Updater Services Limited

Updater Services Limited has filed  its DRHP with market regulator SEBI on March 31, 2023 to raise capital through IPO. The IPO of the Company consists of Fresh Issue and Offer for Sale both.  The size of fresh issue is Up to [●] Equity Shares aggregating up to ₹ 400 crore and Offer for sale of Up to 13,300,000 Equity Shares aggregating up to ₹ [●] crore. As part of OFS, the selling shareholders are Tangi Facility Solutions Private Limited, India Business Excellence Fund – II and India Business Excellence Fund – IIA. 

Business Model of the Company

Updater Services Limited a leading, focused, and integrated business services platform in India offering integrated facilities management (“IFM”) services and business support services (“BSS”)  with a pan-India presence. (Source: F&S Report)

The Company is the second largest player in the IFM market in India and has the widest service offering in the industry, making it a unique and differentiated player in the market. (Source: F&S Report) Within its BSS segment, it offers Audit and Assurance services through its 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 reachhas driven the company to reach the top spot in India, with a market share of 16.2% in the Financial Year ended March 31, 2022.

The Company also offers employee background verification check services through Matrix and in this segment, Matrix is the third largest company in India with a share of 5.7% in the Financial Year ended March 31, 2022. (Source: F&S Report) 

In addition, the Company provides sales enablement services through its Subsidiaries Denave and Athena and as per the F&S Report, Denave is the largest player in this segment with a market share of 15.4% in India in the Financial Year ended March 31, 2022. In addition, the Company also offers mailroom management services through its Subsidiary, Avon which is a market leader in India with a share of 15.5% in the mailroom management services market in the Financial Year ended March 31, 2022. (Source: F&S Report)

The Company Company was founded by Raghunandana Tangirala who has over 30 years of experience in the integrated business services industry. The Company commenced its operations in 1990 as a housekeeping and catering services company situated at Chennai, Tamil Nadu. Over the years, it has evolved into an integrated business services platform with a pan India presence serving customers across industries and business service lines. 

Management of the Company

(i) 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. 

(ii) Amitabh Jaipuria is an Additional Director (Executive Director) on the Board of the Company. He holds a bachelor’sdegree in science from University of Bombay and a post-graduate diploma in management from XLRI, Jamshedpur. In the Company, he focuses on corporate affairs, investor relations and key strategic initiatives. 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 etc.

Object of the Issue

Offer for Sale

The Company will not receive any proceeds from the Offer for Sale by the Promoter Selling Shareholder and the proceeds received from the Offer for Sale will not form part of the Net Proceeds. The Promoter Selling Shareholder will be entitled to the proceeds of the Offer for Sale after deducting his proportion of Issue expenses and relevant taxes thereon.

Fresh Issue

The net proceeds are proposed to be utilized in the following manner:

1. Repayment and /or prepayment of certain borrowings availed by the Company;
2. Funding  working capital requirements
3. Pursuing inorganic initiatives
4. General corporate purposes

Further, the Company expects to receive the benefits of listing the Equity Shares on the Stock Exchanges, which will result in enhancement of  visibility and  brand image among its existing and potential customers.

Risks in the IPO

Operational risks

Operational risks are inherent in the business as it includes rendering services in contrasting environments. A failure to manage such risks including any errors, defects or disruption in the service or inability to meet expected or agreed service standards, could have an adverse impact on the business, cash flows, results of operations and financial condition.

Service-related claims and losses or employee disruptions

The Company has a large workforce deployed across workplaces and customer premises. Consequently, the Company may be exposed to service-related claims and losses or employee disruptions that could have an adverse effect on the reputation, business, cash flows, results of operations and financial condition.

The Company’s business is manpower intensive 

The businesses of the Company is manpower intensive and its inability to attract and retain skilled manpower could have an adverse impact on the growth, business and financial condition. Further, in the event if the Company is not able to manage  attrition, it may not be able to meet the expectations of the customers, which may have an adverse impact on the financial condition.

Significant portion of revenue is dependent on southern region 

A significant portion of the revenues are derived from a few geographical regions and any decrease in revenues from south India, including due to increased competition or supply, or reduction in demand, in markets in which the Company operates, may have an adverse effect on the business, cash flows, results of operation and financial condition.

Significant employee related regulatory risks

The Company faces significant employee related regulatory risks and any significant disputes with its employees and/or concerned regulators may adversely affect the business prospects, cash flows, results of operations and financial condition. Further, it has significant employee benefit expenses, such as workers’ compensation, staff welfare expenses and contribution to provident and other funds. In case it faces an increase in employee costs that it is unable to pass on to its customers, it may be prevented from maintaining its competitive advantage and  profitability may be impacted.

Financial Performance

As per the financial statements of the Company, here are Financial Highlights for FY22 compared to FY21:

Revenue:

The company’s total revenue increased by 23% to Rs. 1497 crore in FY22, compared to Rs. 1216 crore in FY21.

Expenses:

Total expenses rose by 22% to Rs. 1426 crore in FY22, compared to Rs. 1161 crore in FY21.

Profit Before Tax:

The company’s profit before tax experienced a 29% increase, reaching Rs. 70 crore in FY22, compared to Rs. 54 crore in FY21.

Profit for the Year:

The profit for the year saw a 21% growth, amounting to Rs. 57 crore in FY22, compared to Rs. 47 crore in FY21.

Total Assets:

The total assets of the company surged by 50%, reaching Rs. 874 crore in FY22, compared to Rs. 579 crore in FY21.

Total Equity and Liabilities:

The company’s total equity and liabilities also increased to Rs. 874 crore in FY22, compared to Rs. 579 crore in FY21.

Net Cash Flow:

Operating Activities:

The net cash generated from operating activities in FY22 was Rs. 31 crore, a decrease from Rs. 128 crore in FY21.

Investing Activities:

The net cash used in investing activities was Rs. (47) crore in FY22, compared to Rs. 16 crore in FY21.

Financial Activities:

The net cash generated from financial activities in FY22 was Rs. 28 crore, contrasting with Rs. (87) crore cash used in FY21.

Net Cash and Cash Equivalents:

The net cash and cash equivalents at the end of FY22 were Rs. 12 crore, down from Rs. 27 crore in FY21.