ESDS Software Solution, a recent market debutant, has delivered exceptional returns to investors, achieving 'multibagger' status within just two trading sessions. The stock's rapid appreciation has caught the attention of brokerage firm Choice Institutional Equities, which has initiated coverage with a 'Buy' rating, forecasting a significant 42% upside from current levels.
Rapid Listing Gains for ESDS Software
The company's shares were listed on Friday at Rs 757 on the National Stock Exchange (NSE), representing a substantial 76.46% premium over its issue price of Rs 429. Following strong post-listing buying interest, the stock closed its first trading session at Rs 908.40, marking an impressive 111.75% gain.
The momentum continued into its second trading session on Monday, where ESDS Software hit a 20% upper circuit at Rs 1,090.05. This surge propelled its total gains to 155% above the initial public offering (IPO) price in just two sessions, solidifying its multibagger status.
Why Analysts See Continued Growth
Choice Institutional Equities believes ESDS Software is strategically positioned to capitalize on India's expanding cloud and artificial intelligence (AI) infrastructure market. The brokerage highlights that India's cloud market is projected to grow at a compound annual growth rate (CAGR) of 23.6%, from Rs 65,100 crore to Rs 1.9 lakh crore by FY30. This growth is primarily driven by enterprise digitization, increasing demand from Banking, Financial Services, and Insurance (BFSI) sectors, and rising government workloads.
The firm also noted that growing data residency and compliance requirements are expected to bolster domestic infrastructure providers like ESDS, which serves a diverse client base across enterprise, government, and BFSI segments. Furthermore, India’s cloud GPU market is anticipated to expand at approximately a 50% CAGR through FY30, creating significant opportunities for ESDS in GPU-as-a-Service (GPUaaS), GPU colocation, and AI-led managed infrastructure.
Strategic Partnerships and Financial Outlook
ESDS's integrated approach, spanning cloud, colocation, GPUaaS, managed services, and Software-as-a-Service (SaaS), is reportedly strengthening customer relationships. Choice's report indicates that the proportion of customers utilizing all three core services increased from 62% in FY24 to 89% in FY26, with a strong revenue retention rate of 94.9%.
The company has also demonstrated robust financial performance, with EBITDA margins improving from 35.6% to 49.6% and Return on Capital Employed (ROCE) rising from 14.5% to 32.8% between FY24 and FY26, partly attributed to its proprietary SWARAJ technology. ESDS currently serves 115 BFSI institutions and 104 government clients.
A key trigger identified by Choice is ESDS's $1.25 billion AI infrastructure contract with Sharon AI. The brokerage projects a significant revenue increase from Rs 470 crore in FY26 to Rs 2,260 crore in FY27E and Rs 4,580 crore in FY28E, supported by the planned deployment of approximately 8,208 NVIDIA B300 GPUs. ESDS plans a capital expenditure of Rs 570 crore, with about 70% front-loaded in FY27E. Choice anticipates revenue, EBITDA, and PAT to grow at CAGRs of 120.9%, 72.6%, and 81.3%, respectively, over FY26-29E.
Risks and Target Price
Choice Institutional Equities maintains a 'Buy' rating on ESDS Software, setting a target price of Rs 1,550 per share. This target implies a 42% upside potential from Monday's closing levels. While additional AI wins and broader workload migration could further support growth, the brokerage also highlighted key risks, including execution challenges, customer concentration, capital expenditure intensity, and competitive pressures.