Canarys Automations IPO Listing: A Deep Dive into IT Solutions and Financial Performance

Canarys Automations IPO Listing

The Canarys Automations IPO listing has created significant waves in the Indian stock market. Canarys Automations, a company specializing in IT solutions, recently made its debut on the Small and Medium Enterprises (SME) platform of the National Stock Exchange (NSE).

This IPO received a great deal of attention from investors, leading to an oversubscription rate of more than 9 times the offering size.

In this article, we’ll delve into the specifics of the Canarys Automations IPO, the response it garnered from investors, and the company’s background, operations, and financial performance.

The IPO Listing and Initial Trading

The Canarys Automations IPO offered investors the opportunity to acquire shares in a company that provides IT solutions.

The IPO’s price per share during the initial offering was set at Rs 31. However, when trading commenced on the NSE SME, the share price opened at Rs 43.45, reflecting a significant increase.

This initial trading price, often referred to as the “listing gain,” amounted to an impressive 40 percent, meaning that IPO investors who secured shares during the offering enjoyed an immediate gain.

Despite the initial enthusiasm, the share price experienced a notable decline after listing, eventually hitting the lower circuit at Rs 41.30.

This closing price meant that the profit for IPO investors was retained at 33 percent, compared to the listing gain.

This decline in share price post-listing is not uncommon in the IPO market, as it can be influenced by various market factors and investor sentiment.

Investor Response to the Canarys Automations IPO

One of the key indicators of an IPO’s success is the extent to which it is oversubscribed, reflecting the demand for shares.

The Canarys Automations IPO, valued at Rs 47.03 crore, was open for subscription between September 27 and October 3. Investors displayed substantial interest in this offering, with the IPO being oversubscribed by 9.94 times its offering size.

This oversubscription rate underlines the high level of enthusiasm and demand among investors for Canarys Automations shares.

Breaking down the oversubscription, the participation of different categories of investors is noteworthy:

1. Qualified Institutional Buyers (QIB): The QIB portion was oversubscribed by 2.73 times. QIBs typically include financial institutions, mutual funds, and other entities with significant financial resources. Their interest in the IPO is an encouraging sign, as it suggests institutional confidence in the company.
2. Non-Institutional Investors (NII): The NII portion, which often includes high-net-worth individuals, was oversubscribed by an impressive 14.29 times. The strong interest from this category of investors is a testament to the broader appeal of the IPO.
3. Retail Investors: Retail investors also demonstrated substantial interest, with their portion being oversubscribed by 11.70 times. This category comprises individual investors who participate in the IPO market. Their enthusiastic response indicates a widespread retail interest in the offering.

Utilization of Funds

The funds generated through the issuance of new shares in the IPO have specific purposes. Canarys Automations intends to utilize these funds to support various aspects of its business:

1. Development and Digital Transformation: A portion of the funds will be allocated to the development of digital transformation solutions. In an era where digital technologies play a crucial role in business operations, this investment is expected to enhance the company’s technological capabilities.
2. Expansion of Existing Facilities: Expanding existing facilities is vital for a company’s growth. This use of funds reflects Canarys Automations’ commitment to expanding its physical infrastructure and operational capacity.
3. Construction of New Delivery Centers: Building new delivery centers signifies an expansion of the company’s operational reach. This move is likely aimed at better serving its client base and entering new markets.
4. Working Capital Needs: Working capital is the lifeblood of any business. The funds will also be directed toward fulfilling the company’s working capital requirements, ensuring smooth day-to-day operations.
5. General Corporate Purposes: Lastly, some of the funds will be allocated to general corporate purposes. This category typically includes expenses related to running the business efficiently.

Canarys Automations: A Business Overview

Canarys Automations, founded in 1991, is an IT solutions provider that has established a strong presence in the industry. The company operates across two core business verticals:

1. Technology Solutions: Canarys Automations offers a range of IT solutions to clients across various sectors, including Banking, Financial Services and Insurance (BFSI), Retail, Healthcare, Pharma, Manufacturing, and Insurance. The diverse client portfolio underscores the company’s adaptability and ability to cater to the needs of clients in different industries.
2. Water Resource Management Solutions: In addition to its technology solutions, Canarys Automations also provides water resource management solutions. This underscores the company’s commitment to sustainability and addressing critical environmental concerns. Managing water resources is an area of increasing importance in a world facing water scarcity challenges.

The company’s footprint extends beyond India, with a global presence that includes clients in over 10 countries.

These countries include the United States, the United Kingdom, Canada, Germany, Singapore, Malaysia, and Australia.

This international reach demonstrates the company’s ability to serve a diverse clientele and adapt its solutions to different markets.

Financial Performance

One of the key factors that investors often consider when evaluating an IPO is the financial health and performance of the company.

In the case of Canarys Automations, its financial trajectory is notably positive. Over the years, the company has shown significant growth in both revenue and net profit.

• FY 2021: In this fiscal year, the company reported a net profit of Rs 2.10 crore. This indicates a solid financial performance for a company of its size.
• FY 2022: The following year, Canarys Automations saw substantial improvement in its financials. The net profit surged to Rs 4.56 crore, marking a significant increase from the previous year.
• FY 2023: The most recent fiscal year, FY 2023, witnessed an even more impressive performance. The net profit climbed to Rs 8.53 crore, underscoring the company’s capacity for sustained growth.

This consistent rise in net profit showcases the company’s financial strength and its ability to generate profits over time. Moreover, the company’s revenue has followed a similar growth trajectory:

• FY 2021: The revenue for FY 2021 stood at Rs 25.78 crore.
• FY 2022: In the subsequent fiscal year, the revenue increased to Rs 52 crore, reflecting substantial growth.
• FY 2023: The most recent fiscal year, FY 2023, saw a remarkable surge in revenue, with the figure reaching Rs 75.47 crore.

This upward trajectory in revenue demonstrates not only the company’s ability to grow its client base and expand its offerings but also its capacity to generate substantial revenues.

In summary, the Canarys Automations IPO listing on the NSE SME platform has been notable for its strong response from investors, oversubscription, and a substantial listing gain.

The company’s diverse business verticals, global presence, and strong financial performance are key factors that have contributed to the enthusiasm surrounding the IPO.

While the post-listing decline in share price is a common phenomenon, it is crucial to consider the long-term potential of the company and its ability to deliver value to shareholders.

The funds raised through the IPO will undoubtedly play a pivotal role in realizing the company’s growth plans and continuing its success story in the IT solutions and water resource management sectors.