Emudhra
is a licensed certifying authority involved in issuing digital signature
certificates in India under its eMudhra brand. The company is licensed by the
Controller of Certifying Authorities (CCA), Ministry of Information Technology,
and operates under the guidelines set by the Information technology Act.
It
also provides various enterprise solutions and services around digital
signatures like authentication solutions, paperless office solutions, solutions
for securing data in transit. Apart from this, the company has solutions for
Internet of Things (IoT), and other solutions around Public Key Infrastructure
(PKI)
Emudhra
is the largest licensed certifying authority in India, with a market share of
37.9% in the digital signature certificate market space in FY2021, having grown
from 36.5% in FY 2020.
As
part of its digital trust services, the company issues a range of certificates
including individual/organizational certificates, Secure Sockets Layer/Transport
Layer Security certificates and device certificates [used in IoT use cases] to
build a digital trust backbone.
Under
its enterprise solutions vertical, the company offers a differentiated
portfolio of digital security and paperless transformation solutions,
complementing its digital trust services business, to customers engaged in
different industries, thereby making the company a 'one stop shop' player in
secure digital transformation to provide a wide spectrum of services and
solutions from issuance of certificates as a certifying authority to offering identity,
authentication and signing solutions.
With
more than 50 million digital signature certificates issued since inception, the
company caters to all kind of subscribers who use digital signature
certificates for income tax return filing, filings with the Ministry of
Corporate Affairs (Registrar of Companies), tenders, foreign trade, banking,
railways and many other needs. The company works closely with large government
and banking customers like the 20+ public and private sector banks and state
governments.
The
company has been identified and ranked amongst the '20 Most Promising Tech
Solution Providers for Government & Public Sector 2019' by CIO Review
India. The company is the only Indian company to be admitted as a member of
European Cloud Signature Consortium as well as Certifying Authority / Browser
Forum, a global forum that governs the use of SSL/TLS certificates and to be
accredited to Web trust, which makes its digital signature certificates
directly recognized by browsers across the world allowing the company to issue
digital signature certificates in many countries.
The
company has a strong digital signature certificate expertise and is the only
Indian company to be directly recognized by renowned browsers and document
processing software companies such as Microsoft, Mozilla, Apple and Adobe
allowing it to sell digital identities to individual/organization and issue
SSL/TLS certificates for website authentication globally.
The
company's Enterprise Solutions are developed by the company and is built on the
principle of delivering digital trust by helping users seamlessly identify,
authenticate and authorize or sign digital transactions thus accelerating the
transition to a presence-less and paperless way of doing business.
The
company’s enterprise solutions are majorly divided into three broad categories
viz., eSignature workflow solutions for paperless office (emSigner),
authentication solutions (emAS) and public key infrastructure solutions (emCA).
As part of these offerings, the company provides capabilities, such as
password-less authentication that free users from the challenges and security
risks associated with weak and forgotten credentials.
The company since inception has issued over 50
million digital signature certificates through its network of 88,457 channel
partners spread across all states and union territories of India. The company
has established presence and differentiated product portfolio in digital
security and paperless transformation. The company has consistently designed
and developing differential products at competitive price points under its business
verticals which has contributed towards its growth and expansion of its
customer base in recent years. Its retail customers grew from 58,872 as of March
31,2019, to 1,15,905 as of March 31,2021. Its enterprise customers grew from
249 as of March 31,2019, to 518 as of March 31,2021.
Further, as of December 31,2021 the company
caters its services to 1,43,406 retail customers and 626 enterprises.
The
revenue contribution of the digital products offered under its enterprise
solution vertical has consistently grown from Rs 36.18 crore in FY 2019 to Rs
64.34 crore in the FY2021. As of Dec 30, 2021, the company's enterprise
solutions are used by 10 out of top 10 banks, 6 of top 10 automotive companies
and 19 out of top 20 companies amongst the top 500 ranked companies in India by
Economic Times in FY2020.
The
company provides its solutions and services in overseas regions such as,
Americas, Europe, Middle East and Africa and Asia Pacific. During the nine
months period ended December 31, 2021, and the Financials Year 2021, 2020 and
2019, the revenues earned from its domestic operations contributed Rs 110.8 crore,
Rs 106.1crore, Rs 101.9 crore and Rs 91.4 crore, respectively, and revenues earned
from its international operations contributed Rs 26.5 crore, Rs 25.5 crore, Rs
14.6 crore and Rs 10.2 crore, respectively.
The company is promoted by Mr Venkatraman Srinivasan and Taarav
Pte Limited.
Object of
the offer
The offer comprises a fresh issue of 62,89,063 equity shares at
upper price band of Rs 256 and 66,25,514 equity shares at lower price band of
Rs 243 aggregating up to Rs 161crore by the company and an offer for sale by
selling shareholders Mr Venkataraman Srinivasan of up to 32,89,257 equity
shares aggregating Rs84.2cr at upper price band, Taarav PTE Limited of up to 45,16,246
equity shares aggregating Rs115.6cr at upper price band , Mr Kaushik Srinivasan
of up to 5,10,638 equity shares
aggregating Rs 13.1cr at upper price band, Ms Lakshmi Kaushik of up to 5,04,307 equity shares aggregating Rs 12.9cr at upper price band, Mr
Arvind Srinivasan of up to 8,81,869 equity shares aggregating Rs 22.6crat upper price band and Mr
Aishwarya Arvind of up to 1,33,077 equity shares aggregating Rs 3.4 cr at upper price band.
The company on May 05,2022 has raised Rs 39 crore through pre-IPO
placement by issuing 16,03,617 equity shares for a cash price
of Rs 243.2 per equity share.
Thecompany proposes to utilize the net proceeds of the fresh issue
towards funding prepayment or repayment in part of all or certain borrowings
availed by the company amounting to Rs 35.0 crore, funding its working capital
requirements amounting Rs 40.22 crore, Purchase of equipment and funding of
other related cost for data centers proposed to be set up in India and overseas
locations amounting Rs 46.36 crore, Funding of expenditure relating to product
development amounting Rs 15.03 crore, investment in eMudhra INC for augmenting
its business development, sales, marketing and other related cost for future
amounting Rs 15.27 crore and the balance towards general corporate purposes.
Strengths:
Emudhra is licensed by Controller of Certifying Authorities in
India to issue Digital Signature Certificate (DSC) in India. It started
operation in 2008 and is now a leading player in the digital authentication
space supported by its wide network of controllers or agents spread across
India.
The company has a strong track record in digital authentication
market and has issued 18 lakhs DSC in FY2021. The company is the largest
licensed Certifying Authority in India with a market share of 37.9% in the
digital signature certificate market space in FY 2021 having grown from 36.5%
in FY2020.
The company is a registered certifying authority with the
Controller of Certifying Authorities and are the only Indian company to be
admitted as a member of European Cloud Signature Consortium as well as Certifying
Authority/ Browser Forum, a global forum that governs the use of SSL/TLS
certificates. The company has obtained a variety of accreditations,
security/compliance certifications which the company maintain on an ongoing
basis for example, Webtrust Accreditation to provide services as a public
certifying authority globally and list its digital signature certificate roots
with renowned browsers.
All the services provided under trust solutions, are compliant
with the quality standard of ISO 9001 and are certified by the applicable
certification body. Further, its cloud offerings are compliant with SOC2 Type 2
and its eSignature workflow solutions, emSigner is listed on the SAFE Identity
Qualified Product List (QPL).
The company is one of the largest players in the Indian digital
trust services market with a market share of 17.8% and it enjoys 19.0% market
share in the digital transformation solutions market in India for FY 2021.
The company's relevant experience in the digital secure and
paperless transformation industry enabled the company in identifying and
capitalising the market opportunity offered by the Indian digital certificates
market and garner the capabilities of serving all kind of subscribers who use
digital certificates for income tax return filing, filings to be made with
Ministry of Corporate Affairs (Registrar of Companies) filings, tenders,
foreign trade, banking and railways.
The company's digital trust services and enterprise solutions are
backed by technological infrastructure including its data centres located in
India and proposed to be set up in overseas locations, with appropriate
virtualization, computing and storage, physical and logical isolation, network
firewalls and disaster recovery site to support high availability, uptime and
redundancy.
The digital signature certificates issued by the company are based
on asymmetric cryptographic key pairs (private and public key).
The company services marquee customers through its digital trust
services and enterprise solutions and has been able to form a portfolio of
renowned customers in private as well as in public sectors, including, Infosys,
Hindalco Industries, Mashreq Bank, Baud Telecom Company, Cholamandalam MS
General Insurance Company Limited, Thales DIS CPL India Private Limited, Larsen
& Toubro Infotech, DB Schenker, JSW Steel, Bharti AXA Life Insurance
Company Limited and TATA Consultancy Services.
The company works closely with large government and banking
customers, 20+ public and private sector banks and state governments. As of Dec
31, 2021, the enterprise solutions of the company were used by 10 out of top 10
banks, 6 of top 10 automotive companies and 19 out of top 20 companies amongst
the top 500 ranked companies in India by Economic Times in Financial Year 2020.
As of December31, 2021, the company had 91,259 channel partners
for digital trust services spread across various States and Union Territories
in India and out of its 539 system integrator partners, 267 are present in
India and 272 are present internationally in United States of America, Europe,
Middle East and Africa and Asia Pacific.
The company's enterprise solution partners are broadly categorized
into system integrators which comprise of large IT companies who bundle the
company's solution as part of a larger turnkey offering to the end customers;
technology partners with whom the company has a direct integration for selling its
products on their platform; and lastly, resellers and distributors, who resell
or distribute the company's digital products and solutions to their customer
base.
The distribution reach and selling capabilities of its extensive
partner network will continue to drive the company's business growth and
provide it with the competitive advantage in the market as well as serve as a
barrier to entry for new entrants.
Weakness
The company's scale of operations remained moderate at Rs. 131.5
crore in FY2021, restricting the financial and operational flexibility to an
extent.
The company is licensed by the Controller of Certifying
Authorities (CCA), Ministry of Information Technology and operates under the
guidelines set by the Information Technology Act. This exposes its business to
any changes in the requirements of CCA.
Further, CCA has strict audit requirements, which DSC certifying
authorities are required to follow. The license from controller of certifying
authorities has been renewed in 2018 and is valid till until October 2023.
The IT industry is susceptible to risks related to technological
changes, competition from substitutes and shifts in customer demand apart from
data management and cybersecurity risks. This necessitates continued
investments in technology upgradation. Diversification efforts will support
mitigation of the technological obsolescence risk.
As part of the company's growth strategy, the company intends to
expand its business operations to geographical areas in which it has limited
operation history. The company cannot assure that its expansion plans will be
profitable or that such expansion will not adversely affect its business,
results of operations and financial condition.
One of the objects of the Offer is to invest in eMudhra INC one of
the company's subsidiaries, incorporated in United States of America to augment
its business development, sales, marketing and other related costs for future
growth. The expenditure proposed to be incurred is subject to external factors
and uncertainty of the outcome of such expenditure.
The company proposes to use Rs 46.36 crore of the net proceeds of
the offer towards purchase of equipment and funding of other related costs for
data centres proposed to be set up in India and overseas locations.In case the
company is unable to set-up the data centres in a timely manner it may face
delay in deploying net proceeds towards purchase of equipment for these data centres
to be set up in India and overseas locations which could have impact on growth
prospects of the company.
The company's security measures may in the future be, compromised.
Consequently, its services and solutions may be perceived as not being secure.
This may result in customers curtailing or ceasing their use of the company's
solutions, its reputation being harmed and incurring of significant liabilities
and lead to an adverse effect on its results and growth prospects.
The company is dependent on channel partner for a significant
portion of its revenues and a loss of such partner could adversely affect its
business.
If the company's solutions fail to perform properly due to
defects, delays or similar problems, and if the company fails to develop
enhancements to resolve any defect or other problems, it could lose customers,
become subject to service performance or warranty claims or incur significant
costs.
The company faces competition in the DSC from other players like
Sify Communications Ltd, Capricorn Identity Services Pvt. Ltd, (n) Code
Solutions, Verasys. The intense competition results in limited pricing
flexibility and bargaining power with the customers for the sale of DSC in the
domestic market.
Further, in the enterprise solutions business, it faces
competition from established players based out of U.S. and Europe in the global
market. However, Emudhra's enterprise solution has cost advantage over its
competition supported by low payroll cost incurred in India.
The company relies on its data centres for efficient functioning
of its technology platform, and any interruption or delay in service from these
facilities could impair the delivery of its technology platform and digital
products and adversely impact its business and results of operations.
Valuation
For nine months ended December 31,2021,
the company earned net profit of Rs 30.6 crore on sales of Rs 137.24cr.9M
revenues and net profit was higher than FY2021 revenues and profit. Healthy
revenue growth in 9months FY2022 was on back of improved realization on Digital
Signature certificate and increase in sales of enterprise solutions in export
market. For FY 2021, consolidated sales were up by
13.2% to Rs 131.6 cr. OPM rose 291bps to 30.34% which led to 25% increase in
operating profit to Rs 39.93 crore. Other income increased 146.7% to 0.86 crore
while interest cost increased25.9% to Rs 0.84 crore and depreciation increased 1.9%
to Rs 8.77 crore.
PBT increased by 35.5% to Rs 31.18 crore.
Tax expenses increased by26.5% to Rs 5.82 crore. Net profit after minority
interest stood at 17.5 crore as against net profit of Rs 16.6crore in FY2020. At higher price band of Rs 256, the offer
is made at a around 15.2 times P/ (S FY2021) and 114.5 times P/(E FY2021) and
49 times P/(E 9M Annualised FY2022) . The company on May 05,2022,through pre-IPO
placement has allotted 16,03,617 equity shares for a cash price of Rs 243.2 per
equity share aggregating Rs 39.0 crore to Baring Private Equity India AIF 2,
Acacia Banyan Partners, Motilal Oswal Equity Opportunities Fund Series III,
Negen Capital Services Private Limited, Value Wise Consultancy Private Limited,
Jagadeesan Kumar and Krishna Kumar.There are no listed peers for the company in
India.
eMudhra:
Issue Highlights
|
Fresh issue (in Rs crore)
|
161.0
|
Offer for sale (in Rs crore)
|
|
Offer for sale (in number of shares)
|
|
- in Upper price band
|
9835394
|
- in Lower price band
|
9835394
|
|
|
Price Band (Rs)
|
243-256
|
For Fresh Issue Offer size (in no of shares)
|
|
- in Upper price band
|
6289063
|
- in Lower price band
|
6625514
|
Pre issued capital (Rs crore)
|
|
Post issue capital (Rs crore)
|
|
- in Upper price band
|
39.0
|
- in Lower price band
|
39.2
|
Pre issue promoter and Promoter Group shareholding
(%)
|
79.2%
|
Post issue Promoter and Promoter Group shareholding
|
|
-On higher price band (%)
|
61.0%
|
-On lower price band (%)
|
60.8%
|
Bid Size (in No. of shares)
|
|
Issue open date
|
20-05-2022
|
Issue closed date
|
24-05-2022
|
Listing
|
BSE, NSE
|
Rating
|
42
|
eMudhra:
Consolidated Financial
|
|
1903 (12)
|
2003 (12)
|
2103 (12)
|
2112 (09)
|
Sales
|
101.58
|
116.45
|
131.59
|
137.24
|
OPM (%)
|
32
|
27.43
|
30.34
|
35.92
|
OP
|
32.21
|
31.94
|
39.93
|
49.30
|
Other inc.
|
0.10
|
0.35
|
0.86
|
1.06
|
PBIDT
|
32.31
|
32.29
|
40.79
|
50.36
|
Interest
|
0.26
|
0.67
|
0.84
|
3.50
|
PBDT
|
32.05
|
31.62
|
39.95
|
46.86
|
Dep.
|
8.50
|
8.60
|
8.77
|
10.12
|
PBT
|
23.55
|
23.02
|
31.18
|
36.74
|
Share of profit/loss from JV
|
-
|
-
|
-
|
-
|
PBT Before EO
|
23.55
|
23.02
|
31.18
|
36.74
|
Exceptional items
|
-1.90
|
-
|
-
|
-
|
PBT After EO
|
21.65
|
23.02
|
31.18
|
36.74
|
Total Tax
|
4.21
|
4.60
|
5.82
|
6.40
|
PAT
|
17.44
|
18.42
|
25.36
|
30.340
|
Minority Interest
|
-
|
1.77
|
7.90
|
-0.28
|
Net Profit
|
17.4
|
16.6
|
17.5
|
30.6
|
EPS (Rs)*
|
2.43
|
2.13
|
2.24
|
#5.23
|
*EPS is calculated based on post issue share
capital of Rs 39 cr at upper price band, Face Value Rs 5
|
#Annualised
|
Figures in Rs crore
|
Source: Capitaline Corporate Database
|
|