IPO Analysis: Tracxn Technologies Limited

The maiden offer comprises an entirely offer for sale worth Rs 309 crore at the upper price band.

IPO Rating: Avoid 

About the issue: 

Tracxn Technologies Limited (“Tracxn”) is a Bengaluru-based company that operates a Software as a Service (“SaaS”) based platform, Tracxn. The company is hitting the primary capital market with its initial public offering (IPO) of equity shares of the face value of Re 1 per equity share. 

The maiden offer comprises an entirely offer for sale worth Rs 309 crore at the upper price band. The price band of the issue has been fixed at Rs 75 to Rs 80 per equity share. At the upper and lower price band post-issue the company will have a market cap of Rs 752 and Rs 802 crore, respectively. The IPO opening date is October 10, 2022, while it will be closing on October 12, 2022. The IPO market lot size is 185 shares. The issue constitutes 38.55 per cent of the post-issue paid-up capital of the company. It has allocated 75 per cent for QIBs, 15 per cent for HNIs, and 10 per cent for Retail investors. 

The entire offer is an offer for sale and not a single rupee will go to the company. The company has a few marquee investors, such as Ratan Tata, the NRJN Family Trust, Neeraj Arora, Sachin Bansal, Binny Bansal, Amit Ranjan, Girish Mathrubootham, Anand Rajaraman, Amit Singhal and Ashish Gupta. They have also received investments from Elevation Capital, Accel Partners, Sequoia Capital, Prime Venture Partners and KB Investments. Many of them are exiting partially with this IPO. 

 IPO Details

About the company: 

Tracxn is among the leading global market intelligence providers for private company data and ranks among the top 5 players globally in terms of the number of companies profiled offering data of private market companies across sectors and geographies. They have one of the largest coverages of private companies in emerging technology sectors including IoT, artificial intelligence, virtual reality, robotics, blockchain and electric vehicles. Tracxn has an asset-light business model and operates a Software as a Service (“SaaS”)-based platform, Tracxn, that scanned over 662 million web domains, and profiled over 1.84 million entities across 2,003 feeds categorized across industries, sectors, subsectors, geographies, affiliations and networks globally, as of June 30, 2022. Their platform has 3,271 users across 1,139 customer accounts in over 58 countries, as of June 30, 2022. Their customers include several Fortune 500 companies and/or their affiliates. 

They launched their platform in Fiscal 2015 with a particular focus on the global emerging technology sector, providing users with detailed profiles of companies including detailed information on funding rounds and acquisition-related information, taxonomy and market maps, global competitor benchmarking, financial information, valuation and capitalization tables, employee count, investor profiles, competitor mapping, information about founders, key team and board member, company and sector-specific reports and news events. 

The company’s Customer Accounts have increased at a CAGR of 30.42 per cent, from 642 Customer Accounts, as of March 31, 2020, to 1,092 Customer Accounts, as of March 31, 2022, and 1,139 Customer Accounts as of June 30, 2022. They have maintained long-standing relationships with their customers and as of June 30, 2022, 23.44 per cent or 267 active Customer Accounts have been associated with them for over 3 years (with a maximum gap of 3 months between subscriptions). The company work with 1,139 Customers across 58 countries, as of June 30, 2022. No single customer accounted for more than 1.54 per cent of the revenue from operations in the last 3 completed Fiscals and in the 3 months ended June 30, 2022. 

Their customers span various industries including the investment industry, financial services, technology, healthcare, CPG, auto, manufacturing, education, non-profit and social impact. Their customers include some of the world’s largest organisations including a number of Fortune 500 companies and/or their affiliates. 

As of June 30, 2022, they had a lean 81-member technology and product development team. In addition, their employee benefit expenses in Fiscals 2020, 2021 and 2022, and in the 3 months ended June 30, 2021, and 2022, were Rs 51.28 crore, Rs 53.81 crore, Rs 58.57 crore, Rs 14.26 crore and Rs 16.17 crore respectively, accounting for 137.35 per cent, 122.92 per cent, 92.31 per cent, 95.28 per cent and 87.86 per cent of their revenue from operations, respectively. Their platform requires limited costs to scale and launch additional service offerings. 

Company Financials: 

Tracxn is a young start company and is still in investing phase hence financials do not look very good. For the last three fiscals, Tracxn has posted a turnover and net profit - (loss) of Rs 6.31 crore/Rs - (54.03) crore (FY20), Rs 55.74 crore/Rs - (5.35) crore (FY21), and Rs 65.16 crore/Rs - (4.85) crore (FY22). For Q1 of FY23, it reported a net profit of Rs 0.84 crore on a turnover of Rs 19.08 crore.

Valuation and Outlook 

The company has been posting a loss for the last three fiscals. Tracxn, posted a profit in the latest quarter only of Rs 0.84 crore or Rs 0.07 per share, if we annualise the latest EPS (Rs 0.07) it comes to around Rs 0.28. Considering the upper price band of Rs 80, the issue is demanding a PE of 285 times. If we look at the market cap to sales, the offer is coming at around five times. Compare this will some of the more established names such as Adani Power, Apollo Hospitals and Cipla available at below market cap to sales of less than five times. 

Looking at the exorbitant valuation at which the company is bringing the issue and fate of some of the fintech IPOs that came in the last one year, our advice is to safely avoid this IPO.