Fortune Scrip     

Published: November 15, 2024
Updated: November 15, 2024

Orient Technologies Solutions

Market Newbie With Huge Potential

This fortnight, we have picked Orient Technologies Solutions as the Fortune Scrip. The company entered the capital market just four months ago – August 21, 2024, to be exact. Its IPO shares were offered at a price of Rs 206, opened at a 47 per cent premium at Rs 302, and are currently quoted around Rs 456.

This multibagger IT company, which commenced operations in 1997, did not take much time in gaining a strong domestic reputation, primarily on account of the quality of its products and services. Its business involves technologically advanced solutions via collaborations with a diverse range of technology partners, including Dell, Fortinet and Nutanix. These partnerships have enhanced the company’s ability to design and innovate products as well as deliver services tailored to specific customer needs.

The company’s IT offerings are broadly categorised into IT products and IT services, covering a wide range of application areas, including (a) IT infrastructure, (b) IT enabled services (ITeS), and (c) Cloud and Data management services.

CORE SEGMENT

(a) IT infrastructure: The segment with the longest operational history, it has been the company’s largest revenue generator. Orient Tech has significantly expanded its offerings within this segment and continuously introduces new products such as CrowdStrike, Forcepoint and Netskope, which were added to the cyber-security solutions portfolio.

(b) ITeS: These managed services involve monitoring maintenance and support of IT systems as well as back-up and disaster recovery services.

(b1) Multi-vendor support services: These services provide hardware and software support through annual maintenance contracts encompassing trouble-shooting, repair and maintenance for devices and systems from various vendors.

(b2) IT facility management services: These include both on-site and remote support for system administration, storage administration, cloud administration and network administration, network operations centre services, and securities services and renewals.

(c) Cloud and data management services: These include a range of offerings designed to optimise and manage IT resources.

Orient Tech serves a diverse range of customers across various industries. Its customer base includes entities across both public and private sectors, BFSI information technology, and healthcare/ pharmaceuticals.

PROFIT SOARS

The company has made rapid strides on the financial front. During the last four years, its sales turnover has expanded two and a half times – from Rs 247 crore in fiscal 2021 to Rs 603 crore in fiscal 2024, with operating profit shooting up 19 times – from Rs 3 crore to Rs 57 crore, and the profit at net level spurting 41 times — from nil to Rs 41 crore.

But we have not picked Orient Technologies as the Fortune Scrip because of its enviable performance so far. We strongly feel that going ahead, the company will do even better and will get a place among the leading IT multibagger private entities. Consider:

• The ITeS industry is on a fast growth track. During fiscal 2024, the volume recovery in the healthcare and government sectors supported this industry, which led to a growth of 6-8% and revenues of Rs 360-365 billion. In the current year (FY2025), sectoral volumes are expected to be driven by the BFSI (banking, financial services and insurance) and telecom sectors, leading to a growth rate of 6-8% as the CRM (customer relationship management) volumes will shoot up. It is estimated that the domestic revenues of ITeS companies will grow at a CAGR of 6-8% between FY24 and FY27 — driven by a spurt in volumes due to digitization — to reach approximately Rs 430-460 billion by FY27. Orient, being a leading ITeS company, is expected to benefit substantially on account of this growth of the industry.

RECORD EXPORTS

• The ITeS industry is doing well on the export front and its growth prospects going ahead are all the more promising. For the current fiscal (FY25), export revenues are expected to rise 6-8%, bringing the total export revenues to $ 46-48 billion. During the last four quarters, ITeS companies have seen record order wins. As a result, from FY24 to FY27, exports are projected to grow at a CAGR of 6-8%, fuelled by user demand for knowledge services like analytics and robotic process automation.
• Orient Tech has during the last 25 years built a solid domestic reputation for high-quality products and services. Its growth is significantly driven by its ability to customise solutions to meet specific customer needs. Little wonder, the company has developed a marquee customer base across diverse customer industries. Its clients include prominent organisations like Coal India, Mazagon Dock, D. Décor, Jyothy Laboratories, ACG Integreon, Bluechip, Tradebulls, NJS Bank, VKS Bank, and Joint Commissioner of Sales Tax (GST)-Mumbai.

KEY CLIENTS

• In terms of revenue, the top 10 customers contributed Rs 2,299 million in FY24, which accounts for 38.11% of the company’s total revenue. The consistent and substantial revenue contributions from these key customers showcases the company’s strong market position, high-quality service and the trust it has earned from its clientele.
• The company is financially strong, with reserves at the end of March 2024 standing at Rs 266 crore – almost five times its equity capital of Rs 42 crore. Its debt is negligible at Rs. 8 crore for the year ended March 2024, with its interest burden being just Rs. 2 crore. Orient Tech’s shares, which were offered at Rs 206 in August 2024, are now quoted over Rs 450 (face value Rs 10). Discerning investors need to have this stock in their portfolios as the chances of further appreciation are high.