iValue InfoSolutions IPO: Day 2 Sees Robust Demand, GMP Hints at a Stellar Debut. Is it a Must-Have for Your Portfolio?

The much-anticipated Initial Public Offering (IPO) of iValue InfoSolutions is generating significant buzz in the market, with its subscription window closing on November 23. As of Day 2, the offering witnessed an impressive overall subscription of 3.03 times, signaling keen investor interest. The retail portion led the charge, oversubscribed by a remarkable 4.88 times, while Non-Institutional Investors (NIIs) showed strong participation at 2.12 times.

Qualified Institutional Buyers (QIBs), however, showed a more cautious approach with only 0.01 times subscription, a figure often seen picking up closer to the closing date.

Adding to the excitement, the Grey Market Premium (GMP) for iValue InfoSolutions has been hovering around Rs 60-65 per share.

This translates to an estimated listing premium of approximately 39% over the upper end of the IPO price band of Rs 151-163. Such a robust GMP often acts as a strong indicator of potential listing gains, catching the eye of short-term investors.

iValue InfoSolutions, a leading value-added distributor of digital transformation products and solutions, aims to raise Rs 395 crore through its public issue.

This comprises a fresh issue of Rs 172 crore and an Offer for Sale (OFS) of Rs 223 crore by existing shareholders. The funds from the fresh issue are earmarked for working capital requirements, repayment of debt, and general corporate purposes, crucial for fueling the company's growth trajectory.

The company boasts an impressive business model, operating an asset-light distribution network across India and Southeast Asia.

They serve a diverse clientele of over 20,000 customers with critical digital infrastructure, security, and data solutions, supported by a vast network of over 7,000 channel partners. Their comprehensive portfolio includes cloud, cybersecurity, data analytics, and artificial intelligence, positioning them squarely in the heart of the ongoing digital transformation wave.

Financially, iValue InfoSolutions has demonstrated consistent growth.

Their revenue from operations climbed steadily from Rs 607.4 crore in FY21 to Rs 776 crore in FY22, and further to Rs 1007.8 crore in FY23. Net profit has also followed a similar upward trend, from Rs 20.7 crore in FY21 to Rs 28.5 crore in FY22, and reaching Rs 30.6 crore in FY23. This robust financial performance underscores their strong market position and operational efficiency.

However, like any investment, there are considerations.

At the upper end of the price band, the IPO values iValue InfoSolutions at a P/E multiple of 28.3x based on its FY23 earnings. While some analysts deem this valuation reasonable given its growth prospects, others, like Canara Bank Securities, have advised against subscribing, citing a fully priced valuation compared to industry peers like Redington (P/E 13.9x) and its dependence on a limited number of vendors.

Despite these cautions, many market experts remain optimistic.

Swastika Investmart recommends subscribing for both listing gains and long-term potential, highlighting the company’s strong fundamentals, asset-light model, high return on capital employed (ROCE), and the positive outlook for digital transformation. Hem Securities and Master Capital Services echo this sentiment, pointing to iValue's proven track record, extensive customer base, experienced management, and robust vendor relationships as compelling reasons to consider the IPO.

Investors eyeing this IPO should weigh the promising GMP, strong retail demand, and positive growth outlook against valuation concerns and competitive pressures.

With the digital transformation sector poised for continued expansion, iValue InfoSolutions presents an interesting proposition for those looking to tap into this high-growth market.