Excelsoft Technologies
IPO Size: Rs. 500 cr
- Fresh Issue of Rs. 180 cr for (i) land and building Rs. 62 cr (ii) IT infra upgrade Rs. 55 cr (iii) Brownfield capex for electrical system Rs. 40 cr
- Offer for Sale (OFS) of Rs. 320 cr by the promoter (95% to shrink to 59%) to repay Rs. 300 cr debt, to which company stands guarantor
Price band: Rs. 114-120 per share
M cap: Rs. 1,381 cr, implying 36% dilution
IPO Date: Wed 19th Nov to Fri 21st Nov 2025, Listing Wed 26th Nov 2025
Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.
Education Sector SaaS Company
Excelsoft Technologies is a 25 year old Mysuru-based vertical software as a service (SaaS) company, providing education technology services, assessment and proctoring, learning and student success solutions, to its B2B customers, who are publishers, certification and testing agencies. 60% of Rs. 230 cr topline, comes from North America, 20% from Europe, 8% from India and balance Asia Pacific region. However, Pearson group alone accounts for 59% of revenue, which is a huge business risk, given small topline and sector-focused SaaS offering.
Corporate Guarantee to Corporate Promoter
Corporate promoter Pedanta Technologies has issued Rs. 300 cr non-convertible debentures (NCD) to part-fund 43% stake purchase in the company, for which Excelsoft has issued corporate guarantee. These NCDs are sought to be repaid from OFS proceeds.
Seasonality in Business
Between FY22 to FY25, company’s revenue has grown at 14% CAGR, while net profit excluding other income at 13% CAGR. On Rs. 233 cr FY25 revenue, EBITDA excluding other income was at Rs. 73 cr, translating into 31% margin. PAT was at Rs. 35 cr, but excluding other income, was at ~ Rs. 26, implying a healthy 11% net margin from core business.
Company’s business is highly seasonal, with Q4FY or Q1CY witnessing higher budgets from customers. With expenses spread uniformly over the year, margin in H2 is much stronger than H1. Thus, Q1FY26 revenue was at Rs. 56 cr, with PAT of Rs. 6 cr.
Low RoE to Continue
On net worth of Rs. 376 cr, company clocks RoE of only 10%, despite double digit net margin. Even if cash equivalents and other income are excluded, RoE on core operations is at 12.5%.
Rs. 180 cr fresh issue is a large quantum, given net fixed assets were at Rs. 125 cr, including Rs. 100 cr software, as of 30.6.25 and will increase net worth by nearly 50%. Company proposes to buy land and build building for Rs. 72 cr from fresh issue proceeds, of which, Rs. 40 cr is towards a plot of land. This is may not be RoE-accretive.
Fully Priced IPO
On FY25 EPS of Rs. 3.5, share is being offered at a PE multiple of 35x, on historic earnings. Excluding treasury income, earnings multiple is seen at 45x, which is on the higher side, as other software services companies trade lower, even on a higher topline.
Besides a large dilution of 36%, partly to clear promoter debt, company is dependent on its largest client Pearson, revenue from which rose at 34% CAGR between FY22-25, as against company’s overall revenue CAGR of 14%. While business has healthy margins, increasing dependance on the largest client is a red flag, especially for a technology business.
19th Nov 2025 at 06:52 pm