ESDS Software shares hit 5% lower circuit for sixth straight session; still up 217% from IPO price - BusinessToday

Shares of ESDS Software Solution Ltd extended their decline for the sixth straight session on Monday, falling another 5 per cent to Rs 1,360.15 on BSE. The stock, however, has delivered multibagger returns since its market debut last month.

BSE and NSE have placed ESDS Software under the long-term Additional Surveillance Measure (ASM) framework. Exchanges use the short-term and long-term ASM frameworks to alert investors to unusual price movements and heightened volatility.

The counter remains up 217.05 per cent from its initial public offering (IPO) price of Rs 429 apiece. ESDS, a data-centre and artificial intelligence (AI) infrastructure-focused company, was listed on September 4.

Amid the recent steep run-up, Choice Institutional Equities has assigned a 'Sell' rating on ESDS. The brokerage said the near-term risk-reward had become less favourable despite its constructive view on the company's longer-term opportunity.

"ESDS reported in-line numbers, with the core standalone business remaining stable. However, the delayed Sharon AI deployment pushes the key AI-led revenue contribution from October to November and increases near-term execution risk," Choice said.

The brokerage remains positive on the longer-term opportunity from sovereign cloud, AI infrastructure and rising GPU demand. It noted that ESDS has a domestic order book of around Rs 3,000 crore and an international pipeline exceeding 50,000 GPUs.

However, Choice highlighted pipeline conversion, deployment timelines, and utilisation as key variables. It also noted that the sharp scale-up in GPU capacity could increase execution and funding requirements.

ESDS reported revenue of Rs 133.6 crore for the June quarter, down 20.2 per cent sequentially but up 7.2 per cent year-on-year (YoY). EBITDA stood at Rs 55.9 crore, down 45.5 per cent sequentially, while up 6.6 per cent YoY.

EBITDA margin fell to 41.9 per cent from 61.3 per cent in the previous quarter, while profit after tax (PAT) stood at Rs 29.2 crore, down 56.8 per cent sequentially and up 13.8 per cent YoY.

Choice continues to value ESDS at 18 times its FY28 estimated EV/EBITDA. It retained its target price of Rs 1,550.