Sonata Software Ltd. is a leading global IT services and technology solutions company based in India. It provides a wide array of IT services, software solutions, and digital transformation offerings to enterprises worldwide. With a focus on innovation and customer-centricity, the company caters to industries such as retail, manufacturing, travel, ISV (Independent Software Vendors), and BFSI (Banking, Financial Services, and Insurance). It has business segments in IT services, platformation, Product Engineering, and software Distributors. It has a global presence with operations in over 35 countries, serving more than 500 clients.
Return Summary
YTD
1 Month
6 Month
1 Year
2 Year
3 Year
5 Year
(15.73%)
4.75%
15.07%
(0.15%)
113.87%
111.02%
444.02%
3 Year Return: Sonata Software v/s NIFTY
Result Highlights
Revenue for YoY and QoQ is at increasing phase at Q2 FY25 revenue of ₹2527 crore with moderate EBITDA margin of 7% at ₹176 crore.
The target revenue company want to achieve is ₹12,000 crore by the end of 2027, and strengthening its client partnerships with Microsoft, AWS and other significant players.
In this half year company has closed 6 large deals, and in active pipeline 49% are large orders.
The cash reserves on balance sheet has reduced from ₹700 crore to ₹500 crore, because of dividend payouts and acquisitions.
Major wins in Q2 are Collaboration with a US technology giant for AI, cloud, and data services. A multi-year data modernization program with an Australian wholesaler. Strategic partnership with a leader in food safety systems for consumer-facing automation platforms
Shareholding Pattern
Return Comparison with Peers
COMPANY
1 Year
2 year
3 Year
5 Year
Sonata Software
(0.15%)
113.87%
111.02%
444.02%
Tata Elxsi
(19.7%)
(1.86%)
14.26%
734.5%
KPIT Technology
(8.12%)
91.47%
196.3%
1341.6%
Newgen Software
75.56%
560.6%
319.2%
1176.5%
Birlasoft
(3.44%)
97.15%
25.32%
745.02%
Contribution to Industry Size
The great partnership for 30+ years of Sonata with Microsoft in the AI industry has helped Sonata grow significantly. It is helping Microsoft with 400+ clients across the globe generating Microsoft’s $650+ million revenue per annum. It has 3500+ teams on Microsoft Technologies, contributing in the industry of healthcare, retail, manufacturing, and Telecom. For corporates, it has made its own AI called Harmoni. AI with Microsoft and AWS as partners.
Balance Sheet Analysis
Reserves have been increasing gradually with high revenues and efficient management operations.
Borrowing has increased year on year to fulfil the expansion and partnerships with clients for projects.
The cash reserves are enough to pay the borrowed debts and acquisitions of companies to grow inorganic way.
The balance sheet is strong and efficient in industry aspects.
Cash Flow Analysis
Cash flow from operations is ₹281 crore in FY24 and is positive for many years.
The acquisitions have increased in the past 2-3 years because of high demand in the industry, showing great strength in the company.
The borrowing has been stable and is very low, maintaining its debt-to-equity ratio.
The company is paying its dividend every year constantly with good payouts to its investors.
Incorporated in 2005, Suraksha Diagnostic Limited has grown into a prominent player in the diagnostic services sector, offering a range of pathology, radiology, and medical consultancy services. The company has announced its Initial Public Offering (IPO) to raise ₹846.25 crore, structured as a book-built issue consisting entirely of an Offer for Sale (OFS) of 1.92 crore shares.
Suraksha Diagnostic operates an extensive network across eastern India, which includes: 1 Central Reference Laboratory, 8 Satellite Laboratories, and 215 Customer Touchpoints, comprising: 49 Diagnostic Centres & 166 Sample Collection Centres.
This robust presence spans key states like West Bengal, Bihar, Assam, and Meghalaya, as of June 30, 2024. The IPO presents an opportunity for investors to engage with a well-established brand in the growing healthcare and diagnostic market in India.
IPO Subscription Period
The IPO subscription period for Suraksha Diagnostic Limited opens on November 29, 2024, and closes on December 3, 2024. The finalization of the allotment is expected by December 4, 2024, with refunds being initiated the same day.
Pricing and Lot Details
The Suraksha Diagnostic IPO presents an opportunity to invest in a leading diagnostic service provider in eastern India. Below are the key details for potential investors:
Price Band: ₹420 to ₹441 per share. The price band represents the range within which investors can place their bids. The lower end is ₹420, while the upper end (or cap) is ₹441.
Lot Size: Investors must purchase a minimum of 34 shares, totaling approximately ₹14,994 for retail investors at the highest price.
Issue Size: The IPO aims to raise ₹846.25 crore, consisting entirely of an Offer for Sale (OFS) of 1.92 crore shares.
Face Value: Rs. 1 Per Equity Share. The face value is the nominal or base value of the share. However, the IPO pricing reflects the premium set above the face value based on the company’s valuation and market demand.
The Suraksha Diagnostic IPO has a structured bidding system for different investor categories. Here’s a breakdown of the investment requirements for retail investors and high-net-worth individuals (HNIs):
Application
Lots
Shares
Amount (Rs)
Retail (Min)
1
34
14,994
Retail (Max)
13
442
1,94,922
Small HNI (Min)
14
476
2,09,916
Small HNI (Max)
66
2244
9,89,604
Large HNI (Min)
67
2278
10,04,589
Reservation Structure
Reservation Structure for Suraksha Diagnostic IPO: The reservation structure for the Suraksha Diagnostic IPO is organized to balance participation from institutional, non-institutional, and retail investors.
Qualified Institutional Buyers (QIBs): 50% of the issue is reserved for QIBs. This category includes entities such as mutual funds, foreign institutional investors, banks, and other large financial institutions.
Non-Institutional Investors (NIIs): 15% of the issue is allocated to non-institutional investors, often high-net-worth individuals (HNIs) who bid in larger lot sizes.
Retail Investors: 35% of the issue is reserved for retail investors. Retail investors can bid for a minimum of 34 shares per lot, requiring an investment of ₹14,994 at the upper price band.
Employee Reservation: There is no specific employee reservation mentioned for the Suraksha Diagnostic IPO.
This well-structured reservation model ensures a fair distribution of the IPO, catering to a wide range of investor categories and encouraging participation across different segments of the market.
Key Dates & Timelines
Suraksha Diagnostic IPO Timeline (November – December 2024)
IPO Open Date: Friday, November 29, 2024
IPO Close Date: Tuesday, December 3, 2024
Basis of Allotment: Friday, December 6, 2024
Initiation of Refunds: Monday, December 9, 2024
Credit of Shares to Demat Accounts: Tuesday, December 10, 2024
Listing Date on BSE and NSE: Wednesday, December 11, 2024
Book Running Lead Managers
The Suraksha Diagnostic IPO is being managed by the following Book Running Lead Managers (BRLMs):
ICICI Securities Limited
SBI Capital Markets Limited
Nuvama Wealth Management Limited
The registrar for the IPO is KFin Technologies Limited, responsible for processing applications and managing allotments.
Promoters Information
Here is the promoter and key management information for the Suraksha Diagnostic IPO:
Dr. Somnath Chatterjee: Chairman and Joint Managing Director of Suraksha Diagnostic Limited. He is a medical graduate from the University of Calcutta (1985) with over 32 years of experience in the medical and diagnostics industry. Dr. Chatterjee has been associated with the company since its inception and is responsible for overall planning and business strategies.
Ritu Mittal: Joint Managing Director and CEO. A commerce graduate from the University of Calcutta (1996), she has over 28 years of experience in the medical and diagnostics sector, including her association with Suraksha Diagnostic & Eye Centre Private Limited. She oversees the company’s operations end-to-end.
Satish Kumar Verma: Non-Executive, Non-Independent Director. He is a mechanical engineering graduate from Punjabi University (1969) with a postgraduate diploma (1971). With over 40 years of management experience, he also serves as a director at Kanika Audio Visuals Private Limited and oversees strategic planning and customer relationship management.
Institutional Investors: The IPO includes the sale of equity by various stakeholders, including Orbimed Asia II Mauritius Limited, which acts as a key investor selling shareholder. The total offer includes shares from promoter shareholders and other individual shareholders as part of the Offer for Sale
About Suraksha Diagnostics Ltd.
Suraksha Diagnostics Limited, the largest integrated diagnostics chain headquartered in East India, provides a comprehensive range of services that include pathology and radiology testing, as well as medical consultation services. As of March 31, 2024, the company operates 48 diagnostic centers and 146 sample collection centers across West Bengal, Assam, Bihar, and Meghalaya, making it a leader in its region.
The company boasts a technologically advanced infrastructure with a central reference laboratory, eight satellite laboratories, and 215 customer touchpoints, including 49 diagnostic centers and 166 sample collection centers. Its offerings include over 2,300 tests, ranging from routine pathology (788 tests) to specialized pathology (647 tests), and basic/intermediate radiology (748 tests) such as X-rays, CT scans, MRIs, and ultrasounds. Additionally, it supports its operations with robust systems like Laboratory Information Management System (LIMS), Radiology Information System (RIS), Picture Archive Communication System (PACS), and Enterprise Resource Planning (ERP) tools, ensuring efficiency and quality.
The company places a strong emphasis on quality certifications. Three laboratories hold NABL certification, and two advanced diagnostic centers are accredited by the National Accreditation Board for Hospitals & Healthcare Providers (NABH). Its high brand recall, superior service quality, and strong management team further enhance its reputation.
Suraksha Diagnostics derives most of its revenue (94% in Fiscal 2024) from the B2C segment, reflecting its dominant consumer reach. It also offers online and offline medical consultations through 44 diagnostic centers, which house 120 polyclinics with over 750 doctors.
According to a CRISIL report, India’s diagnostic service market is expected to grow at a CAGR of 10%-12%, reaching ₹1,375 billion by Fiscal 2028 from ₹870 billion in Fiscal 2024. This presents a significant growth opportunity for Suraksha Diagnostics to expand its footprint.
Key Strengths:
Largest diagnostic chain with a stronghold in East India.
Proven track record of profitability and consistent financial performance.
Comprehensive, one-stop solution for diagnostics combining pathology, radiology, and consultations.
Utilization of advanced technology platforms for operational excellence.
Strong brand positioning and quality-focused services since its inception in 2005.
Suraksha Diagnostics’ robust network, quality services, and market leadership position it to capitalize on the growing demand for diagnostic services in India.
Suraksha Diagnostics faces several challenges that could impact its operations and market position. Its heavy reliance on West Bengal makes the company vulnerable to regional disruptions, potentially affecting business continuity. Health epidemics pose a dual threat by affecting both workforce availability and service delivery. The risk of sample handling errors could compromise diagnostic accuracy and damage its reputation. Moreover, franchisee non-performance may negatively influence service quality and financial outcomes.
The company’s dependence on third-party vendors for critical diagnostic equipment introduces the possibility of supply chain disruptions, hindering operations. Additionally, failure to adopt new technologies could result in losing competitiveness and market share in the rapidly evolving diagnostics industry. These factors collectively highlight the importance of effective risk management strategies to sustain and grow its market position.
Financial Highlights
INR in Crores
31-Mar-24
31-Mar-23
31-Mar-22
Revenue from Operation (in ₹ Cr.)
218.71
190.13
223.19
Profit After Tax (PAT) (in ₹ Cr.)
23.127
6.065
20.824
Total Borrowings (in ₹ Cr.)
8.637
14.007
19.027
Net Worth (in ₹ Cr.)
179.41
155.93
145.84
Return on Capital Employed (%)
21.46
9.05
23.11
Return on Equity (%)
14.09
4.32
15.38
Earnings Per Share (EPS)-in absolute ₹
4.43
1.22
3.91
KPI’s as on 31-Mar-24
Value
ROCE
21.46%
Debt/Equity
0.2
RoNW
14.09%
P/BV
13.1
PAT Margin (%)
10.57
ROE
14.09%
IPO Objectives
The proceeds from the Suraksha Diagnostic IPO will not be allocated to operational expansion or growth initiatives. Instead, the offering is structured as an offer-for-sale (OFS), enabling existing shareholders to divest their stakes and exit their investments. The company itself will not receive any funds from the IPO. This approach primarily aims to provide liquidity to the selling shareholders while facilitating the listing of the company’s shares on the stock exchanges.
