ESDS Software Solution Ltd.

ESDS Software Solution Limited

Incorporated in August 2005 and headquartered in Nashik, ESDS Software Solution Limited is an AI-enabled provider of cloud, managed services, data centre infrastructure and software solutions. It runs five Tier 3 data centres at Nashik, Navi Mumbai, Bengaluru, Mohali and Noida, together over 75,266 sq ft, with two more planned at Kolkata and Sahibabad. Revenue splits into infrastructure as a service at 43.88% of FY26 revenue, managed services at 41.21% and software as a service at 14.91%. It served 2,501 customers in FY26 across BFSI, government and enterprises, and its SWARAJ Cloud autoscaling technology is patented in India and the United States. It is promoted by Piyush Prakashchandra Somani, Komal Piyush Somani and the P.O. Somani Family Trust, who together hold 45.86% pre-issue.

DRHP filed: March 30, 2025

RHP filed: August 24, 2026

IPO open & close: 28 August 2026 to 1 September 2026 (anchor book 27 August 2026)

Price band: INR 408 to INR 429 per share; face value INR 1; lot size 34 shares

Issue structure: Fresh issue of INR 720 cr; no offer for sale. Made under Regulation 6(1), so QIB 50%, NII 15%, retail 35%

Listing date (tentative): 4 September 2026 (BSE and NSE)

BRLM: DAM Capital Advisors Limited and Systematix Corporate Services Limited

Auditor: M S K C & Associates LLP, Chartered Accountants (previous auditor: Shah Khandelwal Jain & Associates)

Disclaimer. Delta Partners (public market division under Dexter Capital) is not a SEBI registered Investment Advisor and this report does not constitute a recommendation but is only prepared for educational purposes. We (our team members including our directors) may or may not apply to IPO.

This note is not reviewed by our CIO, Devendra Agrawal, CFA. It is prepared by our team of Investment Analysts, and is reviewed by our senior team members. Any questions related to the IPO can be directed to shubham@deltainvest.in and we will come back.

We at Delta Partners continue to analyse many businesses and IPOs.

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As of 1^st September the GMP for the issue is around 59%, and the IPO was subscribed 2.1 times on the first day. At the upper band of INR 429 the market capitalisation is around INR 5,028 crore, and enterprise value, after excluding from cash the customer advance explained below, is around INR 5,050 crore. That puts the listing at 21.5x EV/EBITDA, 10.7x sales and 42x earnings, which looks full for a company where most of the recent growth has come from managed services, a lower-quality line that involves managing someone else's cloud, security, network, backup, database or DevOps, and which compounded at 58.4% over two years. The infrastructure business, covering cloud computing and data centre services, was flat in FY26 and has compounded at 20.7% over the same period. After going through various news pieces and podcasts we have lower confidence in the senior management. The USD 1.26 billion contract rests on a very weak base and depends heavily on several third parties (who themselves have not yet demonstrated any significant execution). Given these issues we would skip the business.

● The single most important number in this offer document is not in the profit and loss account. A subsidiary, SPOCHUB Solutions Private Limited, has signed a GPU-as-a-Service contract with an enterprise customer incorporated outside India, and has received an advance of INR 1,176.64 crore against it. That advance is 2.49 times FY26 revenue. It sits in cash on the asset side and in other current liabilities on the other, and the RHP states it will be amortized only after the go-live date under the contract. Neither the customer nor the contract value is disclosed.

● In May 2025 the promoter bought 1% of SPOCHUB from ESDS for ₹2,000. SPOCHUB had 0 revenue as of March 2025. By March 2026 it reported profit after tax of ₹53.96 crore and net worth of ₹54.21 crore. SPOCHUB is also the entity holding the customer advance of roughly $125 million received by the group.

● The RHP carries multiple ratings where Acuité and CRISIL have marked ESDS as issuer not cooperating, with the agencies recording that the company did not share information with them. Acuité downgraded the long term rating in December 2023 and downgraded it again in March 2025.

● The $1.26 billion number is presented as a contract won, which is not what it is. It is future cash outflow from ESDS to Sharon AI. The corresponding inflow to ESDS is not disclosed anywhere. There is no timeline, no named counterparty on the revenue side and no quantification of what the company expects to earn from the arrangement.

● Although mentioned nowhere in the RHP but through regulatory filings of an Australian, called Sharon AI neocloud company, it can be found out that this $1.26 billion is what is supposed to be the payable over next 5 years to Sharon in return for renting ~8200 B300 for 5 years. As per the filings, This contract can be further extended by 2 years incase required

● On 31 March 2026, the last day of its fiscal year, ESDS signed a Master Services Agreement and first service order with SharonAI Holdings Inc (NASDAQ: SHAZ), an Australian neocloud. Sharon AI will deploy and operate roughly 8,200 NVIDIA B300 GPUs and 17.80 petabytes of storage inside an Australian data centre. The contract runs 60 months with a 24 month extension option, carries a total value of about USD 1.26 billion, and fees are payable monthly in advance. ESDS cannot terminate for convenience in the first 36 months. Delivery is required by 16 September 2026

● Sharon AI has not financed the hardware. Its S-1/A dated 11 August 2026 carries a risk factor on the financing and economics of the ESDS contract. Serving it requires approximately USD 733 million of capex, which Sharon AI intends to fund with asset-level debt at 70 to 80% loan to value against the GPUs themselves. As at 11 August, five weeks before the delivery deadline, no binding financing had been finalised. The same risk factor states that Sharon AI is exposed to the credit quality of ESDS.

● Sharon AI is an NVIDIA preferred cloud partner, one of only two holding that status in Australia, and is backed by Howard Marks' Oaktree Capital. It is listed on NASDAQ at a valuation of roughly USD 2 billion against revenue of about USD 1.5 million in the last calendar year, which is 1,333 times sales. Quarterly revenue in the latest period (April May June) was under USD 2 million. The company projects revenue of a couple of billion dollars within two to three years and reports contracted revenue of approximately USD 9 billion.

● The NVIDIA leg is where it gets interesting. NVIDIA will supply Sharon AI with 40,000 GPUs and has committed USD 4.9 billion revenue over six years, paying Sharon AI if compute usage falls short of the agreed level. So NVIDIA books the sale of 40,000 GPUs as revenue today at roughly a 60% margin and carries the shortfall risk on paper. Funding the GPUs, which cost around USD 2 billion, remains Sharon AI's problem, and it has not solved it yet. On 29 August, NVIDIA announced that it would be halting the financing model putting the entire $4.9 billion dollar floor pricing in jeopardy.

● ESDS must post bank guarantees of about USD 140 million to demonstrate commitment under the contract. The advance received from its own customer is most likely destined to be pledged against those guarantees and letters of credit, which would mean the INR 1,176.64 crore sitting in cash on the balance sheet is not free cash at all.

● Clause 4.2 of the filed agreement required the customer to deliver the letters of credit by no later than 15 May 2026, three months before the RHP was dated. ESDS discloses non-fund based facilities of INR 61.01 crore against sanctioned limits of INR 52 crore. USD 140 million is roughly INR 1,325 crore. Either the guarantees were issued and are not disclosed anywhere in the offer document, or they were not issued.

● ESDS contracts with none of these parties and owns no GPUs, no data centre (in this case) and no supply agreement in this arrangement. Piyush Somani, the founder expects a double-digit PAT margin on this contract and has not mentioned anything about the customer or the timelines.

● Rushikesh Jadhav, brother-in-law of Piyush Somani and the company's Chief Technology Officer for over sixteen years, left in early 2026 to head technology at White Unicorn, a Dubai-based startup. He departed roughly two months before the billion-dollar contract was signed and five to six months before the IPO. The management team that remains does not look especially deep on paper, whether measured by prior experience or by background.

● FY26 growth did not come from the core. Revenue rose 30.68%, but infrastructure as a service, which is the data centre and cloud business and the reason to own the stock, grew just 1.75% to INR 207.20 crore. Software as a service fell 14.17% to INR 70.42 crore. Managed services rose 157.23% to INR 194.59 crore and accounted for essentially all of the increase, taking its share of revenue from 20.94% to 41.21%. Managed service is a low-quality business with high competitive intensity and no edge.

● The promoter cost base and recent transaction marks are worth setting against the issue price. Average cost of acquisition is INR 0.08 per share for Piyush Somani, nil for Komal Somani and INR 0.15 for the family trust, all after bonus issues and the face value split from INR 10 to INR 1. More usefully, promoters and promoter group transacted at a weighted average of INR 225.00 over the last eighteen months and INR 81.72 over three years, with the highest price paid in three years being INR 309. The cap price of IPO INR 429 is 39% above that.

● The register already carries recognised names. Mukul Mahavir Agrawal holds 7.00% pre-issue and Ashish Kacholia 2.39%, alongside Anchorage Capital Fund at 1.32% and a number of individual holders. There are 2,615 public shareholders. Promoter and promoter group holding is 46.06% pre-issue, which is low for a founder-led Indian company and will fall further post-issue.

● The company compares itself with E2E networks but there is a very significant difference between E2E and ESDS, It is an NVIDIA partner with direct procurement, and it was the first mover on H100 and H200 in India. It reports priority access to Blackwell, and bought a 1,024-unit B200 cluster with 184 TB of GPU RAM for its Chennai facility. The installed fleet is roughly 3,700 high-end NVIDIA GPUs across Delhi NCR and Chennai, including about 2,048 H200s and 1,000 H100s, described as the largest H200 deployment in India. Management has said it is highly confident in the NVIDIA supply chain and that Blackwell allocation is assured. ESDS is neither a partner of NVIDIA, nor does it own anything.

● The RHP states that FY25's 43.33% jump came primarily from ₹50.19 crore of IaaS revenue from the Russian BFSI customer, which is the bulk of the ₹55.51 crore of new-customer revenue that year. In FY26 that same client's IaaS revenue fell 85.07% to ₹7.49 crore. The entire revenue growth in last 2 years have come from managed services (the share in revenue grew from 27% to 41%+)

Reported Cash Flow Against Cash Flow Excluding the Customer Advance

The RHP attributes the FY26 increase in other current liabilities to an advance received from a new enterprise customer for a GPU-as-a-Service contract. Because the advance is recorded as a working capital movement, it flows through cash flow from operations. The table removes that movement so the underlying cash generation of the business is visible. Revenue, EBITDA and profit after tax are unaffected.

Particulars (INR cr)

FY24 rep.

FY24 adj.

The adjusted column removes the movement in other current and non-current liabilities from operating cash flow, and removes the INR 1,176.64 crore advance from cash on the balance sheet. The RHP discloses the movement as INR 1,181.26 crore in FY26, INR 3.61 crore in FY25 and negative INR 1.61 crore in FY24, and separately discloses the advance balance at INR 1,176.64 crore, the difference being other items within the same line. Cumulative FY24 to FY26 cash flow from operations is INR 1,583.38 crore as reported against INR 400.12 crore adjusted, and cumulative profit after tax is INR 190.04 crore. The adjusted figures are our calculations.

Business

● The business has three lines. Infrastructure as a service covers colocation and data centre services plus cloud services and cloud computing, including public, private, virtual private, hybrid and community cloud and GPU-as-a-Service. Managed services covers cloud, data centre, security, network, backup and disaster recovery, database and DevOps management. Software as a service covers data centre management and monitoring, vulnerability scanning, web access firewalls and VPN, sold on subscription.

● As at 30 June 2026 the company had 104 government clients on its government community cloud, 115 banks and financial institutions on its BFSI community cloud across 1,045 branches, 113 organisations on its SAP HANA community cloud and six smart cities on its smart cities cloud. Nexdigm records it as one of the first Indian providers to offer community cloud on a multi-tenant model, which is a compliance-driven proposition rather than a price one.

● Five data centres are operating, at Nashik, Navi Mumbai, Bengaluru, Mohali and Noida, the last of which commenced operations in October 2025. All five are Tier 3 certified by QSA International or EPI Certification, cover over 75,266 sq ft in aggregate and offer contracted uptime of at least 99.95%. Two further data centres at Kolkata and Sahibabad are in planning and are not funded by this issue.

● SWARAJ Cloud, the vertical autoscaling technology that powers the infrastructure business, is patented in both India and the United States and has been built out into a full-stack platform positioned on data sovereignty, scalability, security, compliance and AI. SPOCHUB is the group's digital marketplace and is also the subsidiary that holds the offshore GPU contract. Other products include the SWARAJ GPU Monitoring Tool, VTMScan, Famrut and Low Code Magic.

● The group has subsidiaries in the UAE, ESDS Cloud FZ LLC, and the United States, ESDS Global Software Solution Inc, alongside SPOCHUB Solutions Private Limited in India. The company extended an unsecured loan of INR 39.95 crore to the UAE subsidiary in March 2025. Promoter Piyush Somani personally holds 0.50% of SPOCHUB and has lent it INR 1.23 crore, repayable on demand.

Promoters and Leadership

● Piyush Prakashchandra Somani, 47, is the Promoter, Chairman and Managing Director, and the largest single shareholder at 24.54% pre-issue. He started the firm within 2 years out of college.

● Komal Piyush Somani, 40, is a Promoter and Whole-time Director, holding 10.13% pre-issue directly and acting as trustee of the P.O. Somani Family Trust, which holds a further 11.19%.

● Promoter group holdings outside the three promoters total 0.20%, held by Sarla Prakashchandra Somani, Pooja Prakashchandra Somani and Prajakta Rushikesh Jadhav (Ex CTO wife). Combined promoter and promoter group holding is 46.06% pre-issue, which is low by the standards of founder-led Indian issuers and falls further after the fresh issue.

Shareholding Pattern

Pre-issue paid up capital is 10,04,27,753 equity shares of face value INR 1 each, held by 2,615 public shareholders plus the promoters and promoter group. Percentages below are on total pre-issue paid up capital. Post-issue percentages and values assume the cap price of INR 429 and 1,67,83,216 fresh shares.

Pre-issue percentages are as disclosed in the RHP as at the date of the RHP. Post-issue percentages and values are our calculations, assuming 11,72,10,969 shares outstanding after the fresh issue at the cap price. Vanaja Sundar Iyer appears twice in the RHP top ten, once jointly with Sundar Iyer at 2.94% and once singly at 1.26%, and the two have been combined here. There is no offer for sale, so no existing shareholder sells into this issue and the whole of the proceeds reaches the company.

Issue Details

Total issue size, amount -> INR 720 cr, entirely a fresh issue. There is no offer for sale component.

Fresh issue size, amount -> INR 720 cr. To be utilised in:

● Purchase and installation of cloud computing and other equipment and infrastructure for the Airoli, Bengaluru, Nashik and Mohali data centres -> INR 576.00 cr, split INR 432.00 cr in FY27 and INR 144.00 cr in FY28. Within that, computer servers INR 266.00 cr, data storage devices INR 83.36 cr, networking equipment INR 51.64 cr and infrastructure INR 175.00 cr.

● General corporate purposes -> balance, not quantified in the RHP, capped at 25% of gross proceeds.

● The equipment costs are certified by Apt Data Center Consultants India LLP and rest on vendor quotations dated July 2026 valid for four months, principally from Orient Technologies Limited. No orders have been placed. None of the objects has been appraised by any bank or financial institution. There is no debt repayment object, borrowings being modest, and the two proposed data centres at Kolkata and Sahibabad are not funded by this issue.

Financials

All figures restated consolidated, converted from INR million to INR crore.

Profit and Loss

Balance Sheet

Cash Flow