Tracxn Technologies’ initial public offering (IPO) opened for subscription on Monday and will close on Wednesday. The price band for the Rs 309 crore issue, which is entirely an offer-for-sale, has been fixed at Rs 75-80 per share.
The promoters will offload a cumulative stake of 15.28 per cent in the company via the issue.
The company is a leading global market intelligence data provider, which offers data of private companies operating across emerging technology spaces such as IoT, AI, virtual reality, robotics, blockchain etc.
With an asset-light business model, it operates a subscription-based software as a service (SaaS) platform called Tracxn.
It offers customers detailed profiles of companies including information on their funding rounds, acquisition-related data, taxonomy and market maps, and global competitor benchmarking etc.
As of June 30, 2022, the company had a diverse base of 1,139 customer accounts in over 58 countries, which include investment banks, venture capital funds, private equity (PE) investors, and start-up accelerators, among others.
Some key clients of the company include Accel Management India LLP, growX Ventures Fund, Wipro, and Yamaha Motor Solutions.
Key risks: Attrition continues to remain at elevated levels. The company’s bottom-line performance has been disappointing in the last three years, while it turned profit positive only recently in the June quarter.
Here’s what brokerages recommend:
Swastika Investmart | AVOID
The company faces significant competition from private players such as Crunchbase, CBInsights, PrivCo & Pitchbook, and free online and offline sources of information on companies.
Due to rising interest rates and recessionary conditions, private equity market participants like investment banks, and venture capital funds are witnessing a significant cutback in terms of activities and traction in North America & Europe. Hence, the company will find it difficult to substantially grow its client base and top line in the coming years.
Anand Rathi | AVOID
The company is operating in a highly competitive industry and has been reporting negative EBITDA in the last three financial years. Hence, we recommend an “Avoid” rating to the issue.
Choice Broking | AVOID
There is no peer company in the listed space with operations similar to the company. At the upper price band, Tracxn commands an EV/Sales multiple of 12.3x, which seems to be stretched for loss-making operations.
Considering its high double-digit attrition rate (49 per cent in FY22 and 13.8 per cent in Q1FY23), we are cautiously optimistic on the company’s efforts to bring down employee costs. Also, partial/full exit by PE investors raises concerns on its long-term growth outlook.
Religare Broking | NEUTRAL
Investors need to keep an eye on the financial performance for FY23. The company’s revenues could be jeopardised if customers do not renew their subscriptions.
ICICI Securities | UNRATED
With growing users of private market data, the company is looking to capitalise on the opportunity by growing its customer base further. A good chunk of its business also comes from repeat business (74 per cent retention rate).
The pricing (avg revenue per customer) has largely been stagnant over the last three years but with scale benefits, we believe it could be one of the growth levers in the medium-to-long term. With operating leverage kicking in, profitability is likely to improve going forward.
Arihant Capital | SUBSCRIBE for long-term
The company operates in India, which gives it significant cost advantages over its global competitors. Its revenue has grown at a 3-year CAGR of 30 per cent as against a cost CAGR of 3-4 per cent over this period, which shows that the company can scale up at low operating cost.
High operating leverage, a strong technology platform, and comprehensive data coverage is strengthening the company’s position. It has achieved breakeven and reported gains in Q1FY23.