eMudhra IPO opens: Here's what brokerages have to say about the issue

New Delhi: The Rs 412.79 crore initial public offering (IPO) of eMudhra Limited kicked off for subscription on Friday, May 20. The company is selling its shares in the range of Rs 243-256 apiece.

eMudhra is India's largest licensed certifying authority. The company's business is divided into two vertices - digital trust services and enterprise solutions.

The company aims to raise Rs 161 crore crore via issuance of fresh equity shares, whereas existing shareholders and promoters will offload 9,835,394 shares aggregating to Rs 251.79 crore.

The issue can be subscribed till May 24. Investors can subscribe to the issue by bidding for a minimum of 58 shares and in its multiples thereof.

The net proceeds from the fresh issue will be utilized to pre-pay or repay in part or full the existing loans, working capital requirements, equipment purchases and setting up data centres across India and overseas.

eMudhra has strong digital signature certificate expertise and is the only Indian company to be directly recognised by renowned browsers and document processing software companies such as Microsoft, Mozilla, Apple, and Adobe.

The company has issued over 50 million digital signature certificates through the network of 88,457 channel partners spread across India. As of September 30, 2021, the company is serving 36,233 retail customers and 563 enterprises.

The company reported a profit of Rs 25.36 crore in the financial year 2020-21, which was a net loss of Rs 18.41 crore in the previous year. Its revenue increased to Rs 132.45 crore from Rs 116.8 crore during the period under review.

It clocked a profit of Rs 30.34 crore in the nine-month period ended December 2021, with a total revenue during the same period reported at Rs 138.30 crore.

eMudhra has allocated 48,37,336 equity shares to anchor investors at Rs 256 per share, aggregating the transaction size to Rs 123.83 crore, according to a circular uploaded on BSE website.

Aditya Birla Sun Life Mutual Fund (MF), Motilal Oswal MF, Nippon India MF, SBI MF, Baring Private Equity India, Hornbill Orchid India Fund, Pinebridge India Equity Fund and Abakkus Growth Fund are among the investors subscribing to the anchor book.

The quota for retail investors in eMudhra IPO has been fixed at 35 per cent of the net offer. QIB quota is fixed at 50 per cent while the quota for NII is reserved at 15 per cent.

IIFL Securities, Yes Securities and Indorient Financial Services are the book running lead managers to the issue, whereas Link Intime India is the registrar to the issue.

Brokerages have a mixed review over the issue. Majority believe that the company is at the numero uno position in the growing digital segment, whereas others say that the valuations are fully priced, leaving no headroom for further upside.

Let us have a look at what brokerages have to say about the IPO of eMudhra:

Angel One
Rating: Neutral
eMudhra has an established position as licensed CA with a strong network of channel partners, a diverse customer base and it will be using part of the IPO proceeds to grow in overseas markets as well as improve its data center infrastructure, said Angel One.

"However, the scale of operation is relatively modest and the digital security and paperless transformation market is highly competitive," it added with a 'Neutral' rating on the issue.

Choice Broking
Rating: Subscribe with caution
There are no listed peers having business similar to the company. At a higher price band, it is demanding a PE multiple of 114.5x, which seems to be high, said Choice Broking in its pre-IPO note.

Annualizing the 9 months FY22 performance, the demanded PE multiple comes out to be 49x. Also considering the current turbulence in the global equity market, it added with a 'subscribe with caution' rating for the issue.

Marwadi Financial Services
Rating: Subscribe
The company is going to list at a PE of 78.81x with a market cap of Rs 1,998.7 crore, said the brokerage firm. "There are no listed companies in India that are comparable in all aspects of business and services that the company provides," it added.

The brokerage has assigned a 'subscribe' rating on the issue as the company is the largest licensed certifying authority in India with a market share of 37.9 per cent in the digital signature certificates market space and considering the future growth potential of the company.

Reliance Securities
Rating: Not Rated
eMudhra has strong financials, leadership position in the digital signature certificates and digital trust services space, massive network of Indian and global channel partners, a growing customer base and an experienced management team, said the brokerage firm.

"However, the aggressively priced IPO hardly leaves anything meaningful on the table for investors with a medium-term perspective," it added, with no rating on the issue.