Steep valuation takes the gleam away.
Global listed peer Google is discounted less than 30 times its earnings. US based Trimble is priced 38 times. European leader TomTom is valued at less than 11 times. Considering these valuations, MapmyIndia’s IPO cap price of Rs 1033 at a P/E multiple of 94 is too heavy to hold for long.
|
C.E. INFO SYSTEMS OFFER AT A GLANCE |
|
| Offer Type | Book Built |
| Platform | Main Frame |
| Offer Size | Rs 1039 Cr |
| Fresh Issue | Nil |
| Offer for Sale | 1,00,63,945 equity shares (Rs 1039 Cr) |
| Face Value | Rs 2 |
| Price Band | Rs1000–1033 |
| Mkt/Bid Lot | 14 Nos. |
| Implied M-Cap | Rs 5,500 Cr |
| Implied Equity Cap | Rs 10 Cr |
| Free Float | 46.27% |
| Lead Manager | Axis Capital, JM Financial, Kotak Mahindra Cap and Dam Capital |
| Registrar | Link Intime |
| Listing | BSE, NSE |
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INDICATIVE ISSUE SCHEDULE |
|
| Opening :9-Dec-2021 | Closing :13-Dec-2021 |
| Allotment :16-Dec-2021 | Refunding :17-Dec-2021 |
| Demat Credit :20-Dec-2021 | Trading :21-Dec-2021 |
The Offer
The owners of MapmyIndia, C.E. Info Systems Ltd (CEISL), is going public with an offer for sale of 1,00,63,945 equity shares (valued Rs 1039 C)r. The offer is being made through the book-building route with a price band of Rs 1000-1033 for Rs 2 paid-up share. Applicants for the IPO should bid for a minimum lot of 14 shares and multiples thereof. The shares are proposed to be listed on the main frame of BSE and NSE on Tuesday, December 21, 2021.
Axis Capital, JM Financial, Kotak Mahindra Capital and DAM Capital have been roped in as lead-managers to the offer. Link Intime will act as the registrar to the issue. The bidding opens on Thursday, December 9, 2021 and closes on Monday December 13, 2021.
The objects of the IPO are to carry out the Offer for Sale by the selling shareholders and achieve the benefits of listing on the stock exchanges.
Lineage
As per the offer document, the New Delhi-based CEISL’s board has identified the Chennai-based Cholamandalam Investment and Finance Company Ltd (CIFCO) as a group company. Everyone knows that CIFCO belongs to the well known Murugappa group. The link between CEISL and CIFCO is the promoters’ son and whole-time director & CEO of CEISL, Rohan Verma (36), whose nationality is “U.S.A with Overseas Citizenship of India”, is an independent director on CIFCO’s board.
The 26 years old CEISL was promoted by Rakesh Kumar Verma and his spouse Rashmi Verma. The company claims to have built India’s digital maps in 1995. It launched India’s internet mapping portal and internet mapping technologies in the year 2004. The company reportedly launched pan-India GPS navigation system in 2007. Between 2007 and 2015 CEISL received external funding aggregating to over Rs 140 Cr from private investors.
Two years ago the promoters were collectively holding a minority stake of only 32.16%. In November 2021, their stake has gone up to 61.16% through significant acquisitions from private investors namely, PhonePe Singapore, Zenrin and Qualcomm.
Key Management
Promoter Rakesh Kumar Verma (70) is the chairman and managing director of the company. He holds a bachelor’s degree in mechanical engineering from the Birla Institute of Technology and Science, Pilani, and a master’s degree of business administration from the Eastern Washington University, U.S.A. He claims to have considerable experience in the field of digital maps and geospatial information technologies. He is the FICCI National Committee Chair of Geospatial Technologies. He is also currently a member of the Department of Science and Technology’s Legal-sub Committee for the National Geospatial Policy.
The promoters’ son, Rohan Verma, is the whole-time director and the CEO of the company. He has a bachelor’s degree in electrical engineering from the Stanford University and master’s degree of business administration from the London Business School. As a 19-year-old he reportedly built an interactive internet mapping portal, MapmyIndia.com, in 2004. He currently serves as a member of the Confederation of Indian Industry National Committee on Space. He also serves on the Internet and Mobile Association of India’s (IAMAI) Logistics Committee. He has been a whole-time director on CEISL’s Board since July 26, 2007.
The promoters’ daughter, Rakhi Prasad, is a non-executive director on CEISL’s board. She holds a bachelor’s degree of science in computer science from the University of Michigan and a bachelor’s degree of arts in economics from the Lady Shri Ram College, Delhi. She also holds a master’s degree of science in financial engineering from the Columbia University, U.S.A. She has experience in the field of finance and technology and has previously worked with Goldman Sachs, Enam Securities, and Matrix Partners. She is currently an investment manager at Alder Capital. She has been a Director on CEISL’s Board since September 28, 2020.
Stakeholders
Post offer for sale, the promoters would hold 53.73% of which 20% would be locked-in for eighteen months and the balance for six months. Of this, Rakesh Verma will hold the largest chunk of 43.5% at an average cost of Rs 64.11 a share. Rashmi Verma will hold 9.68% at an extremely negative cost. Among the private investors, Zenrin too will have 6.21% at a negative cost.
Business
CEISL is a data and technology products and platforms company, offering proprietary digital maps as a service (MaaS), software as a service (SaaS) and platform as a service (PaaS). The company is reportedly India’s leading provider of advanced digital maps, geospatial software and location-based Internet of Things (IoT) technologies. Having pioneered digital mapping in India in 1995, the company has achieved the market leadership position in the industry. CEISL provides products, platforms, application programming interfaces (APIs) and solutions across a range of digital map data, software and IoT for the Indian market under the (MapmyIndia) brand, and for the international market under the (Mappls) brand.
The company claims to have serviced over 2,000 enterprise customers since its inception. During fiscal 2021 it had over 500 customers on its SaaS, PaaS and MaaS platforms. Its customers include renowned global tech giants, new-age consumer internet technology companies, leading automotive manufacturers, large businesses across industry segments such as BFSI, telecom, FMCG, industrials, logistics and transportation, and key government organizations. Some of its customers include PhonePe, Flipkart, Yulu, HDFC Bank, Airtel, Hyundai, MG Motor, Avis, Safexpress and Goods and Service Tax Network.
The new Geospatial Policy 2021 guidelines in India allows all Indian entities to freely acquire, collect, generate prepare, analyse, store or distribute geospatial data including maps. While it opens out huge scope for the geospatial sector in India, it restricts foreign companies’ ability for most accurate, high resolution mapping. Geospatial data with spatial accuracy of one meter for horizontal and three meters for vertical cannot be created or owned by foreign entities and they would have to license the same from Indian players to serve their Indian customers. Indian companies like MapmyIndia thus stand to benefit over its global competitors.
Financial Track
In terms of growth, CEISL’s top line has steadily climbed in recent years though its profitability has been fluctuating. However, notwithstanding the pandemic-caused staggered trend in economic activity, CEISL has reported highly impressive financial performance during the fiscals 2021 and 2022. Was the performance real or was it a pre-issue bloom? Time alone can answer.
|
C E Info Systems Consolidated Financials (in Cr) |
||||
| Period Ended |
Sep-21 |
Mar-21 | Mar-20 |
Mar-19 |
| Months |
6 |
12 | 12 |
12 |
| Revenue |
100.03 |
152.46 | 148.63 |
135.26 |
| Operating Profit |
45.25 |
51.41 | 29.35 |
25.50 |
| OPM% |
45.2 |
33.7 | 19.7 |
18.9 |
| Other Income |
22.55 |
39.81 | 14.85 |
28.08 |
| EBIDTA |
67.81 |
91.22 | 44.2 |
53.58 |
| EBIDTA % |
55.3 |
47.4 | 27.0 |
32.8 |
| Interest |
1.08 |
2.56 | 2.84 |
2.63 |
| Depreciation |
3.87 |
9.9 | 9.77 |
9.15 |
| Net Profit |
46.77 |
59.43 | 23.2 |
33.57 |
| Equity (Implied) |
10.65 |
3.83 | 3.83 |
3.83 |
| Reserves (Implied) |
395.51 |
225.2 | 164.94 |
152.4 |
Valuation
CEISL has fixed an ultra-high price band of Rs 1000-1033 for Rs 2 paid-up shares. The IPO cap price discounts the fiscal 2021 earnings more than 92 times and fiscal 2022 earnings about 59 times which certainly look steep as compared to the current ruling of CEISL’s global peers.
US giant Google is currently discounted less than 29 times its earnings and Google’s country-mate Trimble is priced 38 times. European leader TomTom is traded at less than 11 multiple. Moreover, only a month ago, promoter Rakesh Verma has acquired more than 29% of the equity from the private investors at a price less than Rs 95 a share.
Since only 20% of the promoters’ stake is locked in for eighteen months, 80% of the equity will become free-float after six months. As the residual cost of holding for many a selling shareholder will be negative, or abysmally low, as compare to the ultra-high IPO price, unless the company holds its bottom line at the current level, the stock may encounter selling pressure after the lapse of the lock-in period.
Concern
Boom-time steep valuation is bound to suffer during ordinary time.