India-cost arbitrage or limited competitors: What makes Tracxn different?

Tracxn Technologies, which offers customers with private company data, is headed to Dalal Street soon. It has set price band at Rs 75-80 a share for its initial public offering (IPO) which will open for subscription on October 10 and close on October 12. The stock will list on October 20.

The Software as a Service (SaaS)-based platform scans over 662 million web domains and profiles over 1.84 million entities. One can find relevant data for deal sourcing, identifying M&A targets, deal diligence, analysis and following emerging themes.

Tracking the journey of Tracxn, chairman and managing director Neha Singh told reporters in a webinar: “Before co-founding the company, I worked with Boston Consulting Group and Sequoia. During my stints there, I realised that private markets were becoming larger and important to track. I wished a platform like this existed when I was an investor.”

Tracxn is among the top five firms globally in terms of number of companies profiled. It adds over 1000 new companies to its platform every day, she added.

What makes the company stand apart is its India-cost arbitrage. The company builds in India but rakes in major moolah from international markets. “United States accounts for 27 percent of our revenue. In the last financial year, 69 percent of our revenue was in USD,” Singh said.

The company enjoys high operating leverage. Its revenue has increased at a faster pace than costs. “If you look at the past three years, our revenue increased at 30 percent CAGR, while costs rose by only 4 percent,” she said.

Given the limited number of players in the space, the company sees huge headroom for growth. Private market AUM is expected to reach $12.5 trillion by 2025, with total addressable market at $2.1 billion. The company is looking to capitalise on this by expanding its coverage, venturing into adjacent customer segments and acquiring businesses/technologies to complement existing capabilities.

“We actually have negative working capital as we do invoicing/billing and cash collection upfront for the entire subscription,” Singh said. For the fiscal year 2021, its total income stood at Rs 55.74 crore against Rs 63.13 crore a year ago. Net loss for the period stood at Rs 5.35 crore down from Rs 54.03 crore last year.

The company’s customer base has grown by 70 percent in three years. “Since we play in a vertical industry instead of a horizontal one, our peers are limited. There are only 5-6 firms in this market globally,” she said.

Singh and co-founder Abhishek Goyal are looking to sell up to 7.66 million shares each, Flipkart founders Binny Bansal and Sachin Bansal 1.26 million each, Elevation Capital 10.98 million, Accel India IV Mauritius 4.02 million and SCI Investments V 2.18 million shares.

After the IPO, promoters holding will come to 35 percent for the current 51 percent.