ESDS Software extends rally, hits 20% upper band a day after bumper listing

Shares of ESDS Software were locked in the 20 per cent upper circuit on Monday, a day after a bumper debut as investors continued to plough money into the recently listed stock. Moreover, Choice Broking initiated coverage on the stock with a 'Buy' rating as it finds the stock a good play to ride India’s cloud-to-AI infrastructure supercycle.

 

The stock opened at the upper price band of ₹1,074.65 on the BSE and continues to trade at this level. As of 10.05 AM, there were only buy orders for 2.18 million shares on both BSE and NSE combined.

 

ESDS Software Services shares were listed on Friday at a premium of 76 per cent and soon extended gains to trade over 100 per cent higher. The stock listed at ₹757 apiece on the National Stock Exchange (NSE) as against the offer price of ₹429, a premium of 76.46 per cent. Meanwhile, on the BSE, the stock opened 73.96 per cent higher at ₹746.30. During the day, ESDS shares hit the 20 per cent upper circuit at ₹908.40, up 111.5 per cent from the issue price. 

Analysts on ESDS Software shares

Choice Broking believes that ESDS offers one of the most compelling listed opportunities to gain exposure to India’s structural cloud, data-centre and AI infrastructure build-out, supported by its full-stack capabilities across cloud, managed infrastructure and datacentre services.

 

 

"Growth is underpinned by capacity expansion, deeper customer monetisation and operating leverage, with the $1.25 billion AI contract adding a significant new leg to the earnings trajectory," it said.

 

It further expects revenue/Ebitda/PAT to grow at 120.9 per cent/72.6 per cent/81.3 per cent CAGR over FY26–29E, driven by core business momentum and the ramp-up of AI infrastructure revenues. "Our 18x FY28E EV/EBITDA valuation implies ~31x FY28E forward P/E, which we believe appropriately reflects ESDS’s strong growth profile. Successful execution and faster ramp-up of the AI contract could provide further upside to earnings and valuation," the brokerage added. Its target price of ₹1,550 signals another 44 per cent upside from today's high.

 

However, Arun Kejriwal, founder at Kejriwal Research & Investment Services, said that chasing a stock is not the best thing to do; and in the case of ESDS even if you get in now, whatever expectations there are for the stock’s performance in FY27, FY28 and FY29 are already discounted.

 

"There is some controversy about the agreement that the company has entered into with the Australian company. Clarity will come once the conference call happens when they declare the June results. Once we get clarity, you will have a much better idea of whether to enter the stock at these levels," he opined.

ESDS Software IPO details

The company's initial public offering (IPO) was available for bidding from August 28 to September 1, garnering a bumper response from investors.

 

The offer received bids for 1.67 billion shares as against 12.35 million shares on offer, according to NSE data, resulting in 135.88 times subscription. The qualified institutional buyer (QIB) quota was booked the most at 261.51 times, followed by the non-institutional investor (NII) segment, which received 192.94 times subscription. Finally, the retail portion was subscribed 39.64 times.

 

The ₹720-crore offer was entirely a fresh issue of shares. The funds raised are proposed to be utilised for purchase and installation of cloud computing and other equipment and infrastructure for data centres, along with general corporate purposes.

 

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