Choice Equity Broking IPO report on eMudhra
Digital signature certificate provider, eMudhra Ltd. (EML), is coming up with an IPO to raise around Rs. 413cr, which opens on 20th May and closes on 24th May 2022. The price band is Rs. 243 - 256 per share. The company on 5th May 2022, has executed a pre-IPO placement of 0.16cr shares at Rs. 243.2 for a total consideration of Rs. 39cr. Consequently, it has reduced the fresh issue size from Rs. 200cr (as indicated in the DRHP) to the current size of Rs. 161cr. The IPO is a combination of fresh issue and OFS portion. The company will not receive any proceeds from the OFS portion. Of the fresh issue net proceeds, Rs. 46.4cr to be used for setting-up data centers; Rs. 40.2cr will be utilized to fund the working capital; Rs. 35cr will be used for the repayment/prepayment of the borrowings; Rs. 15.3cr to be used for augmenting business development in the US and another Rs. 15cr to be used for product development.
There are no listed peers having business similar to EML. At higher price band of Rs. 256, the company is demanding a P/E multiple of 114.5x (to its FY21 earnings of Rs. 2.2 per share), which seems to be high. Annualizing the 9M FY22 performance, the demanded P/E multiple comes out to be 49x. Also considering the current turbulence in the global equity market, we assign a “Subscribe with Caution” rating for the issue.
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