Human resource management software firm Info-Tech will offer 24.86 million shares at 87 cents apiece at its initial public offering (IPO).
Of the total amount of offering shares, 19.86 million will be offered to selected investors outside the US including institutional and other investors in Singapore under Regulation S of the US Securities Act 1933.
The remaining 5 million shares will go to the public.
Oversea-Chinese Banking Corporation (OCBC) is the sole issue manager and global coordinator for this proposed IPO. The bank, together with CGS International Securities Singapore (CGSI), are the joint bookrunners and underwriters.
Peter Lee, co-founder of Info-Tech, has granted the IPO’s joint bookrunners and underwriters an over-allotment option exercisable by CGS International Securities Singapore to buy up to 4.9 million additional shares representing 19.7% of the total offer shares.
Separate from the offering, each of the IPO’s cornerstone investors have entered into cornerstone agreements to subscribe to a total of 41.14 million shares. Of these shares, 27.35 million shares will be newly issued by Info-Tech while 13.79 million shares will be sold by Lee at 87 cents each.
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The cornerstone investors are Asdew Acquisitions, Avanda Investment Management, Dymon Asia Multi-Strategy Investment Master Fund (DAMSIMF), Ginkgo-AGT Global Growth Fund, Lion Global Investors, Maybank Asset Management, Nikko Asset Management Asia, Qilin Wealth Fund and Splendid Asia Macro Fund. Avanda Investments is the fund of former Singapore presidential candidate Ng Kok Song, and Qilin is the family office of Lim Chap Huat, executive chairman of Soilbuild.
The base deal size was $57.4 million but the total deal was upsized to $61.7 million following the overallotment of 4.9 million shares.
As Info-Tech’s post-offering share capital will come up to 258 million shares at 87 cents each, the company’s market capitalisation will be around $224.5 million.
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The company expects to raise $23.4 million in net proceeds from the offering and the issue of the cornerstone shares. The sum will be used for the research and development of new product lines and promotional activities. The amount will also go towards sales and marketing activities for the company’s existing markets and product lines.
The IPO will close at 12pm on July 2. Trading of Info-Tech’s shares is expected to commence on a “ready” basis at 9am on July 4.
Business model
Info-Tech’s main product line is a proprietary cloud based one-stop HRMS solution that helps organisations streamline their processes, improve efficiency and enhance workforce management. It comprises nine modules including Mobile Attendance, Time Attendance, Project Costing, Payroll, Leave Management, HR Software, Expense Claims, Performance Appraisal and E-Scheduling Software.
As at June 13, Info-Tech HRMS, which accounts for 78.7% of Info-Tech’s revenue, has 850,000 active users in 23,000 organisations.
A second product, the Accounting Software is fully integrated with its Info-Tech HRMS, and allows for streamlined processes, improved data accuracy, and enhanced reporting capabilities and has established a growing customer base of over 1,000 organisations.
The Group’s solutions are tailored for SMEs with the required scalability to accommodate fast growing businesses.
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During a media briefing on June 27, CEO and co-founder Babu Dilip said Info-Tech offers the most comprehensive solution because its HRMS comprises many modules. “We have a complete, comprehensive solution, providing first class service to the customer. This makes customers sticky and happy. Our retention rate is 91%,” he says.
Customers are mainly SMEs, some of which have headcounts as low as 40-50. The company’s HRMS customer acquisition rate is growing at 19% Cagr over three years, Dilip adds.
“As at December last year, we had a cash balance of $30 million, with a clean balance sheet, and no loans. We have a dividend policy of a 50% payout ratio for next two years,” Dilip says. The prospectus states that the company will pay a dividend based on a 50% payout ratio for the period from the listing date which is July 4 to Dec 31. In FY2024, the company reported a net profit of $12.34 million.
“Our customer service is very important. If the SMEs need help they can call the support helpdesk. Once a customer is onboarded, two people dedicated to supporting each customer. This means our support staff know customers’ history and can resolve the problem,” Dilip points out.
“As a Software as a Service company, we operate an asset-light, people-driven company where functions like R&D and customer support are crucial,” he adds.
Info-Tech’s competitive advantage compared to the big boys such as Salesforce, Oracle or SAP, is the low cost Info-Tech HRMS. SMEs can apply for the Productivity Solutions Grant to defray the cost of the HRMS in the first year by around 50%. In the second year, the charge is around $2 per employee per month. Hence a 40-50 headcount SME would be paying just $80 to $100 a month.
This makes Info-Tech’s product much cheaper than some of the big boys who charge around US$100,000.
“The product is inexpensive for the user,” notes Charlie Chan, who manages Splendid Asia Macro Fund, which is one of the nine cornerstones for the IPO.
Since Info-Tech is a subscription-based service, subscriptions provide stable cash flows for the company. Nonetheless, Dilip says the company’s growth has been fuelled by customer acquisitions. “Number one in our business model and the most important thing is customer acquisition,” he says. The company started in Singapore in 2007, and expanded its product distribution to Malaysia, India and more latterly Hong Kong.
The company also moved its customer support to Malaysia, and R&D to India to optimise its cost structure. “For revenue, Singapore is our largest and most dominant market, contributing 75% to 80% of total group revenue. The HRMS solution contributed 80% to group revenue."
As a small company, Info-Tech is a lot more nimble than the big boys. “Our products are comprehensive as compared to our competitors. Secondly, our after sales service is first class, with dedicated support to customers. Number three, we are innovative. We always innovate, learn, improve, enhance our system,” Dilip recounts.
“If you compare the global players, their systems need a lot of customisation, a lot of settings, and this requires a lot of time to implement. It could take up to six months to one year. SMEs need a simple, easy, user-friendly system, at an affordable price. [Ours] is plug and play with no need for customisation,” Dilip says
Valuation
On valuation, Dilip acknowledges he could have gotten better valuations on Nasdaq or even in Malaysia. “Our idea here is not only valuation. We wanted value for our company. We want our company to carry the Singapore brand which stands for stability, the rule of law, and sound regulation,” Dilip says.
The price-to-earnings ratio on listing is likely to be around 18x based on the historic earnings per share of 4.8 cents in FY2024.
According to OCBC, the 87 cents IPO price was arrived at after the pre-marketing process, the cornerstone process, then, based on the book (as in book building), a price was agreed upon. The IPO’s 18x PER compares with Salesforce’s forward PER of 21x and Oracle’s forward PER of 31x as at June 26.
Info-Tech is the first mainboard IPO after Digital Core REIT in December 2021, and the first non-REIT IPO since Aztech Group in March 2021.
