Updater needs to deliver value from recent acquisitions
Updater Services, a provider of facility management services to corporates, plans to raise ₹640 crore from its initial public offering (IPO). Of this, ₹400 crore will be raised from fresh issuance of shares that would be deployed to repay loans and enhance its working capital and the balance includes an offer of sale (OFS) by promoters and a private equity investor.
Promoter holding will drop to 58.5% after the IPO from 80.5%.
The company's revenue has been boosted by a series of acquisitions that helped drive top-line growth; however, the fair-value changes in liabilities payable on recent acquisitions have depressed profits. Considering this, investors may look at taking exposure in the company after the listing based on how new acquisitions create value in the next few quarters.
Business Model: Chennai-based Updater Services provides facility management services such as housekeeping, pest control, production support, warehouse management and general staffing that contribute nearly 70% of the total revenues.
The balance revenue comes from business support services like sales enhancement services, employee background verification and airport ground handling services.
It serves nearly 2,800 customers including Procter & Gamble Home Products, Aditya Birla Fashion and Retail, Microsoft, Hyundai Motor, TCS and HMSI.
The top 10 customers of the facility management segment contributed 35% to segmental revenue, while the top 10 customers of business support contributed around 50% of the segment's revenues. The business support vertical fetches superior margin than facility management.
Financials: Revenue expanded 31% annually to ₹2,098 crore between FY21 and FY 23, mainly backed by acquisitions, while operating profit (EBITDA)
