Trust Fintech Limited IPO Review
Trust Fintech Limited, a company that has carved a niche in the financial technology sector, is known for its innovative solutions and commitment to excellence. Founded in 1998 by Hemant Chafale, Heramb Ramkrishna, and Mandar Kishor Deo, Trust Fintech Limited has been at the forefront of providing secured core banking solutions and technological advancements to the banking and financial sector.
The company is headquartered in Nagpur, Maharashtra, and was established with a vision to revolutionize the banking and financial services industry through cutting-edge software solutions. The founders, with their deep understanding of the sector's needs and the potential of technology, aimed to create products that would enhance the efficiency and security of financial operations.
Over the past 25 years, Trust Fintech Limited has evolved significantly, adapting to market shifts and technological advancements to reach its current business model and product version. The company's journey has been marked by a consistent focus on innovation and customer-centric approaches, which have been instrumental in its growth and success.
Trust Fintech's flagship product, TrustBankCBS, is a testament to the company's expertise in core banking software. It offers a comprehensive suite of modules designed to streamline banking operations, including customer onboarding, KYC compliance, loan management, digital banking interfaces, and treasury management. Additionally, the company provides a range of IT solutions, including ERP implementation, customized software development, and offshore IT services tailored to the BFSI sector.
As Trust Fintech Limited continues to grow, it remains dedicated to its mission of delivering world-class technology solutions to a virtually integrated banking and financial ecosystem. With its recent IPO, the company aims to raise funds for various purposes, including setting up a new development facility, procuring hardware, upgrading IT infrastructure, enhancing existing products, and funding global and domestic business development, sales, marketing expenses, and general corporate purposes.
Trust Fintech Limited stands as a beacon of innovation and excellence in the fintech space, with a promising future ahead as it continues to navigate the ever-changing landscape of financial technology.
Competitive Strengths
Trust Fintech Limited, a Nagpur-based SaaS company, has carved a niche for itself in the competitive fintech sector with its comprehensive suite of software solutions. The company's offerings are primarily divided into two categories: banking software and other solutions, catering to commercial, cooperative banks, and financial institutions. Their product portfolio includes Core Banking, GST Compliance, Loan Origination, anti-money laundering, Billing, Financial Accounting, and add-on modules for statutory report generation, among others.
Revenue, Sales, and Profit
Trust Fintech Limited has shown a dynamic financial performance over the past few years. For the fiscal year ending on March 31, 2023, the company reported net sales/income of INR 22.54 crores. This was a significant increase from the previous year's INR 17.63 crores, although a slight decrease from INR 23.95 crores reported in 2021. Other income for the years 2023, 2022, and 2021 were INR 0.16 crores, INR 0.37 crores, and INR 0.23 crores, respectively. The net profit/loss figures were also noteworthy, with the company achieving INR 4.02 crores in 2023, a substantial growth compared to INR 1.34 crores in 2022 and INR 2.20 crores in 2021. Employee expenses and other expenses constituted significant portions of the outgoings, amounting to INR 10.55 crores and INR 7.96 crores respectively in 2023. The company's earnings per share (EPS) showed a positive trend, with an EPS of INR 7.76 in 2023, up from INR 2.58 in 2022 and INR 4.24 in 2021. Additionally, for the six-month period ended on September 30, 2023, Trust Fintech reported a net profit of INR 7.28 crores with a revenue of INR 18.83 crores.
Distribution Network and Geographical Reach
Trust Fintech Limited, a Nagpur-based software as a service (SaaS) company, primarily caters to the BFSI sector with its core banking software solutions. The company's flagship product, TrustBankCBS, is designed to serve medium to large banks and financial institutions, while MicroFinS targets small and growing co-operative societies among other clients. Trust Fintech Limited's distribution network is likely to be extensive, given the nature of its products which are essential for financial operations across various regions. The geographical reach of the company extends to areas where its client institutions operate, potentially covering a wide range of locations due to the universal need for robust banking software solutions. The company's recent IPO details suggest an expansion strategy, which may further extend its distribution network and geographical reach.
Unique Features
TFL has established itself as a one-stop-shop solution provider, delivering secure core banking solutions, ERP implementation, and customized software development. Their flagship product, TrustBankCBS, is a testament to their commitment to innovation, providing a web-based core banking platform that is both flexible and compliant with RBI regulations. This platform is designed to be configurable, allowing for seamless adaptation to policy changes and regulatory compliance. TFL's product suite extends beyond core banking to include loan origination software, GST compliance software, financial accounting and billing software, and various add-ons for statutory report generation, ATM reconciliation, and anti-money laundering measures. Their global footprint is notable, with implementations across India, Sri Lanka, Nepal, and several African countries, demonstrating their capability to navigate diverse regulatory environments and customer requirements.
Investment in Research and Development
Trust Fintech Limited, a software development company specializing in banking solutions, has been proactive in investing in research and development (R&D). The company's commitment to innovation is evident from its recent Initial Public Offering (IPO), where it aimed to raise ₹63.45 crores. A significant portion of these funds is allocated for setting up an additional development facility and upgrading IT infrastructure, which includes procuring hardware and investing in global and domestic business development. This move is strategic for Trust Fintech Limited as it seeks to expand its product portfolio, which already includes more than ten banking-related products such as Core Banking Software, Loan Origination software, and GST compliance software. Furthermore, the company plans to establish a new facility in Nagpur, Maharashtra, which will span 8093.71 sq. m. and accommodate 1000 employees for software development, leveraging tax benefits and strategic location advantages. This expansion is a clear indication of Trust Fintech Limited's dedication to R&D and its vision to enhance its offerings in the BFSI sector. The company's financial reports also reflect a healthy investment in R&D, with a net profit of Rs 7.28 crore on a revenue of Rs 18.83 crore for the six-month period ended on September 30, 2023, indicating a robust reinvestment strategy.
Trust Fintech Limited IPO Details
Issue Date: The issue date in an IPO, also known as the initial offering date, is when a company's stock is first made available for public purchase. This date is a significant milestone in the process of an initial public offering, marking the transition of a company from private to public status. (Issue Date: March 26, 2024 to March 28, 2024).
Listing Date: The listing date refers to the day when the company's shares are officially listed and begin trading on a stock exchange. This is typically several business days (3-6 days) after the issue date after processes like share allotment and finalization are completed. On this date, investors who were allotted shares during the IPO can begin selling them, and new investors can start purchasing them on the exchange at the prevailing market price. (Listing Date: Thursday, April 4, 2024).
Face Value of Shares: The face value of shares in an IPO, also known as the nominal or par value, is a predetermined fixed price set by the company and mentioned in its memorandum of association. It represents the initial capital contributed by the founders and is used for accounting and regulatory purposes. During an IPO, shares are typically offered at a price higher than the face value, which includes a premium based on market demand and the company's performance indicators. (IPO Face Value: ₹10 per share).
Price Band: A price band of an IPO is the range of prices within which the investors can bid for the shares of a company that is going public. The price band is set by the issuer and the lead managers of the IPO, based on various factors such as the demand and supply of the shares, the financial performance and valuation of the company, and the market conditions. (IPO Price: ₹95 to ₹101 per share).
Lot Size: In an Initial Public Offering (IPO), the lot size refers to the minimum number of shares an investor can apply for. It is a pre-determined set of shares that investors must bid for, and applications must be in multiples of this lot size. The lot size ensures a standardized bidding process and helps in the fair allocation of shares among investors. (Lot Size: 1200 Shares).
Total Issue Size: The total issue size represents the total number of shares the company is offering to raise capital through the IPO. This number is determined by the company and its advisors, considering factors like their funding needs and the expected investor demand. The total issue size is then divided by the lot size to determine the total number of lots available for purchase by investors. (Total Issue Size: 6,282,000 shares (aggregating up to ₹63.45 Cr)).
Fresh Issue: A fresh issue of shares in an IPO refers to the creation and sale of new shares by a company to the public for the first time to raise capital. Unlike an Offer for Sale, where existing shareholders sell their shares, a fresh issue results in new funds going directly to the company, which can be used for various purposes such as expansion, debt repayment, or investment in new projects. This process dilutes the existing shareholding but does not provide an exit route for current investors. (Fresh Issue: 6,282,000 share (aggregating up to ₹63.45 Cr)).
Issue Type: The type of an IPO can vary depending on the market and regulatory conditions. Some of the common types of IPOs are, Fixed priced IPO, Auction IPO, Book Building IPO, and Hybrid IPO. (Issue Type: Book Building IPO).
Listing At: An integral part of the IPO process is the listing. This refers to the day the company's shares officially begin trading on a stock exchange, such as the National Stock Exchange (NSE) or the Bombay Stock Exchange (BSE) in India. Once listed, anyone with a brokerage account can buy and sell the company's shares on the exchange. (Listing at: NSE SME).
Retail Shares Offered: This refers to the portion of the total shares being made available specifically for individual investors, distinct from institutional investors like banks or hedge funds. Regulatory bodies often mandate a minimum percentage of shares be reserved for retail investors, aiming to promote broader public participation in the capital markets. (Retail Shares Offered: 2,088,000 (33.24%)).
QIB Shares Offered: These shares are offered to institutions like mutual funds, insurance companies, foreign institutional investors (FIIs), banks, and other financial institutions registered with SEBI (Securities and Exchange Board of India). QIBs typically invest large sums of money, and SEBI regulations mandate a minimum investment amount for this category. Due to their significant investment power, QIBs are often allocated a minimum percentage (usually 50%) of the total IPO shares.(QIB Shares Offered: 1,192,800 (18.99%)).
NII (HNI) Shares Offered: NIIs are investors who are not QIBs or retail investors. They include high net-worth individuals (HNIs), corporate bodies, trusts, societies, etc., who bid for more than Rs 2 lakhs worth of shares in an IPO. NIIs can bid for up to 15% of the total shares offered in an IPO. NIIs have to pay 100% of the bid amount at the time of application. NIIs cannot bid at the cut-off price, which is the highest price at which the shares are allotted. HNIs are a sub-category of NIIs who bid for more than Rs 10 lakhs worth of shares in an IPO. (NII Shares Offered: 895,200 (14.25%)).
Market Maker Shares Offered: Market Maker Shares in an IPO refer to the shares that a market maker commits to buy and sell to ensure liquidity for the stock once it starts trading on the exchange. Market makers are typically brokerage firms that agree to hold a certain number of shares of the new issue to facilitate trading and provide stability to the stock price. They play a crucial role in the SME (Small and Medium Enterprises) segment, where they help in price discovery and improve the liquidity of stocks by providing two-way quotes. (Market Maker Shares Offered: 318,000 (5.06%)).
Competitors of Trust Fintech Limited
Trust Fintech Limited operates in a highly competitive environment, with several players that offer similar banking software and services. The company's main product, TrustBankCBS, is a web-based core banking software that allows for on-premises deployment with customized infrastructure. Its other offering, MicroFinS, caters to cooperative societies, credit unions, and microfinance institutions with a cloud-based solution.
The competitive landscape for Trust Fintech Limited includes a mix of established firms and emerging challengers. Some of the notable competitors are:
1. GRASIMPP: A company with a significant market cap, although not directly listed as a competitor in core banking products, it represents the broader competitive environment in which Trust Fintech operates.
2. SJKHCCS: Another player with a substantial market presence, it showcases the diversity of companies that Trust Fintech Limited contends with in terms of market capitalization and financial assets.
3. Hybrid Fin Ser: A smaller entity when compared to Trust Fintech Limited, but still a part of the competitive set, offering financial services that could overlap with Trust Fintech's offerings.
It's important to note that the fintech sector is rapidly evolving, with new technologies and players entering the market regularly. This means that Trust Fintech Limited must stay ahead of the curve in terms of innovation, customer service, and technological advancements to maintain its competitive edge.
Trust Fintech Limited faces a diverse range of competitors, from large-scale enterprises to specialized fintech firms. The company's focus on core banking software and services for the BFSI sector has served it well, but continuous innovation and adaptation are crucial for staying competitive in this fast-paced industry. As the fintech landscape continues to evolve, Trust Fintech Limited will need to navigate the challenges and opportunities that come with such a dynamic market. For more detailed insights and a comprehensive analysis of Trust Fintech Limited's competitive position, interested readers can explore the resources provided.
Conclusion
In conclusion, Trust Fintech Limited's IPO presents a compelling opportunity for investors seeking to enter the fintech space. With a fresh issue aimed at raising ₹63.45 crores, the company is poised for expansion and technological upgrades. The IPO's price band of ₹95 to ₹101 per share and the minimum lot size of 1200 shares make it accessible for retail investors. The company's strong fundamentals, including a rebound in revenue and impressive profitability growth, underscore its potential. However, investors should consider the inherent risks and conduct due diligence, keeping in mind the competitive nature of the BFSI solutions segment. As Trust Fintech Limited charts its course towards a promising future, the IPO could be a gateway for investors to be part of the company's growth trajectory.
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Disclaimer: This is not an investment advisory. The article above is for information purposes only. Investments in the securities market are subject to market risks, read all the related documents carefully before investing. Please consider your specific investment requirements, risk tolerance, goal, time frame, risk and reward balance, and the cost associated with the investment before choosing securities, that suit your needs. The performance and returns of any equity stock can neither be predicted nor guaranteed.
FAQs
Q: What is an IPO?
An Initial Public Offering (IPO) is the process by which a privately held company offers its shares to the public for the first time. It allows the company to raise capital by selling shares to investors and get listed on a stock exchange.
Q: How can I apply for an IPO?
To apply for an IPO, follow these steps:
Open a Demat account with a registered Depository Participant (DP).
Choose the IPO you want to apply for.
Fill out the IPO application form through your broker or online platform.
Specify the number of shares you wish to apply for and the price range (if it’s a book-building issue).
Q: What is ASBA (Application Supported by Blocked Amount)?
ASBA is a payment method for IPOs where the bid amount is blocked in your bank account until the allotment process is complete. It ensures that you have sufficient funds to cover the shares you applied for.
Q: Can I make payments through UPI for an IPO?
Yes, you can use the Unified Payments Interface (UPI) to apply for an IPO. Many banks and brokers allow UPI-based payments during the IPO application process. Make sure your UPI ID is linked to your bank account.
Q: What is the difference between a fixed price issue and a book-building issue?
Fixed Price Method: The company determines a fixed price for issuing shares, and investors know the exact price before the IPO.
Book Building Method: The company offers a price range, and investors bid within that range. The final price is determined after the bidding process.
Q: What is the difference between the floor price and cut-off price in a book-building issue?
Floor Price: The lowest price at which an investor can bid within the price range.
Cut-off Price: An option where investors bid at the highest price (or cap price) without specifying a bid amount. They receive the allotment at the final determined price.
Q: What does ‘DP name’ mean in an IPO online form?
DP Name: It refers to the name of your Depository Participant (DP) with whom you hold your Demat account. You need to provide this information while applying for an IPO.
Q: What are the different investor categories in an IPO?
RII (Retail Individual Investor): Individual investors who apply for a small number of shares.
NII (Non-Institutional Investor): High-net-worth individuals, corporate bodies, and trusts.
QIB (Qualified Institutional Buyer): Institutional investors like mutual funds, banks, and foreign institutional investors.
Anchor Investors: Institutional investors who invest before the IPO opens for subscription.
Q: How is the allotment process done in an IPO?
The allotment process considers various factors, including investor categories, oversubscription, and the price at which bids are placed. The final allotment is based on demand and availability of shares.
Q: What happens if I don’t get the full allotment of shares in an IPO?
If the number of allotted shares is less than what you applied for, the excess funds are refunded to your bank account. You’ll receive the allotted shares, and any remaining funds will be returned.