ESDS Software Shares Plunge Amid Surveillance
ESDS Software Solution Ltd. has seen its shares extend their fall, hitting a 5% lower circuit for the third consecutive session. The stock, which debuted as a multibagger earlier this month, is now trading at ₹1,586.35 on the BSE.
In response to unusual price movements and heightened volatility, both the BSE and NSE have placed ESDS Software under their long-term Additional Surveillance Measure (ASM) framework. This move aims to alert investors to potential risks.
From Multibagger to Decline: A Rapid Turnaround
Since its market debut on September 4, ESDS Software had surged significantly, delivering a 269.78% return from its initial public offering (IPO) price of ₹429 per share. This performance made it India's second-best new listing in terms of first-month returns, trailing only Paras Defence and Space Technologies Ltd.
ESDS focuses on data-center and artificial intelligence (AI) infrastructure, a sector with high growth potential. However, the recent sharp rally has prompted caution among some analysts.
Brokerage Issues 'Sell' Rating
Choice Institutional Equities has assigned a 'Sell' rating on ESDS, maintaining a target price of ₹1,550. The brokerage cited a less favorable near-term risk-reward profile, despite a constructive long-term view on the company's prospects.
According to Choice, ESDS reported in-line numbers for its core standalone business. However, a delay in the deployment of its Sharon AI project, pushing key AI-led revenue contributions from October to November, has increased near-term execution risk.
Q1 Performance and Future Outlook
For the June quarter, ESDS reported revenue of ₹133.6 crore, a 20.2% sequential decline but a 7.2% year-on-year (YoY) increase. EBITDA stood at ₹55.9 crore, down 45.5% sequentially but up 6.6% YoY. The EBITDA margin fell to 41.9% from 61.3% in the previous quarter, while profit after tax (PAT) was ₹29.2 crore, down 56.8% sequentially but up 13.8% YoY.
Despite near-term challenges, Choice remains positive on the long-term opportunities in sovereign cloud, AI infrastructure, and rising GPU demand. ESDS boasts a domestic order book of approximately ₹3,000 crore and an international pipeline exceeding 50,000 GPUs. However, the brokerage emphasized that pipeline conversion, deployment timelines, and utilization remain critical variables, noting that a sharp scale-up in GPU capacity could increase execution and funding requirements.