ESDS Software IPO sails through on 1st day, GMP at 77%; check reviews

ESDS Software Solution IPO: The initial public offer (IPO) of ESDS Software Solutions, an AI-enabled provider of cloud, managed services, data centre infrastructure and software solutions, garnered a strong response on the first day of the book-building process on Friday, August 28. 

 

The ₹720-crore offer was fully booked in a couple of hours of opening. As of 12.56 PM, ESDS Software Solution IPO had received bids for 14 million shares as against 12.35 million shares on offer, according to BSE data, resulting in a 1.31 times subscription. 

 

The retail and non-institutional investors (NIIs) led the subscription as their quotas were subscribed 1.68 times and 1.55 times, respectively. The qualified institutional buyer (QIB) segment did not see any bids so far. 

 

 

The company also enjoys a strong grey market premium (GMP). ESDS Software Solution IPO listing price could be ₹759, a premium of 76.92 per cent as per websites tracking the unofficial market. 

 

ESDS Software Solution IPO details & review

ESDS Software Solution IPO is entirely a fresh share sale, with the proceeds raised proposed to be used for purchase and installation of cloud computing and other equipment and infrastructure for data centres, along with general corporate purposes. 

 

The offer closes for bidding next week on September 1, and the tentative listing date has been set as September 4. 

 

ESDS Software Solution IPO price band is at ₹408 to ₹429 per share. Investors can apply in lots of 34 shares. 

 

The company offers a comprehensive platform of cloud infrastructure and software solutions, which includes infrastructure as a service (IaaS), managed solutions, and software as a service (SaaS). It operates five tier-3 data centres across India, covering over 75,266 sqft, supported by redundant power, disaster recovery infrastructure and 24/7 services. 

 

ESDS is well positioned to benefit from India's rapidly growing cloud and data centre industry, with the Indian data centre market expected to grow at a CAGR of ~20.7 per cent during FY26-FY30, driven by increasing cloud adoption, AI workloads, data localisation requirements and ongoing digital transformation initiatives, said SBI Securities. 

 

On the financial front, the company has delivered a strong FY24-26 Revenue/EBITDA/PAT CAGR of 28.4 per cent/51.6 per cent/186.9 per cent, respectively, supported by operating leverage and an improving business mix. EBITDA margin expanded significantly from 35.6 per cent in FY24 to 49.6 per cent in FY26. 

 

SBI Securities said that at the upper price band, ESDS is valued at FY26 P/E of 41.6x and EV/EBITDA multiple of 13.2x on post-issue capital. While risks remain around government exposure (~27 per cent of FY26 revenue), customer concentration and rapid technological changes, these are partly mitigated by rising enterprise revenues, diversified service offerings and healthy customer retention, according to the brokerage.

 

Considering its differentiated cloud platform, improving profitability, scalable business model and favourable industry tailwinds, SBI Securities recommended investors to 'SUBSCRIBE' to the issue. 

 

Swastika, meanwhile, said ESDS is a rare, full-stack cloud, data-centre, SaaS player with patented tech, providing a differentiated positioning. It has explosive margin and profit growth and very strong customer stickiness (94.92 per cent revenue retention rate; deepening account tenure). 

 

"ESDS is a richly-valued, high-growth niche tech play with no clean valuation anchor. Rising demand for cloud computing, data-centre infrastructure, cybersecurity and digitalisation in India provides a favourable structural growth opportunity for ESDS over the long term," it added as it gave a 'SUBSCRIBE' tag. 

 

Disclaimer: Views and outlook shared belong to the respective brokerages/analysts and are not endorsed by Business Standard. Readers' discretion is advised.