Is Seshaasai IPO a risky bet for investors amidst declining revenue?

Synopsis

Seshaasai Technologies, a payment card fulfillment provider, is launching an IPO to raise ₹480 crore for debt repayment and expansion, alongside a ₹333 crore offer for sale. While revenue dipped slightly in FY25 due to the absence of a large renewal project, net profit doubled, and EBITDA margins improved significantly.

ET Intelligence Group: Seshaasai Technologies, a credit and debit card fulfilment services provider to banks, plans to raise ₹480 crore through fresh equity to repay debt and for capital expenditure and another ₹333 crore through an offer for sale. The promoter stake will fall to 82% after the IPO from 93%. That necessitates the promoters to sell more shares in the coming years to reduce their stake to 75% to meet regulatory requirement. Rising expansion of banks beyond metro and tier-I cities and card renewals are major growth triggers for the company notwithstanding the impact of digital payment solutions on the card transaction volumes. Though it has diversified into RFID (radio frequency identification) and NFC (near field communication) related services, their revenue share at over one-third in total revenue remains low. In addition, the return on equity at 34.8% in FY25 fell gradually from 37.3% in FY23. Given these factors, investors with high risk appetite may consider the IPO.

Business

Incorporated in 1993, Mumbai based Seshaasai Technologies holds around 32% share in the manufacturing of payment cards in India according to a Frost and Sullivan report. It has 24 manufacturing units spread across the country. Its deliverables are broadly divided in three verticals. The biggest among them is payment solutions, which contributed 63% to revenue in FY25. The communication and fulfilment services, which formed nearly 30% of the revenue, consists of providing customised communication documents, direct mailers, notices, utility bills, insurance policy statements among others. The internet of things (IOT) vertical, which formed 7% of the revenue, includes RFID and enabled solutions.

Agencies

Financials
Revenue fell by 6.1% YoY in FY25 to ₹1,463.1 crore after growing by 35.9% in the previous year. The management attributed the drop to a large one-off card renewal assignment in FY24. Net profit doubled to ₹222.3 crore while operating margin before depreciation and amortisation (Ebitda margin) expanded to 25.1% from 18% between FY23 and FY25.

Valuation

The company demands a trailing price-earnings (P/E) multiple of upto 31. It has not identified any listed peers.

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