Nihilent IPO Review

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Nihilent IPO

7.1

Company Background

7.5/10

Price Band

7.0/10

Financial Health

6.5/10

Industry Situation

6.5/10

IPO Proceeds Usage

8.0/10

Pros

  • Returning Client Base
  • Clear IPO Proceeds Objectives
  • International Presence

Cons

  • Dependency on Currency Fluctuations
  • Okayish Financial Growth

 


Nihilent Background

Nihilent Limited, incorporated on May 29, 2000, is a global business consulting and IT solutions integration company.

They offer services including consulting, Analytics and Information Technology Solutions and Services. Besides India, the company has offices in many countries like South Africa, United States, United Kingdom and Australia which employ a total of more than 1800 employees.

The mission of Nihilent is to deliver desired organizational change to their clients in a systematic manner.

Till now, they have catered to around 750 clients located in more than 30 countries in the world.

Nihilent has developed proprietary frameworks and methodologies in-house to aid their services which include tools like MC3TM, a patented tool to change management systems, 14 Signals, which is a tool that helps in evaluating perception, experience and aspirations of a customer and SightN2, which is a framework for digital marketing.

The company has won many awards during the tenure of its operations like Red Herring Top 100 Award for Asia in 2011 and Best Enterprise IT Consultancy 2018 & Award for Innovation in Digital Transformation by APAC Insider and Management Consultancy of the Year 2018 Award by CEO Today Magazine.

Nihilent Management Information

Currently, there are 8 Directors on the Board of Nihilent Limited. Jeremy John Ord is the Non – Executive Chairman, L. C. Singh is the Executive Vice Chairman and Whole Time Director.

Santosh Pande, Kasaragod Ashok Kini, Satish K. Tripathi and Lila Firoz Poonawalla are the Independent Directors, Minoo Darab Dastur is the President, Chief Executive Officer and Whole Time Director and Scott Douglas Gibson is the Non – Executive Director of Nihilent Limited.

C. Singh, Executive Vice Chairman and Whole Time Director

He has a B.Tech Degree from the Institute of Technology Banaras Hindu University and also holds a Bachelor’s Degree in Science with Chemical Engineering as specialization. He possesses an experience of more than 44 years in the Information Technology industry.

Nihilent IPO Data Points

Nihilent IPO will open on (undisclosed) and close for subscription on (undisclosed).

The IPO size will be of (undisclosed) Equity shares and the face value of each share will be ₹10. The offer consists of a fresh issue of up to (undisclosed) lakh equity shares aggregating up to ₹2500 million and an offer for sale of up to 2,125,599 equity shares by selling shareholders which includes an offer for sale of up to 1,171,219 equity shares, aggregating up to ₹(undisclosed) million by Vastu IT Private Limited.

The price band range has been set at ₹(undisclosed) – ₹(undisclosed) per share. The offer price is (undisclosed) times the face value of the equity shares. The IPO size is expected to be up to ₹(undisclosed). The market lot size is of (undisclosed) equity shares and the shares will be listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).

Pursuant to a resolution passed at the meeting held on May 15, 2018, the issue has been authorised by the Board of Directors and pursuant to the special resolution of the shareholders at the EGM held on July 10, 2018, the offer has been approved by them.

Nihilent Financial Performance

The company has shown a consistent rise in total revenues over the last three years. Total income PAT has also increased consistently from fiscal 2016 to fiscal 2018 continuously.

 

The EPS figures also show an increase during the same period. On a standalone basis, the return on the net worth of the company for the fiscal years ended March 31, 2016, 2017 and 2018 was 13.83%, 12.57% and 18.61% respectively.

The sudden increase in PAT in fiscal 2018 to ₹450.89 million from ₹280.35 million in fiscal 2017 raises some concern.

Nihilent IPO Objectives

The Nihilent IPO consists of two parts:

The proceeds from the offer for sale of up to approximately 2.13 million equity shares will be given to the selling shareholders. Any proceeds from the offer for sale will not be received by the company for its operations.

The main objectives of the fresh issue of shares through the IPO are as follows –

  • For meeting expenses related to the inorganic growth of the company
  • For replacing and upgrading activities at the corporate office
  • For expenses related to the relocation of a branch office and for setting up a Heuristic testing centre in Chennai
  • For establishing a user experience laboratory (“UX Lab”) and a media laboratory
  • For meeting expenses related to the general corporate operations

Other than the above-mentioned objectives, the company will also benefit in terms of listing benefits and enhanced brand name and visibility through Nihilent IPO.

Nihilent IPO Events

Nihilent filed the Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India (SEBI) on August 9, 2018, for the 100% Book Building Offer.

The offer will open on (undisclosed) and close on (undisclosed).

The finalisation of basis of allotment is expected to happen by (undisclosed) and the initiation of refunds is expected to start by (undisclosed). The transfer of shares to demat accounts is expected to start on (undisclosed) and the expected listing date will be (undisclosed).

Nihilent IPO Advisors Information

Motilal Oswal Investment Advisors is acting as Book Running Lead Manager to the issue. Link Intime India Private is acting as the Registrar for the Nihilent IPO.

Nihilent IPO Recommendation

Now, let us discuss some of the key strengths of the business and some risks related to it.

In order to attract more customers in this industry, Nihilent has more than 100 employees that are trained in ‘Design Thinking’ and UX which help in analysing and understanding the clients’ needs and requirements.

They share a good long-standing relationship with their clients and try to improve the customer satisfaction consistently through regular reviews. This effort is reflected in the fact that they have around 20 customers which have been with the company for the last 5 years.

They started their operations in the United Kingdom, the United States and South Africa and now have expanded themselves to Australia, Ireland, India and Nigeria as well.

The extremely experienced and professional management team along with skilled and talented employees are an added advantage for the business.

Financially also, the company has been doing well over the last few years, However, the sudden increase in PAT in the financial year ended March 31, 2018, as compared to the previous financial year raises some concerns.

It is yet to be seen if the company is able to sustain such a high growth rate.

The growth of the company depends on demand for information technology and the economic health of their customers.

Any change in IT spending or weak economic conditions may negatively affect the operations of the company.

Due to the nature of their business, if they are unable to anticipate the requirements of their customers and work proactively accordingly, their profitability might get affected.

The company is significantly dependent on operations in South Africa. Any adverse factors for the South African economy may affect the company’s profitability as well.

Since they operate in many other countries, they are also exposed to the risk of foreign currency fluctuations.

The inability to retain talent and attract new skilled people also poses another risk to the company. The dependence on a few clients for a majority of the revenues is also a risk for the company’s business.

The competition in consulting and information technology and outsourcing markets is quite intense and their competitors include several multinational providers and consulting firms, offshore service providers in lower cost locations like India, etc.

The net proceeds of the IPO are proposed to be used for acquisition purposes for which targets have not been selected yet. Inability to raise additional capital for further expansion plans may negatively affect the profitability of the company in future years.

The business is subject to many laws and regulations which are constantly evolving which might affect the business significantly.

After analysing various aspects of the business of the company, it may be said that investors may choose to subscribe for the Nihilent IPO for a long-term for better gains.

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