- Business Overview**
Nature of Business
Excel Soft is a technology-driven provider of software products and solutions for global customers, specializing in digital learning, education technology, and assessment solutions. Its offerings include:
- Learning Management Systems (LMS)
- Assessment platforms
- Digital content solutions
- Custom software development
Revenue Model
- Product licensing
- Maintenance & support
- Implementation services
- Custom development projects
- Recurring SaaS revenues
Customers
- Large enterprises
- Educational institutions
- Governments
- Global clients across US, Europe, Middle East
Geographical Presence
- India (HQ in Mysuru)
- Exports major part of revenue through subsidiaries in US, UAE, Europe
📌 2. Industry & Market Overview
The DRHP highlights that Excel Soft operates in the rapidly growing global EdTech and digital learning solutions space.
Key Industry Trends
- Strong demand for digital learning platforms in enterprises and government bodies.
- Increasing adoption of AI-driven personalized learning.
- Growth in online assessments and proctoring.
Market Growth Indicators
- Global EdTech market growing at high single-digit CAGR.
- Government mandates for skill development and digital education fuel demand.
Competition
- Competes with global and Indian LMS and assessment solution providers.
- Key differentiator: proprietary IP and long client relationships.
📌 3. Objects of the Issue
As per DRHP:
- Fresh Issue: ₹60 crore
- Use of Proceeds:
- Investment in subsidiaries for business expansion
- Funding working capital requirements
- General corporate purposes
(No OFS component → positive signal.)
📌 4. Financial Highlights (Last 3 Years)
| Metric | FY22 | FY23 | FY24 | |
|---|---|---|---|---|
| Revenue from Operations | ₹105.8 cr | ₹123.2 cr | ₹154.6 cr | |
| EBITDA | ~₹12.5 cr | ~₹19.1 cr | ~₹28.4 cr | (derived from PBT & finance costs) |
| EBITDA Margin | ~11.8% | ~15.5% | ~18.4% | |
| Profit After Tax (PAT) | ₹8.65 cr | ₹13.17 cr | ₹20.71 cr | |
| PAT Margin | 8.2% | 10.7% | 13.4% | |
| EPS (Basic/ Diluted) | ₹2.48 / 2.48 | ₹3.77 / 3.77 | ₹5.94 / 5.94 | |
| ROE | 11.94% | 16.3% | 20.75% | |
| ROCE | 16.42% | 17.23% | 20.31% |
Key Insights
- Strong revenue CAGR: ~20%.
- Margins improving consistently.
- ROE & ROCE show improving capital efficiency.
- High-quality earnings (PAT growing faster than revenue).
📌 5. Cash Flow Analysis
Operating Cash Flow
- OCF has been consistently positive, indicating strong revenue-to-cash conversion.
- No major mismatch between PAT and cash flow.
Investing Cash Flow
- Negative due to continuous investment in product development and subsidiaries.
Financing Cash Flow
- Minor debt movements; company is not highly leveraged.
Conclusion on Cash Flows
- Healthy OCF trends
- Investments aligned with long-term strategy
- No red flags regarding accounting cash flow mismatch.
📌 6. Key Risk Factors (From DRHP)
- Dependency on Top Clients
- Significant portion of revenue concentrated among few customers.
- Foreign Currency Risk
- Large share of export revenue exposes company to FX volatility.
- Subsidiary Performance Risks
- Business relies on foreign subsidiaries; failure in any market affects consolidated numbers.
- Competition from Global EdTech Firms
- Risk of losing market share to well-funded competitors.
- Data Security & Technology Risks
- Cybersecurity issues or system failures could impact business.
- Skilled Workforce Retention
- Business depends heavily on tech talent.
- Litigation Risks
- Ongoing legal proceedings could materially impact results.
📌 7. Promoter & Management Analysis
Promoters:
- Mr. D.S. Prasanna Kumar
- Dr. Giridhar Sheshadri
Background:
- Extensive experience in software development, education technology, and global operations.
Promoter Shareholding
- Pre-IPO: 75.65%
- Post-IPO: 60.52%
Controversies
- No major regulatory, legal, or financial controversies linked to promoters in DRHP.
Board of Directors:
Includes experienced professionals across tech, finance, and strategy.
📌 8. Related Party Transactions
Key RPTs include:
- Sales & services to subsidiaries
- Reimbursements
- Remuneration to key management personnel
Assessment
- All transactions appear operational and recurring.
- No abnormal payments or suspicious related-party dealings.
- No evidence of tunneling or diversion of funds.
📌 9. Peer Comparison & Valuation
Peers (from DRHP):
- Not many directly comparable listed EdTech-product companies.
- Indirect peers include software services & LMS providers.
Based on DRHP disclosures:
- Profit margins and ROE/ROCE metrics are higher than typical mid-sized IT services peers.
- No valuation multipliers provided yet (since price band not declared).
Preliminary Take:
- High-growth SaaS + IP-led business generally commands higher multiples.
- ROE above 20% (FY24) → supports premium valuation.
- Final valuation fairness depends on the IPO price band.
📌 10. Red Flags (If Any)
| Potential Red Flag | Present? | Remarks |
|---|---|---|
| Negative cash flow despite profits | ❌ | OCF positive (healthy) |
| Sudden profit spike before IPO | ❌ | Consistent 3-year improvement |
| Large OFS Component | ❌ | No OFS in issue |
| Auditor qualifications | ❌ | No red flags reported |
| Dependence on limited clients | ⚠️ Yes | Noted in risk factors |
| Litigation | ⚠️ Yes | Some legal cases disclosed |
| Governance concerns | ❌ | No issues apparent |
| Unusual RPTs | ❌ | All appear routine |
Overall governance risk: Low to Moderate
📌 Final Analyst View
Strengths
- High-quality SaaS + products-led business
- Strong profitability and ROE
- Recurring global revenue streams
- No debt concerns
- No OFS → Promoter confidence
Concerns
- Client concentration risk
- Competitive EdTech environment
- Dependence on overseas subsidiaries
Overall:
Excel Soft is a high-growth, IP-driven tech company with strong fundamentals, clean governance, and favorable financial metrics.