Evaluating Unicommerce eSolutions Ltd IPO opportunity; Should you invest?

In this analysis, we take a closer look at Unicommerce eSolutions Ltd and present you with the exclusive IPO details.

About the Issue  

Unicommerce eSolutions Ltd is set to launch its initial public offering (IPO) for equity shares, each with a face value of Re 1. The IPO price range is set between Rs 102 and Rs 108 per equity share, resulting in a total issue size of Rs 276.57 crore at the upper price band.  

The IPO is scheduled to commence on August 06, 2024, and will conclude on August 08, 2024. The market lot size for the IPO is 138 shares, with the option to apply for multiples of this lot. Individual retail investors have the opportunity to apply for a maximum of 13 lots, equivalent to 1,794 shares or a total investment of Rs 1,93,752 assuming the upper price band.

Objects of the Issue  

Considering that the issue is exclusively an offer for sale, it is crucial to note that the company will not directly profit from the offer proceeds. Instead, all offer proceeds will flow to the selling shareholders, distributed in accordance with the number of offered shares they sell as part of the offer.

Promoter holding  

AceVector Limited (formerly known as Snapdeal Limited), Starfish I Pte Ltd, Kunal Bahl and Rohit Kumar Bansal are the promoters of the company, holding a pre-issue shareholding stake of 37.88 per cent.

Company profile  

Unicommerce eSolutions Ltd is an e-commerce enablement Software-as-a-Service (SaaS) platform operating in the transaction processing or nerve centre layer. It facilitates end-to-end management of e-commerce operations for brands, sellers, and logistics service providers.

The company empower its enterprise clients, as well as small and medium businesses, to efficiently manage their entire post-purchase e-commerce operations through a comprehensive suite of SaaS products. These include (i) a warehouse and inventory management system, (ii) a multi-channel order management system, (iii) an omni-channel retail management system, (iv) a seller management panel for marketplaces, (v) newly introduced post-order services related to logistics tracking and courier allocation, and (vi) payment reconciliation.

According to the Redseer Report, it is India’s largest e-commerce enablement SaaS platform in the transaction processing or nerve centre layer in terms of revenue for the financial years FY23, FY22, and FY21. Additionally, it is the only profitable company among the top five players in this industry in India during FY23.

The company’s clients span various sectors including fashion (apparel, footwear, accessories), electronics, home and kitchen, FMCG, beauty and personal care, sports and fitness, nutrition, health and pharma, as well as third-party logistics and warehousing. Some of the company's prestigious clients include Lenskart, Mamaearth, Zivame, Paragon, Boat, PharmEasy, XpressBees, Shiprocket, Sugar Cosmetics, and Cello.

Financials  

The company has consistently delivered robust growth over the past few years. In FY24, both revenue and net profit witnessed substantial year-on-year growth, with a notable 18 per cent surge in revenue and an outstanding 101 per cent growth in net profit compared to FY23. In FY24, the company achieved a Return on Equity (RoE) of 17.36 per cent and a Return on Capital Employed (RoCE) of 25.93 per cent.

Valuation and outlook  

The issue is priced with a P/BV ratio of 15.81 times, calculated using its Net Asset Value (NAV) of Rs 6.83 as of March 31, 2024. When we calculate the PE ratio for the company by considering the FY24 earnings relative to the fully diluted paid-up equity capital, the resulting PE ratio stands at 83.

The company stated that there are no directly listed companies in India that have a business model comparable in size and scale to its operations. As a result, providing an industry comparison for the company is not feasible. However, when compared to its global peers, the valuation appears to be overstated.

On the other hand, the company’s unique business model, extensive and diverse base of marquee Indian and global clients with long-term relationships, and ability to upsell or cross-sell new and additional products, coupled with consistent financial growth, position the company for long-term success.

Therefore, we advise investors with surplus funds and a higher risk tolerance to consider subscribing to the issue with a long-term outlook.