?
    No. The stock will offer a 2.7 per cent operating earnings yield on its enterprise value.
  • Is the stock's price-to-earnings less than its peers' median level?
    No. The company will trade at a price-to-earnings ratio of 55.9 times post-IPO compared to its peers' median level of 29.9 times.
  • Is the stock's price-to-book value less than its peers' average level?
    Yes. The company will trade at a price-to-book ratio of 2.6 times post-IPO compared to its peers' average of 3.6 times.

Disclaimer: This is not a stock recommendation. Do your due diligence before investing.

Suggested read: What to look for in a company before investing?

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