SME Rating Agency of India (SMERA) has assigned SMERA ‘IPO Grade 2’ (two on five) to the proposed Initial Public Offer (IPO) of Tejora Technologies Limited (TTL).SMERA assigns IPO Grading on the scale of IPO Grade 5 to 1, with Grade 5 signifying strong fundamentals and Grade 1 signifying poor fundamentals.

The ‘Grade 2’ indicates that the fundamentals of the issuer are below average as compared to its industry peers. This grade is not an opinion on the appropriateness of the issue price, its appropriateness in relation to the issuer fundamentals. Accordingly, the offer price for the issue could be higher or lower than the level justified by issuer’s fundamentals.  The grade is also not a recommendation to buy/sell or hold the graded instrument.

The grading is driven by susceptibility of TTL’s revenues and profitability to the cyclicality and geographic uncertainties in the IT/ITes industry. Moreover, the company’s business model and product mix are still evolving with most of the growth happening in the last two years. Profitability has shown a fluctuating trend. There is a high level of concentration with the top five clients accounting for over 95 per cent of revenues. The grading assigns reflects just adequate internal processes coupled with limited comfort regarding the contribution and independence of the directors as the decision making remains centralized. Finally, as the proposed issue represents a huge increase in operations from the current scale, the success of the IPO will have a strong bearing on the TTL’s fortunes. A large part of the IPO proceeds are aimed to be deployed in purchase of office space and a potential acquisition.

TTL has demonstrated resilience by registering impressive growth in the last few years after a significant dip in its revenues post the financial crisis in 2008-09. It has a diversified end user industries and geographical presence, an ability to retain clients, well qualified senior management, cost flexibility, and good receivables management. The unaudited current year (2011-12) results for the first half year shows a good growth over last year and is in line with the projections for the full year.  For the half year ended September 2011, as per the management discussions, the revenues were Rs 50 crores.

Going forward, TTL’s earnings prospects in the next few years will be critically dependant on its ability to scale up the human resources and systems.  TTL’s expansion plans are likely to face execution challenges. 

About TTL and the issue

Tejora Technologies Limited, Mumbai based company was originally incorporated as ’RT Engines Software Private Limited’, a private limited company in the year 2003 by Mr. Nitin H. Shenoy and Mr. Haridas R. Shenoy. In 2011, constitution of the company was changed to ‘public limited company’ and the name was changed to Tejora Technologies Limited. Currently, the management is vested in the hands of Mr. Nitin H. Shenoy and Mrs. Surabhi Shenoy. 

TTL provides outsourced software development services for mobile application, telecom and VOIP (voice over internet protocol) and social networking sites. Over the years, TTL has also developed a RFID-IPR (Radio frequency identification – Intellectual property right) and sold as Saas (Software as a service) through a re-seller agreement in UAE. The RFID-IPR caters to the oil and gas companies based at Jordan. Recently, TTL has added a business line of reselling softwares in Asia, mainly in the Banking, Financial services and Insurance (BFSI) vertical. Currently TTL caters to industries like Logistics & Transportation, Healthcare Services, Telecom & VoIP, BFSI, Education, and Manufacturing.

In FY 2011 (Financial year ended March 31, 2011); TTL reported revenues of Rs. 35.02 crores, a growth of 60 per cent vis-à-vis FY 2010.  In the past, TTL has experienced a blip in revenues due to customer and geographic concentration and the economic sluggishness in the global markets. This resulted in deterioration in the company’s financial profile.In FY 2009, revenues slipped by 40 percent, fromRs.8.17 crores in FY 2008 to Rs. 4.82 crores in FY 2009.

TTL had negligible borrowings with a gearing of less than 0.1 time and low net worth (Rs. 12.09 crore) as at March 31, 2011. The profit after tax (PAT) margin is average and stood at 6.9 per cent for FY 2011.

For the six months ending September 2011, as per management discussions, the revenues have increased sharply to Rs. 50 crore (an increase of over 42 percent as compared to the full year FY 2011 revenue).