Data Analytics Company Traxcn Technologies Joins The Great Indian IPO Rush: Here Are The Key Facts

Traxcn Technologies Limited is a global market intelligence provider for private company data and ranks among the top five companies in terms of numbers of companies profiled. It recently filed for an Initial Public Offering (IPO) as a way for existing investors to monetise their stakes. The company will not receive any money from the IPO.

Business Profile

Traxcn operates a subscription-based software-as-a-service (SaaS) platform that provides users with profiles of private market companies and other related data. The data is usually used for investment decisions, merger and acquisition decisions, deal sourcing, partner selection, purchase decisions etc.

In order to differentiate itself from other providers, the company has been focused on increasing the number of profiled entities. The number of entities profiled on its platform has reportedly increased at a compounded annual growth rate (CAGR) of 56.85 per cent, from over 540,000 as of 31 March 2019 to over 1.30 million, as of 31 March 2021. The company claims to have added, on average, information related to 1,624 new entities across various sectors on a daily basis in 2021.

Traxcn uses proprietary software to collect, organise and analyse data with human analysts overseeing the process. The data collected includes competitor details, number of employees, global equivalents, funding details, transactions undertaken, acquisitions made, team size, current valuations, etc. It acts as a one-stop-shop for the data needs of corporates and investment funds.

The company had 855 customer accounts from over 50 countries as of 31 March 2021. The customer base has increased at a CAGR of 34.7 per cent in the last three fiscals, from 471 customer accounts as of 31 March 2019 to 855 customer accounts as of 31 March 2021.

Some of these customer accounts include corporates like Yamaha, Lixil, Wipro and Unilever. The customer base also includes venture capital funds like Accel Management India Limited, Kae Capital Management, Elevation Capital, among others. Customer retention rates have increased from 67 per cent to 74 per cent from FY19 to FY21.

Financials

Tracxn’s revenues have grown at 15 per cent from Rs 33 crore in FY19 to Rs 43 crore in FY21. This is despite its customer accounts growing at a CAGR of almost 35 per cent each year. Therefore, Traxcn might be getting into lower-value transactions. The company has reported net losses in FY20 and FY21 in the past due to higher expenditure for expansions and provisions for accounting of compulsorily convertible preference shares. The company has also been burning cash for the past three years.

However, as the company’s costs are fixed in nature, the company can continue scaling without having to continuously invest in fixed assets. The company’s greatest competitive advantage is in lower costs. According to the company, its employee costs are one-tenth of the employee costs in the USA. Therefore, the company would find it easier to compete at a lower cost and undercut its competitors based in other countries.

Key Risks

Competition

The company faces competition from larger players that have a larger repository of data and often bundle services or offer services at zero margins to capture customers. The company must constantly innovate to keep up with the global competition.

Increase in Employees

Like other software companies, Tracxn’s greatest advantage lies in its ability to hire employees at a much lower rate than its competitors operating in other countries. Employee costs also form the largest cost in the industry, and higher employee costs would immediately impact its margins.

Foreign Exchange Rate Fluctuations:

The company derives a majority of its revenues from outside India. Any adverse movements in currency prices can impact the company negatively.