Virtual Galaxy Infotech Ltd. IPO: Key Details

Virtual Galaxy Infotech

• Virtual Galaxy Infotech is coming out with an initial public offering (IPO) of 65,70,000 equity shares in a price band Rs 135-142 per equity share.
• The issue will open on May 9, 2025 and will close on May 14, 2025.
• The shares will be listed on SME Platform of NSE.
• The face value of the share is Rs 10 and is priced 13.50 times of its face value on the lower side and 14.20 times on the higher side.
• Book running lead manager to the issue is Smart Horizon Capital Advisors.
• Compliance Officer for the issue is Anjali Vinay Padhye.

Profile of the company

Virtual Galaxy Infotech is a SaaS product focused company engaged in providing core banking software solution, IT solutions, ERP implementation and customized software solutions development, IT services for the BFSI, ERP, and E-Governance domains. It is primarily involved in the development, customization, installation, and implementation of software applications, along with comprehensive post-implementation support, monitoring, and maintenance services for the delivered solutions. To provide a seamless experience to its clients, it offers a range of essential allied services, ensuring that all software needs are met under one roof. Its wide range of offerings covers services including consultation, architecture, solution design, implementation, monitoring and managed services.

Founded in 1997 in Nagpur, the company has been delivering secure core banking solutions within a seamlessly integrated banking and financial ecosystem. Under the leadership of Avinash Narayanrao Shende and Sachin Purushottam Pande, it has built a diverse clientele including banks, microfinance institutions and non-banking financial companies (NBFCs). Its flagship product, E-Banker is a core banking solution designed specifically for banks, societies, and NBFCs. It is available “on-premises with infrastructure” i.e., it offers the flexibility to the customer to deploy E-Banker on their own premises with customized infrastructure.

Alternatively, it is also available as off-the-shelf banking software solution in a 'Software as a Service' (SaaS) model. This covers bundled solutions of software and hosting infrastructure on a rental basis for those preferring a hassle-free solution. In addition, it offers IBS-ERP, an ERP solution tailored for small and mid-sized enterprises, and e-APMC, an e-governance software developed for Agricultural Produce Market Committees (APMCs) and government organizations. Recently, it has expanded its product portfolio with V-Pay, a comprehensive enterprise digital payment solution, V-SOC, E-Autopsy Software, VGST and LOS (Loan Origination System / Module).

Proceed is being used for:

• Capital expenditure towards setting up additional development facility in Nagpur, Maharashtra
• Repayment/ prepayment of certain borrowings availed by the company
• Investment in procuring GPU, server & storage system at Data Centre
• Funding of expenditure related to enhancement, maintenance and upgrading existing products through manpower hiring
• Funding for business development and marketing activities 
• General corporate purpose

Industry Overview

The IT & BPM sector has become one of the most significant growth catalysts for the Indian economy, contributing significantly to the country’s GDP and public welfare. The IT industry accounted for 7.5% of India’s GDP in FY23, and it is expected to contribute 10% to India’s GDP by 2025. As innovative digital applications permeate sector after sector, India is now prepared for the next phase of growth in its IT revolution. India is viewed by the rest of the world as having one of the largest Internet user bases and the cheapest Internet rates, with 76 crore citizens now having access to the Internet. The current emphasis is on the production of significant economic value and citizen empowerment, thanks to a solid foundation of digital infrastructure and enhanced digital access provided by the Digital India Programme. India is one of the countries with the quickest pace of digital adoption. This was accomplished through a mix of government action, commercial innovation and investment, and new digital applications that are already improving and permeating a variety of activities and different forms of work, thus having a positive impact on the daily lives of citizens.

The Indian IT industry’s revenue touched $227 billion in FY22, a 15.5% YoY growth and was estimated to have touched $245 billion in FY23. The IT spending in India is estimated to record a double-digit growth of 11.1% in 2024, totalling $138.6 billion up from $124.7 billion last year. The Indian software product industry is expected to reach $100 billion by 2025. Indian companies are focusing on investing internationally to expand their global footprint and enhance their global delivery centres. The data annotation market in India stood at $250 million in FY20, of which the US market contributed 60% to the overall value. The market is expected to reach US$ 7 billion by 2030 due to accelerated domestic demand for AI.

The IT industry is likely to accelerate in the coming years, on the back of investments being made by various firms in key areas such as AI, GenAI implementation, Management Discussion and Analysis cost optimization, digital transformation, operational excellence, productivity improvement, customer experience programs, innovation in products and services, talent management, future of workplace and workforce, and ESG initiatives. A stable economy, the expansion of e-commerce, the upgrade of mobile networks to 4G and 5G, and the implementation of ‘Make in India’ and PLI Schemes are some of the elements that will contribute to the expansion of the IT industry in India. As digital transformation remains paramount for enterprises, IT spending is expected to remain healthy, which will provide IT companies opportunity to capture additional market share. 

Pros and strengths

One stop solution provider: The company provides a comprehensive one-stop solution for the banking and financial services sector, catering to the industry's needs with integrated software solutions. Its mission is to empower financial institutions with latest technology, streamlined processes, and strict compliance adherence, enhancing their operational efficiency and customer experience. Its core banking solution incorporates a wide range of functionalities, delivering a responsive and efficient platform for its clients. By integrating major functionalities, the company ensures that financial institutions can seamlessly manage their operations, meet regulatory requirements and offer exceptional service to their customers.

Diversified business across several verticals: The company’s clientele spans multiple domains, including BFSI, ERP, and E-Governance. Its clientele includes commercial bank, state cooperative banks, urban cooperative banks, district central cooperative banks, cooperative societies, NBFCs, Savings and Credit Cooperative Societies (SACCOs) under BFSI domain, various corporate clients under Sugar, Solvex, Textiles, Fertilizer & Seed, Education industry under ERP domain and under E-governance domain, it is serving to Maharashtra Labour Welfare Board and Maharashtra State Agricultural Marketing Board (MSAMB). 

Growing business through intellectual property capabilities: The company is committed to investing in the creation of new intellectual property, which has led to the development of several proprietary products. It holds copyrights for “E-Banker”, “LOS (Loan Originating System/Module)”, “IBS-ERP”, “VPAY (Web Version)”, “VPAY (Mobile Version)”, and “E-Autopsy Software”. In addition to copyrights, it has registered trademarks for its logos, including “VirtualGalaxy”, “E-Banker”, “eAPMC”, “VPAY”, “VIRTUALPAY”, and “V-Connect”. Its ongoing efforts in intellectual property development have resulted in value-added products and services. It plans to continue investing in this area to build systems that showcase its credibility and technical expertise. It aims to monetize its intellectual property by offering premium services and licensing its proprietary software solutions to customers.

Risks and concerns  

Substantial portion of revenues is dependent upon Core Banking software: A significant portion of its revenues is reliant on its Core Banking software, E-Banker. Potential loss of any major client utilizing E-Banker could have a material impact on its business operations and profitability. The loss of a significant clients would have a material effect on its financial results. The company’s revenue from E Banker for the period ended December 31, 2024, Fiscal 2024, Fiscal 2023 and Fiscal 2022, amounted to Rs 7,956.27 lakh, Rs 4,210.48 lakh, Rs 3,801.29 lakh and Rs 2,750.95 lakh constituting 78.58%, 68.50%, 65.00% and 64.54% respectively of its revenue from operations. It cannot assure that it can maintain the historical levels of business from these clients or that it will be able to replace these clients in case it loses any of them.

Geographical constrain: The company has derived a significant portion of its revenue from operations from customers located in Maharashtra region. The company has garnered 82.37%, 73.25% and 87.76% of its total revenue from the customers located in Maharashtra in FY24, FY23 and FY22, respectively. The concentration of its revenues from Maharashtra heightens its exposure to adverse developments related to competition, as well as economic, political, regulatory circumstances including on account of any on-going economic slowdown and inflationary trends. The existing and potential competitors to its businesses in India may increase their focus in the said region, which could reduce its market share. The occurrence of or its inability to effectively respond to, any such events or effectively manage the competition in the region, could have an adverse effect on its business, results of operations, financial condition, cash flows and future business prospects.

Revenues are dependent on clients concentrated in the BFSI segment: The company’s revenues are dependent on clients concentrated in the BFSI industry. During the period ended December 31, 2024, Fiscal 2024, Fiscal 2023 and Fiscal 2022, amounting to Rs 9,435.16 lakh, Rs 5,625.31 lakh, Rs 5,419.56 lakh and Rs 4,015.68 lakh constituting 93.19 %, 91.52%, 92.67% and 94.22% respectively of its revenue from BFSI segment. The performance of the BFSI industry depends on macroeconomic factors, and any downturn in the global economy could negatively affect its business, financial condition and results of operations. Further, due to the concentration of its clients in the BFSI sector, the success of its business also depends on its ability to innovate and develop relevant skills and capabilities to address the rapid technological developments in the BFSI sector and integrating new technologies in its products.

Outlook

Virtual Galaxy Infotech is an IT services and consulting firm based in Nagpur, Maharashtra. It delivers innovative software products and services across multiple sectors, including Banking and finance, ERP, e-government, Web Services, Cloud Computing, Big Data, IoT, and System Integration. On the concern side, the substantial portion of the company’s revenues has been dependent upon its Core Banking software i.e. E-Banker. The loss of any one or more of its major clients would have a material effect on its business operations and profitability. The company derives a significant portion of its revenue from customers located in Maharashtra. Any adverse developments in the region could adversely affect its business, results of operations, cash flows and financial condition.

The company is coming out with a maiden IPO of 65,70,000 equity shares of Rs 10 each. The issue has been offered in a price band of Rs 135-142 per equity share. The aggregate size of the offer is around Rs 88.70 crore to Rs 93.29 crore based on lower and upper price band respectively. On performance front, the revenue from operations has shown a growth of 5.10% from Rs 5,848.40 lakh in Fiscal 2023 to Rs 6,146.39 lakh in Fiscal 2024. This is mainly due to increase in revenue in overall business segments of the company. Moreover, the company reported a net profit of Rs 1,630.19 lakh in Fiscal 2024 as compared to a net profit of Rs 179.53 lakh in Fiscal 2023 which got increased due to higher revenue from operation at increased margins and reduction in operating expenses due to increased operational efficiency during the year.

The company aims to meet the growing demands of its existing customers while expanding its customer base by enhancing its geographical reach. Currently, it is serving customers in various state of India including Maharashtra, Goa, Mizoram, Uttar Pradesh, Telangana, Rajasthan, Manipur, Madhya Pradesh, Himachal Pradesh, Delhi etc. Expanding its presence into additional regions will allow it to tap into larger markets and gain direct access to clients, enabling a deeper understanding of their needs. In addition to its strong domestic presence, it is also focused on expanding its footprint in international markets. The company has identified Africa as a key growth market for its banking and fintech solutions. The company has already secured core banking orders in Tanzania and Malawi. The company intends to leverage these initial successes to expand its presence across other African countries, targeting both urban and rural financial institutions.