Updater Services Limited IPO

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i. Updater Services is a leading, focused, and integrated business services platform in India offering integrated facilities management (“IFM”) services and business support services (“BSS”) to the customers, with a pan-India presence. They are the second largest player in the IFM market in India and have the widest service offering in the industry, making them a unique and differentiated player in the market. Within their BSS segment, they offer Audit and Assurance services through their Subsidiary, Matrix and according to F&S Report, Matrix is a leading Audit and Assurance company for dealer / distributor audits, and retail audits and its strong branch reach and field associate reach has driven the company to reach the top spot in India, with a market share of 19.2% in the Financial Year ended March 31, 2023.

ii. They also offer employee background verification check services through Matrix and in this segment, Matrix is the third largest company in India with a share of 5.4% in the Financial Year ended March 31, 2023. In addition, they provide sales enablement services through their Subsidiaries Denave and Athena and as per the F&S Report, Denave is the largest player in this segment with a market share of 20.1% in India in the Financial Year ended March 31, 2023. In addition, they offer mailroom management services through the Subsidiary, Avon which is a market leader in India with a share of 11.1% in the mailroom management services market in the Financial Year ended March 31, 2023.

iii. The Company was founded by Raghunandana Tangirala who has over 30 years of experience in the integrated business services industry. They commenced operations in 1990 as a housekeeping and catering services company situated at Chennai, Tamil Nadu. Over the years, they have evolved into an integrated business services platform with a pan India presence serving customers across industries and business service lines. They are led by a well-qualified and experienced management team, which has robust experience in the sectors in which we operate, and which has demonstrated its ability to manage and grow the operations across segments that we operate in.

iv. The company operate in the Business-to-Business (“B2B”) services space offering a spectrum of business services, which are broadly classified into the two following segments:

1. IFM & Other Services Segment; and
2. BSS Segment

Competitive Strengths

i. Leading integrated business services platform, operating across diverse segments
ii. Longstanding relationship with customers across diverse sectors leading to recurring business
iii. Track record of successful acquisition and integration of high margin business segments

Objects of the Updater Services Limited IPO:

Objects of the Fresh Issue: 1. Repayment and /or prepayment of certain borrowings availed by the Company. 2. Funding the working capital requirements. 3. Pursuing inorganic initiatives. 4. General corporate purposes. The Total number of shares issues: - a. Fresh Issue is 13,333,333 shares. b. Offer for Sale is 8,000,000 shares.

Updater Services Limited IPO Details:

Open Date: Sep 25 2023
Close Date: Sep 27 2023
Total Shares: 21,333,333
Face Value: ₹ 10 Per Equity Share
Issue Type: Book Built Issue IPO
Issue Size: 640 Cr.
Lot Size: 50 Shares
Issue Price: ₹ 280 - 300 Per Equity Share
Listing At: NSE,BSE
Listing Date: Oct 09 2023

Promoters And Management:

Raghunandana Tangirala is the Promoter, Chairman of the Board and Managing Director on the Board of the Company. He is one of the founding directors of the Company and has been on the board since the incorporation of the Company. In the Company, he focuses primarily on corporate governance, organizational development, capital allocation and strategic growth of the Company. He holds a bachelor’s degree in commerce from Faculty of Commerce, University of Madras. He has approximately 30 years of experience in the service sector as an entrepreneur. Amitabh Jaipuria is a Non - Executive Director on the Board of the Company. He holds a bachelor’s degree in science from University of Bombay and a post-graduate diploma in management from XLRI, Jamshedpur. He was previously associated with Ziqitza Healthcare Limited as the managing director & CEO, First Meridian Business Services Pvt. Ltd. as the president-general staffing/managed & allied services, Quess Corp Limited as president & chief executive officer – global services, Reliance Jio Infocomm Limited as the head – fixed business, AGS Transact Technologies Limited as the chief executive officer in the banking department, Monsanto India Limited as the managing director, PepsiCo India Holdings Pvt. Ltd. as the market unit general manager – west market unit, Reliance Infocomm, GE Lighting India (P) Ltd and Blow Past Limited. Pondicherry Chidambaram Balasubramanian is an Executive Director (Whole-Time Director) on the Board of the Company. He holds a bachelor’s degree in commerce from St. Joseph’s College, Bharathidasan University. He is a member of Institute of Chartered Accountants of India. In the Company, he focuses on group integration and growth initiatives. He is one of the founding directors and previously served as a managing director of Matrix Business Services India Private Limited and as a partner with Gopinath & Sharma, Chartered Accountants.

Financials of Updater Services Limited IPO:

A. Balance Sheet
Particular (In Million) Mar-21 Mar-22 Mar-23
Equity Share Capital 528 528 530
Reserves 2,324 2,876 3,279
Borrowings 116 587 1,765
Trade Payables 319 457 793
Other Liabilities 2,508 4,298 5,802
Total Liabilities 2,942 5,341 8,361
Net Block 135 332 608
Capital Work in Progress 3 41 0
Investments 0.1 0.1 0.1
Other Assets 1,741 3,320 4,544
Total NC Assets 1,879 3,693 5,152
Receivables 2,689 3,475 4,277
Inventory 50 63 70
Cash & Bank 638 710 1,651
Other Assets 538 804 1,019
Face value 10 10 10
B. Profit & Loss Statement
Particular (In Million) Mar-21 Mar-22 Mar-23
Sales 12,100 14,836 20,989
Raw Material Cost 276 387 768
Purchases of Stock In Trade 25 20 24
Change in Inventory 16 -13 10
Other Mfr. Exp 94 1,228 3,117
Employee Cost 9,817 10,682 13,841
Other Expenses 1,213 1,751 2,303
Other Income 63 143 132
EBITDA 724 925 1,058
EBITDA Margin 5.98% 6.24% 5.04%
Depreciation 150 165 370
Interest 30 51 146
Profit before tax 544 709 542
Tax 69 136 196
Net profit 476 574 346
NPM (%) 3.91% 3.83% 1.64%
C. Cash Flow Statement
Particular (In Million) Mar-21 Mar-22 Mar-23
Cash From Operating Activity
Profit From Operation 780 1,095 1,450
Receivable 741 -721 -674
Inventory 16 -13 -1.7
Payable -39 127 213
Loans And Advances -0.8 7 -0.8
Other WC Items -87 30 365
Working Capital Changes 630 -570 -98
Direct Taxes -125 -214 -204
Net Cash Inflow from Operating Activity 1285 311 1148
Cash from Investing Activity
Fixed assets purchased -43 -135 -516
Fixed assets sold 7 0 9
Investments purchased -25 0 -38
Investment sold 0 40 0
Investment in subsidiaries 0 -495 -762
Other investing items -104 118 -224
Net cash inflow from investing activities -165 -472 -1,530
Cash from Financing Activity
Proceeds from borrowings 195 8,790 10,798
Repayment of borrowings -978 -8,361 -9,618
Intrest paid fin -25 -45 -125
Dividends paid 0 0 -10
Other financing items -38 -95 -90
Net Cash Flow 273 127 574

Comparison With Peers:

Name of the Company Revenue (In Crore) PAT (In Crore) EPS ( in Rs) P/E CMP Mcap (In Crore)
Updater Services Limited 2,099 35 5.1.8 57.8 300 2,001
Quess Corp Limited 17,158 223 15.14 38.7 423 6,268
SIS Limited 11,346 346 23.77 17.5 424 6,183
Team Lease Services Limited 7,870 112 65.12 38.2 2,510 4,292
* All the data is as per FY23.

Recommendation on Updater Services Limited IPO:

Review and Recommendation of Updater Services IPO by IZ team is 3/10

A) Integrated Facilities Management (IFM) Sector: Overview and Uses

Integrated Facilities Management (IFM) is a sector that focuses on the management and maintenance of various facility services within an organization. These services can range from real estate management, infrastructure, soft services like cleaning and catering, to hard services like HVAC maintenance, electrical works, and plumbing.

B) Uses of IFM Sector:

1. Operational Efficiency: IFM enables organizations to focus on their core business by outsourcing non-core activities. 2. Cost Savings: Through the consolidation of services under a single provider, organizations can achieve economies of scale. 3. Quality Control: IFM providers often bring expertise and standardization, ensuring high-quality services across the board. 4. Compliance: IFM firms stay updated on regulations and ensure that an organization's facilities are compliant with laws and guidelines. 5. Scalability: As organizations grow, IFM services can be easily scaled to meet new requirements.

C) Problems in the IFM Sector:

1. Fragmented Market: The sector is often fragmented, with many players offering specialized services, making integration challenging. 2. Cost Pressure: In a bid to offer competitive prices, IFM companies might compromise on service quality. 3. Regulatory Challenges: Frequent changes in compliance and regulatory norms can create operational hiccups. 4. Dependency: Heavy reliance on subcontractors can sometimes affect service quality and reliability. 5. Talent Gap: Specialized services require skilled labor, which is often in short supply.

D) Analysis of Updater Services Limited

1. Market Position: Being the second-largest player in the IFM market in India is a competitive advantage. 2. Diverse Service Offerings:  Updater Services Limited's Business Support Services (BSS) division offers a multifaceted range of services, operating through several specialized subsidiaries to serve various market needs. Firstly, Matrix, one of their subsidiaries, stands as a frontrunner in the Audit and Assurance sector in India, specializing in dealer, distributor, and retail audits. According to a recent F&S Report, Matrix has secured the leading position in India with a remarkable market share of 19.2% as of the fiscal year ending in March 2023. This achievement is largely attributed to its expansive branch and field associate network across the country. Secondly, Matrix also extends its expertise to employee background verification services. In this particular segment, the company holds a significant market share of 5.4%, making it the third largest player in India for the fiscal year that concluded in March 2023. Additionally, Updater Services Limited operates in the sales enablement sector through its subsidiaries Denave and Athena. As per the same F&S Report, Denave dominates this sector with a commanding market share of 20.1% in India for the fiscal year ending in March 2023. Lastly, the company also offers specialized mailroom management services through another subsidiary, Avon. Avon has emerged as the market leader in India in this niche, boasting an 11.1% market share in the mailroom management services market for the fiscal year ending in March 2023. These diversified service offerings not only make Updater Services Limited a versatile player in the BSS segment but also position it as a market leader in multiple domains. 3. Financial Performance: Sales have shown significant growth from March 2021 to March 2023, indicating strong market demand. 4. Management: Led by a seasoned entrepreneur with 30 years of experience, the management team brings robust sectorial expertise. 5. Acquisition and Integration: The company has a good track record of successfully acquiring and integrating high-margin business segments.

D) Weaknesses in the Company:

1. Net Profit Margins: There is a noticeable decrease in net profit margins from 3.91% in Mar-21 to 1.64% in Mar-23, which could be a concern. 2. Increasing Borrowings: Borrowings have gone up significantly, from 11 Cr in Mar-21 to 176 Cr in Mar-23, indicating a higher debt load. 3. Operational Costs: Employee costs and other manufacturing expenses have increased substantially, impacting profitability.

E) Comparisons:

Compared to peers like Quess Corp and SIS Limited, Updater Services has a higher P/E ratio, indicating stock might be overvalued. Moreover, the company has lower Revenue and PAT compared to its peers.

Registrar of Updater Services Limited IPO:

  1. Link Intime India Private Limited

Company Address:

Updater Services Limited No. 2/302-A, UDS Salai, Off Old Mahabalipuram Road, Thoraipakkam, Chennai 600 097, Tamil Nadu, India Phone: +91 44 24963234 / 0333 Email: compliance.officer@uds.in Website: https://www.uds.in/

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