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30 November 2023

Canarys Automations IPO: Bridging IT Solutions and Water Resource Management

Introduction:

Canarys Automations IPO, a book-built issue of Rs 47.03 crores, offers a fresh perspective in the market with 151.72 lakh shares. The bidding phase spanned from September 27, 2023, to October 3, 2023. Final allotments were concluded on October 6, 2023, and the shares found their place on the NSE SME on October 11, 2023.

Pricing Dynamics:

Priced between ₹29 to ₹31 per share, the IPO caters to a diverse investor profile. The minimum lot size for retail investors was 4000 shares, entailing a minimum investment of ₹124,000. High Net Worth Individuals (HNIs) had a minimum lot size investment of 2 lots (8000 shares), totaling ₹248,000.

Market Performance Glimpse:

As of November 17, 2023, Canarys Automations Ltd (CANARYS) was trading at ₹42.25, witnessing an impressive surge of 11.18%. The stock opened at ₹39.55, fluctuating between ₹44.00 and ₹39.00. The previous close was ₹38.00, with a total traded value of 8,80,000. Over the last 52 weeks, the stock reached a high of ₹44.00 and a low of ₹39.00.

IPO Configuration:

The IPO boasted a total issue size of 3,456,000 shares, accumulating up to ₹25.92 crores. The face value per share was ₹10, and the listing occurred on NSE SME.

Key IPO Features:

The IPO, conducted from September 27, 2023, to October 3, 2023, presented a face value of ₹2 per share. The listing occurred on October 11, 2023, with a total issue size of 15,172,000 shares, aggregating up to ₹47.03 crores. It was a Book Built Issue and got listed on NSE SME.

Ownership Transformation:

Pre-IPO, Canarys Automations Ltd held 41,011,920 shares, which increased to 56,183,920 post-issue. The IPO included a market maker portion of 760,000 shares handled by Alacrity Securities.

Investor Allocation:

The IPO was divided into categories, with 14,656,000 shares on offer. This included 3,232,000 (22.05%) for Anchor Investors, 760,000 (5.19%) for Market Makers, 2,880,000 (19.65%) for Qualified Institutional Buyers (QIBs), 2,736,000 (18.67%) for Non-Institutional Investors (NIIs), and 5,048,000 (34.44%) for Retail Individual Investors (RIIs).

Insights into Anchor Investments:

Canarys Automations IPO raised Rs 10.02 crore from anchor investors, with the anchor lock-in period ending for 50% shares on November 21, 2023, and the remaining 50% on February 15, 2024.

IPO's Chronology:

The IPO unfolded as follows:

- IPO Open Date: Wednesday, September 27, 2023
- IPO Close Date: Tuesday, October 3, 2023
- Basis of Allotment: Friday, October 6, 2023
- Initiation of Refunds: Monday, October 9, 2023
- Credit of Shares to Demat: Tuesday, October 10, 2023
- Listing Date: Wednesday, October 11, 2023
- Cut-off time for UPI mandate confirmation: 5 PM on October 3, 2023

Lot Size Considerations

Investors could bid for a minimum of 4000 shares and multiples thereof. The table below illustrates the investment parameters for retail investors and HNIs:

Application	Lots	Shares	Amount
Retail (Min)	1	4000	₹124,000
Retail (Max)	1	4000	₹124,000
HNI (Min)	2	8000	₹248,000

Promoter Holdings Shift:

Promoters, including Mr. Metikurke Ramaswamy Raman Subbarao, Mr. Danavadi Krishnamurthy Arun, Mr. Raghu Chandrashekhariah, Mr. Sheshadri Yedavanahalli Srinivas, Mr. Pushparaj Shetty, and Mr. Nagaraju Vineeth, saw their shareholding reduce from 77.49% to the post-issue percentage.

Company Overview:

Incorporated in 1991, Canarys Automations Ltd is a niche player in IT automation solutions and water resource management. Its IT solutions encompass Digitalization, Modernization, Cloudification, Automation, Transformation, and Intelligence. The company also provides Water Resource Management Solutions, offering automation solutions for irrigation water conservation and cloud-based water utilization process automation.

Financial Health:

As of March 31, 2023, the company reported assets worth ₹6,377.89 lakhs, revenue of ₹7,547.28 lakhs, and a net profit of ₹852.51 lakhs. Canarys Automations Ltd has shown steady growth in its financials. The market cap stands at ₹174.17 crores, with a Post P/E (x) of 20.39. The Earnings Per Share (EPS) is ₹3.92, and the Return on Net Worth (RoNW) is 31.64%.

IPO Objectives:

The net proceeds from the IPO are earmarked for:

1. Funding solutions development for digital transformation and water resource management.
2. Establishing a new delivery center and upgrading existing facilities.
3. Catering to working capital requirements.
4. General corporate purposes.

Expert Commentary:

suggests that while the issue appears fully priced, the company's niche in IT automation solutions and its steady growth, especially in FY23, make it a viable consideration for medium to long-term rewards.

In Conclusion:

With a subscription rate of 9.94 times, the Canarys Automations IPO reflects considerable market interest. The company's dual focus on IT automation and water resource management places it strategically in sectors with evolving needs. Investors are advised to conduct thorough due diligence, considering the company's financial trajectory and its unique positioning in niche markets. Seeking advice from financial experts can provide valuable insights, aiding investors in making well-informed decisions aligned with their financial objectives.

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