Understanding Business, Financials, Risks and Valuation of Canarys Automations SME IPO

A) Understand the Business of Canarys Automation SME IPO

The company has been in business for over 30 years Their solutions aim to create value and positively impact customer business Solutions involve a change in perspective and approach towards problem-solving.

(i) Core Focus and Expertise

a) Canarys Automation is primarily delivering meaningful and outcome-driven solutions that cater to businesses and individual needs.

b) The company emphasizes innovation, automation, and modernization, aiming to protect businesses against disruption and anticipate future needs.

c) Their solutions are tailored to be customer-centric, and they pride themselves on fostering open discussions and direct access to management.

(ii) Technological Capabilities

a) The company has expertise in contemporary technologies like Sapcc and S4 Hana, which are geared towards automation.

b) They offer DevOps solutions that have been implemented in some of the top financial institutions in India.

c) Products like DevOps Smart Board for Azure DevOps and GitHub are part of their offering, indicating a strong focus on software development and operations.

(iii) Business Segments

Our business operates across two verticals.

a) Technology solutions: Their technology solution offerings include multiple array of consulting solutions in Digitalization, Modernization, Cloudification, Automation, Transformation and Intelligence. Technology expertise includes DevOps Consulting (Azure, GitHub, Atlassian, GitLab, etc.), Cloud Consulting (Azure, AWS, GCP), Digital Enterprise Solutions using SAP, MS Dynamics 365, RPA, Digital Applications and Mobility Solutions.

b) Water Resource Management Solution: They offer automation solutions to modernize irrigation water conservation, and improve water use efficiency, Turnkey flood risk assessment and mitigation, cloud based water utilisation process automation for water sharing in rivers and canals and SCADA gate control systems.

B) Object of the IPO

a) Funding of expenditure relating to solutions development for digital transformation and water resources management solutions.
b) Creation of a new delivery center including infrastructure thereof and upgrading existing facilities.
c) Funding working capital requirements of the Company.
d)  General corporate purposes

C) Financial Performance

1. The revenue of the company has increased from INR 25 Cr in Fy21 to INR 74 Cr in Fy23.
2. The EBITDA has increased from INR 3.43 Cr in Fy21 to INR 13.70 Cr in Fy23.
3. PAT has increased from INR 2.10 Cr in Fy21 to 8 Cr in Fy23.
4. The IPO is coming at P/E of 20x and Mcap of 174 Cr.

The company has shown excellent growth in top line and bottomline in the last 3 years.