Unicom’s Prospects Ride on Ecomm Rise

ET Intellligence Group: Unicommerce eSolutions, which provides ecommerce-related software solutions, plans to raise up to ₹277 crore through an offer for sale. The promoter group stake will fall to 23.6% after the IPO from 48.6% excluding any Esop adjustments. AceVector, which also owns Snapdeal, is the major promoter of Unicom. The company counts Mamaearth, Lenskart, boAt, Fabindia, Emami, Cello, and Paragon as some of its clients. The number of transactions on its platform increased to over 791 million in FY24 from 410 million in FY22. However, given the rich valuation, the IPO looks more suitable for investors with high-risk appetite.

Business

It offers software as a service solutions to manage ecommerce operations to brands, sellers and logistics service providers. This includes post-purchase operations such as warehouses and inventory management, order tracking, and payment reconciliation. The number of enterprise clients increased to 795 as of March 2024 from 470 two years ago. The contribution of revenue from the enterprise segment increased to 87.8% in FY24 from 82.9% in FY22.

Financials

Revenue and net profit doubled to ₹103.6 crore and ₹13.1 crore, respectively between FY22 and FY24. Share of revenue from overseas clients rose to 3.7% in FY24 from 1.3% in FY22. After adjusting for Esop-based expenses, operating margin before depreciation and amortisation was 17.5% in FY24 vs 12.1% in FY22. RoE increased to 17.4% in FY24 from 16.1% by similar comparison.

Risks

The company’s growth directly depends upon the progress of ecommerce in the country. A failure of its customers to scale up rapidly would hit Unicom’s prospects.

Valuation

The company demands a trailing P/E multiple of up to 84. There are no direct listed peers in India. CE Info Systems, which offers geospatial solutions under MapmyIndia, trades at a P/E of 87. CE Info clocked a revenue of ₹379.4 crore in FY24. Based on price-sales Unicom and CE Info are available at a multiple of 10 and 30.5. The latter had a net margin of 35.4% in FY24 compared with 12.6% for Unicom.