Updater Services IPO opens for subscription. Should you bid?

The initial public offer of integrated facilities management company Updater Services opened for subscription on Monday. Ahead of the issue launch, the company raised about Rs 288 crore from anchor investors.

BNP Paribas, Societe Generale, Citigroup Global Markets, and Nomura Singapore are foreign investors that participated in the anchor round.

The company plans to raise about Rs 640 crore through the IPO, which closes on September 27.

Analysts are dividend on the company's prospects. While they believe the company has successfully created a niche through marque clients, past acquisitions and operational efficiency, they remain concerned over the valuations.

"The company has aimed for high margin through value-added services with the support of the latest technology in its portfolio. On the valuation front, we believe that the company is fairly priced. Thus, we recommend a Subscribe – Long Term rating to the IPO," Anand Rathi said.

The issue comprises a fresh equity of Rs 400 crore and an offer for sale (OFS) of 80 lakh shares by the promoter and other selling shareholders.

The company has fixed the price band at Rs 280-300 per share and investors can bid for a minimum of 50 shares in one lot and in multiples thereafter.

About 75% of the offer is set aside for qualified institutional buyers (QIBs), 15% is reserved for non-institutional investors (NIIs) and 10% for retail investors.

Net proceeds will be used towards funding working capital requirements, repayment of debt, pursuing inorganic initiatives and other general corporate purposes.

"If we attribute FY23 earnings to the post-IPO fully diluted paid-up equity capital of the company, the asking price is at a P/E of 44.8x, and we believe it to be priced aggressively. We, therefore, recommend an “Avoid” rating for the issue. However, we would reassess the company on improvement in financial metrics over a sustained period," said Stoxbox.

Updater Services is a leading integrated facilities management services and business support services provider to their customers, with a pan-India presence.

The company also offers employee background verification check services through Matrix, which is the third-largest company in this segment with a share of 5.4% in FY23.

Its revenue from operations jumped 42% year-on-year (YoY) to Rs 2,099 crore for the year ended March 2023. In the same period, net profit fell 39% to Rs 34.6 crore.

IIFL Securities, Motilal Oswal and SBI Capital Markets are book-running lead managers to the issue, and Link Intime India is registrar.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)