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eMudhra IPO  Fundamental Analysis
  • Incorporated in the year 2010, and headquartered in Bengaluru, eMudhra (the Issuer) is a licensed Certifying Authority in India. The Issuer caters to all kinds of subscribers who use digital certificates for income tax return filing, MCA tenders, foreign trade, banking, railways, and many other needs. eMudhra is one of the very few trust service providers who operate in all three segments of Digital Trust Services, Digital Security Solutions, and Paperless Transformation solutions.
  • The Issuer is engaged in the business of providing Digital Trust Services and Enterprise Solutions to individuals and organizations functioning in various industries. As part of its Digital Trust Services, it issues a range of certificates including individual/organizational certificates, SSL/TLS certificates, and device certificates to build a digital trust backbone.
  • The Issuer has a local presence in 7 Indian cities and expanded to other geographies with a presence in Middle East (Dubai), APAC (Malaysia, Indonesia, North America (New Jersey, Florida), and Latin America (Bogota), and Europe (Amsterdam). The company works closely with large government and banking customers like the Reserve Bank of India, Defence Forces, 20+ public and private sector banks, and state governments.
  • Business Verticals of eMudhra
  1. Digital Trust Services- Under this, it provides individual/organizational services, SSL/TLS certificates and device certificates for income tax return filing, Ministry of Corporate Affairs (Registrar of Companies) filings, large government and banking customers, 20+ public and private sector banks and state governments and also for tenders, foreign trade, banking, railways, and many other needs.
  2. Enterprise Solutions- It provides identity, authentication, and authorization solutions, that are both web and mobile app-enabled, thereby enabling enterprises to secure, manage, and govern the identities of their consumers, employees/ partners, and IoT. This vertical comprises the following product offerings:
  • emSigner offering eSignature workflow solutions for paperless office;
  • emAS offering authentication solutions; and
  • emCA offers public key infrastructure (PKI) solutions.

emSigner and emAS are used by eGovernment platforms, banks and financial institutions, and other industries in India, as well as internationally. emCA, is used by the government agencies and for electric vehicle or smart city devices use cases among others.

  • The Issuer has issued more than 50 million digital signature certificates since its inception, its customers being the subscribers who use digital signature certificates for income tax return filing, filings with the Ministry of Corporate Affairs, tenders, foreign trade, banking, railways, and many other needs.
  • The Issuer caters to 1,43,406 retail customers and 626 enterprises as of Dec 31st 2021. Further, the revenue contribution of the digital products offered under Enterprise Solution vertical has consistently grown from Rs 36.18 crore in FY19 to ?64.34 crore in FY21.
  • The client base includes Infosys Limited, Hindalco Industries Limited, Mashreq Bank, Baud Telecom Company, Cholamandalam MS General Insurance Company Limited, Thales DIS CPL India Private Limited, Larsen & Toubro Infotech Limited, DB Schenker, JSW Steel Limited, Bharti AXA Life Insurance Company Limited, TATA Consultancy Services Limited, etc. The Issuer also offers services and digital products to various government agencies and state governments and thus enables paperless transactions as part of Digital India.
  • Emudhra also offers services in overseas regions such as America, Europe, Middle East , Africa, and the Asia Pacific. The revenues earned from domestic operations contributed ? 110.80 crore (9MFY22), ? 106.11 crore (FY21), ? 101.85 crore (FY20) and revenues earned from international operations contributed ? 26.45 crore (9MFY22), ? 25.48 crore (FY21), ? 14.60 crore (FY20) respectively.

Financial Review

eMudhra posted total revenues of Rs 138.30 crore for 9MFY22 and PAT of Rs 30.34 crore for the corresponding period. The total revenues increased by 13.40% to Rs 132.45 crore in FY21 from Rs 116.80 crore in FY20 due to an increase in the international operations by ? 10.80 crore especially in the Middle East and Africa (MEA) region. The profitability margins have remained strong with net margins being between 15%-21% over the last three fiscals as can be seen in the table.

Return on net worth is 21.59%, 18.05%, 17.16% for 9MFY22, FY21 and FY20 respectively.

Table 1 - Financials and Ratios (Amount in Rs Crore)
Particulars 9MFY22 FY2021 FY2020 FY2019
Total Revenue 138.3 132.45 116.8 101.68
Revenue from operations 137.24 131.59 116.45 101.58
PAT 30.34 25.36 18.42 17.44
EBITDA 50.36 40.79 32.29 32.31
Total Assets 254.11 191.91 158.71 119.52
Cash flow from operating activities 22.63 40.94 23.24 16.79
EBITDA Margin 36.69% 31.00% 27.73% 31.81%
Net Margin 21.94% 19.15% 15.77% 17.15%

Valuation and peer comparison

The Issue is priced at 44.04x with annualized EPS of 5.81 (9MFY22 EPS being 4.36), calculated at the upper price band of Rs 256 per share. P/BV is 12.79 at NAV of Rs 20.02 per share. There are no listed peers as per the RHP hence no comparison for valuations.

Issue Details

eMudhra IPO (fresh Issue of Rs 161 crore) opens on 20th May- 24th May 2022 with a price band of 243-256 per share. The retail quota is 35% and investors can apply with a minimum bid of 58 shares (Rs 14,848). Maximum lot size is 754 shares (Rs 1,93,024). The objects of the offer include repayment of borrowings, funding working capital, and foe development and expansion. The issue consists of an offer for sale by promoters Mr. Venkatraman Srinivasan (3.29 crore shares) Taarav Pte (4.52 crore shares) and the promoter group. The Issue is expected to list on 1st June 2022.

Conclusion and Investment Strategy

The financial sector, Government Agencies, and Educational Institutes are now strongly focusing on automation and finding ways to introduce paperless workflows for customer onboarding and internal processes. Paperless workflows eliminate the need for the physical presence of customers and improve turnarounds. APAC currently has a market contribution of $389.1 Mn. and is expected to be the fastest-growing (CAGR 33.2%) geography during the forecast period.

The Indian Digital Security Solutions market is the biggest contributor to the Digital Security and Paperless Transformation market. IAM (Identity and Access Management) is the single largest revenue pocket within all subsegments of the market. Digital Trust and Paperless Transformation contribute to 20.3% and 15.1% of the overall market respectively.

The growth of Digital Trust Services is expected to be 17.1% in the next 5 years as against 15.9% in the last 5 years. This high growth will primarily be driven by the strong use of digital signature certificates across industries like Govt. and BFSI in India.

The Issuer is one of the strongest players in the Indian Digital Trust Services market with a market share of 17.8% in FY21 and 37.9% market share in digital signature certificates. However, the Issuer operates in a highly competitive segment and has many unlisted players like Sify Technologies, Capricorn Identity services, V Sign, and Pantasign to name a few. Digicert Inc, Docusign, and Nexus group are some of the global peers. Looking at the above factors, one might apply for the short to medium term with concerns over volatility in the market.

Reviewer recommends May Apply to the issue.

Review By CA Priyanka Choudhary on 12th May 2022

Review Author

About CA Priyanka Choudhary

CA Priyanka Choudhary, a freelance chartered accountant

Priyanka Choudhary Jain is a Chartered Accountant and an experienced credit analyst. She has worked with CRISIL as Senior Credit Analyst on ratings assignments including business and financial analysis in Corporates as well as the Public Finance Sector.

Email: [email protected]

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.

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