SYNOPTICS TECHNOLOGIES L IMI T E D 22 nd May 2023 IPO Details SUBSCRIBE Issue opens on 30 - 0 6 - 2 0 2 3 Issue closes on 05-07-2023 Exp date of Listing – 12 th July 2023 Listing – NSE Emerge Price band ₹ 237 Issue Size ₹ 54.03 Crs Face Value ₹1 0 /- Lot Size – 600 Fresh Shares Offered – 14.80 lac shares at price band of Rs 237 OFS - 8 lac equity shares of FV of Rs 10 at Rs 237 Market Maker – 1.14 lac equity shares of FV of Rs 10 at Rs 237 Retail Portion 10.83 lacs Equity Shares of ₹10.00 e ach at Rs 237 HNI/NII 10.83 l acs Equity Shares of ₹10.00 each at Rs 237 BRLMs: First Overseas Capital Limited Synoptics Technologies Limited (STL) initially incorporated in 2008 as a private limited entity & later converted in a public limited company in July 2018 is an IT Services company offering solutions & services in IT Networking Solutions, LAN, WAN, Datacenter Solutions, Cloud solutions, Managed IT Services, IT Security, Data Backup & Recovery. STL has been operating in the IT Services & Solutions market for 15 years and its B2B customers include government entities, public sector undertakings (“PSUs”), private enterprises. Key customers include TATA Communications, BSNL, BOB Financial Services, Blue Dart Express, Lifestlye International, Shoppers Stop, Hennes & Mauritz Retail, Fedbank Financial Services,GIC Housing Finance, Motilal Oswal Financial Services, Government of Gujarat etc STL is promoted by Mr. Jatin Jagmohan Shah & Mr. Jagmohan Manilal Shah who both have over 15 years of business experience in field of IT Services & Solutions & whose efforts have contributed significantly to the growth of STL. STL has a highly qualified & well trained team consisting of 650+ field engineers, 50+ centralized NOC and Helpdesk Resources with 24 x 7 x 365 support offered with a high tech NOC Control facility for round-the-clock monitoring & proactive support STL is now looking at raising Rs 34.58 crs via a fresh issue to fund working capital requirements, investments in strategic investments, debt reduction & rest for general corporate purposes. STL is also offering 8 lac shares of Rs 10 each totaling Rs 18.96 crs via offer for sale. STL is making a fresh issue of 14.80 lac shares of Rs 10 each aggregating Rs 34.58 crs. The net offer to the public is 21.66 lac shares offered at Rs 237 per share. 10.83 lac shares are reserved for retail, 10.83 lac shares to the Non-Institutional HNI category, & 1.14 lac shares to the Market Makers. The shares will be listed on the NSE Emerge platform of National Stock Exchange (“NSE EMERGE”) SYNOPTICS TECHNOLOGIES L IMI T E D Business Model of STL SYNOPTICS Technologies Limited (STL) has a highly qualified & well trained team consisting of 650+ field engineers, 50+ centralized NOC and Helpdesk Resources with 24 x 7 x 365 support offered with a high tech NOC Control facility for round-the-clock monitoring & proactive support Its IT support spans across 12500 touch points, 2 Lac+ Devices Under Maintenance & 55+ Spare Depot Spread Across Regions. It is also the authorized system integrator partner for MTNL/BSNL STL provides both solutions & services to its customers where support is 24 x 7. Some of the Solutions which STL provides include – IT Networking Solutions – Customer branch and Head office Connectivity. Network Devices and Security, Remote management of the solution LAN (Local Area Network) and WAN (Wide Area Network) Solution – Customer Infrastructure solution – in the office, Local area network – Switches, WIFI, LAN network to connect PC, Desktops, Laptops Outside the office – WAN (Wide Area Network). Branch to HO network - Routers Hardware supply and support Data Centre Solution – Building Datacenter IT infrastructure, Supply and support of Servers, Storage, network, security etc Cloud Solution – On premise / Public cloud – Infrastructure as a service, Platform as a service, Software as a service, Hybrid and Multi-Cloud Advisory & Cost Optimization Services, Cloud Migration (Edge to DC to Cloud) and Reverse Migration Services (Cloud to DC to Edge) CSPs Supported: AWS, Azure, Google, IBM, Oracle, DC Colocation operators STL’s Services Portfolio includes – Managed IT Services – Manage the IT Setup remotely, Managed Connectivity & Broadband Services, Installation & Commissioning Services, IT Facility Management Services (T&M based and SLA based) IT Security – IT Security solution for the complete infrastructure Setting up security operation centre Monitoring endpoints, devices, Datacenter infrastructure Data Backup and Recovery – Data Backup and recovery, Cloud based or on premise solution Long Term Archival & Retention SYNOPTICS TECHNOLOGIES L IMI T E D STL has long standing business relationships with all customer segments which include – Government entities, Public sector undertakings (“PSUs”) & Private enterprises. Some Marquee customers of Synoptics Technologies include – Retail Solutions – IT infrastructure solutions for STL’s retail clients are comprehensive and end-to-end in nature. Its solutions have provided the infrastructure for the rapid growth of some of the largest Indian and global brands in India. Banking & Finance Solutions – STL is the provider of connectivity solutions for core banking services of many of India’s largest private banks and financial institutions. It has also provided connectivity solutions and managed guest wifi solutions across multiple branches for many of these banks in the country SYNOPTICS TECHNOLOGIES L IMI T E D Manufacturing, IT, Logistics & Other Sectors – STL’s solutions and services help its clients stay competitive across the value chain Government Projects – STL has designed and delivered enterprise-level AI-enabled CCTV projects, last-mile RF connectivity, managed connectivity solutions for many government institutions. As a preferred solutions partner of BSNL, STL has provided IT infrastructure solutions to multiple sectors SYNOPTICS TECHNOLOGIES L IMI T E D Some Important Partnerships which Synoptics Technologies enjoys include – Technology Partners – Alliance Partners – SYNOPTICS TECHNOLOGIES L IMI T E D Domestic IT Services & BPM Industry Potential going ahead looking strong – The IT & BPM sector has become one of the most significant growth catalysts for the Indian economy, contributing significantly to the country’s GDP and public welfare. The IT industry accounted for 7.4% of India’s GDP in FY22, and it is expected to contribute 10% to India’s GDP by 2025.As innovative digital applications permeate sector after sector, India is now prepared for the next phase of growth in its IT revolution. Emerging Trends in the Digital Enterprise According to National Association of Software and Service Companies (Nasscom), the Indian IT industry’s revenue touched US$ 227 billion in FY22, a 15.5% YoY growth.According to Gartner estimates, IT spending in India is expected to increase to US$ 101.8 billion in 2022 from an estimated US$ 81.89 billion in 2021.Indian software product industry is expected to reach US$ 100 billion by 2025. BFSI is a key business vertical for the IT & BPM industry. A major share of revenue of IT majors comes from the BFSI business vertical. Adoption of new technologies is expected to accelerate growth of the BFSI vertical. The need for undertaking investment in IT will also be required for gaining competitive advantage instead of solely reducing operational costs SYNOPTICS TECHNOLOGIES L IMI T E D With a considerable impact on the GDP and welfare of the nation, the IT & BPM sector has emerged as one of India's most important economic drivers. In FY22, the IT sector contributed 7.4% of India's GDP, and by 2025, it is anticipated to make up 10% of India's GDP SYNOPTICS TECHNOLOGIES L IMI T E D Managed IT Services – Managed services offer various benefits that are proven to positively impact the development of the organization that adopts such services as they can focus on their core expertise. It is estimated that successfully deploying managed services will help reduce IT cost by 25-45% and increase operational efficiency by 45-65%. In addition, according to Intelligent Technical Solutions, 25% of organizations said downtime costs averaged between USD 301,000 and USD 400,000 per hour The application maintenance and support services will be pivotal to the managed services in IT. Application performance monitoring (APM) will imbibe a quick feedback mechanism for developers. Front-end monitoring (for studying user behavior), ADTD (for application discovery, tracing, and diagnostics), and AIOps analytics (for detecting application lifecycle patterns and anomalies) will all be parts of APM. Further, the Blockchain and IoT technologies are set to create better opportunities for managed services providers, as these organizations require expertise to implement these technologies. To get a hold of these opportunities, stay relevant, and keep up with the competition, managed services providers increasingly acquire essential skill sets for these, among other innovative technologies, like AR, VR, and AI The Managed Security Services Market size was estimated to be worth USD 27.7 billion in 2022 and is anticipated to rise to USD 49.6 billion by 2027, showing a CAGR of 12.3% in between 2022 to 2027. Some factors driving the managed security services market growth include the growing adoption of MSS due to stringent government regulations and rising security breaches, and sophisticated cyber attacks across enterprises Cloud Computing market also a big opportunity for growth ahead – India cloud computing market is expected to grow at a CAGR of 28.1% during the forecast period. The high concentration and increasing number of small and medium-sized businesses in India that are rapidly shifting towards cloud computing is emerging as the major driving factor for the market. Furthermore, growing investment towards the construction of cloud data centers is expected to boost the India cloud computing market in the forecast period. Based on services, the India cloud computing market is segmented into infrastructure as a service (IaaS), platform as a service (PaaS), and software as a service (SaaS). The software as a service (SaaS) holds the largest market share because of the presence of a large number of SaaS apps in the Indian market, such as Amazon Web Services (AWS), G-Suite, CloudCherry, Talview, Whatfix, Freshdesk, Zoho, etc. Furthermore, SaaS apps are expected to witness the biggest jump in their growth in the post-COVID-19 period as the demand for remote access to data is growing substantially Synoptics Technologies which operates across cloud, managed services, BPM & It Services across several manufacturing sectors & with corporate capex increasing, government also focusing on Make in India initiatives and with stronger GDP growth expected ahead we believe the market growth opportunity looks huge for STL where demand is expected to remain strong. SYNOPTICS TECHNOLOGIES L IMI T E D STL’s Key Competitive Strengths • Experienced Management Team – The company’s management team is experienced in the industry (Present for over 15 years) in which it is operating and has been responsible for the growth of its operations and financial performance. It also has adequate experience in the line of business undertaken by the Company for its strategic and day-to-day business operations. • Scalable Business Model – Synoptics Technologies enjoys a business model which is scalable. The biggest positive Synoptics Technologies enjoys is that it is a fully Indian-grown value add IT Services player which has a wide product range and enjoys excellent execution metrics & caters to a wide variety of customers. As on May 23 the order book stands at Rs 28 crs • Synoptics Technologies enjoys marquee customers some of them like Pidilite, MGL, Tech Mahindra, Railtel, BSNL, Bluedart MTNL, Kotak Bank, SBI, Federal Bank, Bharti Airtel, Bank of Baroda Mahindra Finance UGRO Capital etc • Further the company enjoys a comprehensive product portfolio across both its services and solution portfolios which includes IT Networking solutions, LAN/WAN solutions, Datacenter/Cloud solutions, Managed Services, IT Security & Data Backup/Recovery which has helped it become a one stop for solutions & Services. Going ahead STL will focus on managed services which generate a recuring revenue & account for 60% of its revenues • STL has seen its debt rise but after IPO it plans to cut down debt & aims to fund all growth plans from Internal accruals going ahead – STL has seen its total debt increase in the last 3 years starting FY20 with total debts at Rs 12.80 crs which have increased to around Rs 14 crs in FY22 & Rs 19.50 crs in first 9 months ending Dec 2022. Further, short term debts are expected to come down further by Rs 5 crs after the companys IPO where it will be repaying short term debts out of the issue proceeds & use equity proceeds to fund its short term working capital requirements Financials – 31st March (₹) Cr. FY20 FY21 FY22 9mths Ended Dec 22 Total Revenue 22.07 34.76 50.92 34.65 EBIDTA 6.13 7.79 11 11.41 EBIDTA % 27.78 22.41 21.60 32.93 PBT 2.20 3.23 5.86 6.46 Profit After Tax 1.82 2.36 4.33 5.25 EPS Rs 2.91 3.47 6.13 7.5 1 Shareholders’ Funds 12.08 14.44 18.77 24.02 Source - Company SYNOPTICS TECHNOLOGIES L IMI T E D Risks- • STL’s business can be badly impacted due to any adverse development in the IT Services segment domestically • Also any slowdown in infrastructure, government spending on projects and slowdown in demand in end user segments could also impact on its profitability in future. Our View on This IPO Synoptics Technologies Limited (STL) which is tapping the SME IPO market, enjoys a strong track record of ramping up its turnover in the last two years & building strong business relationships across many sectors STL is a domestically grown, fully integrated player in the value added IT Services /BPM segment and enjoys a strong presence with wide product offerings across IT Networking solutions, LAN/WAN solutions, Datacenter/Cloud solutions, Managed Services, IT Security & Data Backup/Recovery which has helped it become a one stop for solutions & Services. Going ahead STL will focus on managed services which generate a recuring revenue & account for 60% of its revenues. Hence we believe that Synoptics Technologies enjoys a business model which is scalable Overall, the company is also confident of increasing its domestic revenues in the next three years, which looks promising. Rapid urbanisation and economic growth in India are encouraging IT & manufacturing corporates to increase capex and spend more on new IT initiatives which will drive demand ahead More importantly, STL’s promoters have significant industry experience and have been instrumental in the company's consistent growth. The management team's combined expertise and experience are also a significant asset going ahead. We are positive on STL for the long term as India's domestic IT value added services have multiple applications & offers a massive runway for growth over the next 3-5 years ahead. More importantly, the company enjoys marquee customers which makes its positioning very strong & will help it scale up its operations going ahead After the proposed IPO, the company’s net worth will total Rs 57.62 crore; post-IPO, the equity capital will stand at Rs 8.48 crore. We are confident that Synoptics Technologies Limited will deliver consistent performance and provide an excellent investment opportunity for investors with a long-term horizon. Hence, we recommend SUBSCRIBE for long-term investment.