IPO

ESDS Software Solution (ESDS) is an AI-enabled provider of cloud, managed services, data centre infrastructure and software solutions in India. The company offers an end-to-end portfolio comprising infrastructure-as-a-service (IaaS), managed services and software-as-a-service (SaaS), serving customers across BFSI, Government and enterprise segments. In Fiscal 2026, the company served 2,501 customers and reported revenue from operations of Rs 472.21 crore.

ESDS IaaS portfolio includes co-location and data centre services, public, private, virtual private, hybrid and community cloud solutions, and GPU-as-a-service (GPUaaS). It operates five tier 3 data centres across India, covering over 75,266 sq. ft., supported by redundant power, disaster recovery infrastructure and 24/7 services. The company has data centres in Airoli, Bengaluru, Nashik, Noida, and Mohali. It is also in the process of establishing proposed data centres in Kolkata and Sahibabad.

ESDS managed services include cloud and data centre management, cyber security, IT infrastructure and network management, backup and disaster recovery, database management and DevOps services.

ESDS also develops proprietary technology solutions, including SWARAJ Cloud, its patented cloud autoscaling technology, which has been further developed into an AI-enabled cloud platform focused on data sovereignty, scalability, security, compliance and AI capabilities. Its SaaS portfolio includes data centre management tools, vulnerability scanners, web access firewalls, VPN solutions and AI-powered GPU monitoring solutions.

In March 2026, ESDS entered into a strategic AI cloud infrastructure agreement with an Australia-based neocloud AI compute service provider. The agreement has an initial term of five years, with an option to extend it by a further two years, taking the total potential contract period to seven years. The agreement has an aggregate total contract value of US$1,250 million. Revenue generation under the agreement is expected to commence in the third quarter of FY2027.

The company's operations are supported by 993 employees as of June 30, 2026, across data centre operations, cloud infrastructure, security management, R&D, sales, service delivery and other functions.

Object of the offer

The IPO is entirely a fresh issue of shares worth Rs 720 crore. At upper price band of Rs 429, the fresh issuance is of 1,58,50,816 shares. There is no offer for sale (OFS) component.

The funds raised to the tune of Rs 576 crore will be used towards purchase and installation of cloud computing and other equipment and infrastructure for data centres and the balance to be used for general corporate purposes.

Strengths

Leading player offering end-to-end cloud, managed services, data centre infrastructure and software solutions in India.

The company's comprehensive Security-as-a-Service (SECaaS) framework enables businesses to proactively manage threats and achieve robust security and compliance objectives.

ESDS has long-term relationships with over 100 banks and well-established businesses, including STPI. The company has been able to steadily increase the ageing of its customer relationships, with customers having a relationship of more than three years rising from 49.28% to 65.60%, and those with a relationship of more than five years increasing from 23.25% to 47.75% from Fiscal 2024 to Fiscal 2026.

Strong government partnerships and policy advocacy.

ESDS holds commercial patents for its SWARAJ software, which intelligently identifies customer requirements and applies vertical and diagonal scaling technologies, which enable dynamic resource allocation for cost-effective and efficient cloud performance.

The company is led by Piyush Prakashchandra Somani, Promoter who has more than 20 years of experience in information technology sector, and is supported by an experienced management team and board who bring a diverse blend of domain expertise, technological proficiency, product innovation, and regulatory acumen.

Weaknesses

Failure to innovate in response to new technological changes and technological innovations, or adapt to technological developments or evolving industry standards may affect future business prospects and financial performance.

The company derived around 27.4% of its revenues from government entities. Changes in government policies or budgetary allocations or its ability to satisfy eligibility and selection criteria in relation to outsourcing of service may affect the results of operations and cash flows.

The top 10 and the top five customers contributed 34.9% and 45.4% to the revenue in FY2026, respectively, which exposes ESDS to significant revenue risk in the event of non-continuation of contract with any of the top 10 customers.

The company is likely to witness increased competition from data centre operators and hyper scalars. High competition from the existing and upcoming data centres is likely to have an adverse impact on the off-take price and off- take velocity.

The business is subject to evolving laws regarding privacy, data protection, cyber security and other related matters. Many of these laws are subject to change and could result in claims, changes in business practices, monetary penalties, increased cost of operations, or declines in customer growth or engagement.

Protests by local residents and activists against the opening of new data centres in India could adversely affect the company's ability to open new data centres. Further, such protests, whether or not directed specifically at the company or its projects, may adversely affect the reputation and brand of the company, and could adversely affect its relationships with regulators, customers, business partners, employees and other stakeholder.

The loss of, or the inability to hire, retain, train, and motivate qualified personnel could affect operations.

Valuation

Consolidated sales were up by 30.7% to Rs 472.21 crore in Fiscal 2026. Increase in revenues was primarily due to increase in contribution from managed services from both existing and new customers. Operating profit margin (OPM) expanded from 42.86% to 49.60%, leading to a 51.2% increase in operating profit to Rs 234.23 crore. Other income declined 51.2% to Rs 8.44 crore. Interest cost declined 53.3% to Rs 11.79 crore and depreciation cost inclined by 2.0% to Rs 63.46 crore. PBT inclined 102.7% to Rs 167.42 crore. PAT increased by 117.3% to Rs 120.82 crore in FY2026 when compared to Rs 55.61 crore in FY2025. Tax expense was Rs 46.60 crroe when compared to Rs 26.98 crore in FY2025.

At the higher price band of Rs 429, the offer is made at a P/E of 40.85 times FY2026EPS (of Rs 10.5).

Close listed peers E2E Networks is an AI-focused hyper scale cloud platform, offering advanced cloud GPUs and a comprehensive ecosystem of cloud technologies designed for the development and deployment of AI/ML applications and trades at 405 times P/TTM Eps. Persistent System which offers comprehensive multi-cloud environment management, hybrid infrastructure operations, and legacy IT modernization trades at 44.6 times its P/ TTM EPS, Coforge which focuses on cloud consulting, automated cloud-native pipelines, and resilient infrastructure management solutions trades at 43.5 times its P/ TTM EPS, Happiest Minds Technologies which builds digital-native, secure cloud infrastructure and provides ongoing infrastructure management services trades at 29.1 times its P/ TTM EPS and Orient Technologies which focuses on scaling core IT infrastructure, cyber security, and high-margin data centre and cloud solution trades at 29.1 times its P/ TTM EPS. The OPM and ROE stood at 49.6% and 25.1%, respectively, in FY26. These were 64% and -.95% for E2E Networks, 19% and 44.6% for Persistent Systems, 18.0% and 43.9% for Coforge, 17.0% and 29.1% for Happiest Minds Technologies and 4.8% and 53.3% for Orient Technologies, respectively.