ET Intelligence Group: ESDS Software Solutions, a data centre and managed services provider, plans to raise ₹720 crore through a fresh equity issue to fund facilities expansion. The promoter group's stake will fall to 39.5% after the IPO from 46%. The Company offers infrastructure-as-a-service (IaaS), managed services and software-as-a-service (SaaS), to domestic and overseas customers across BFSI, government and enterprise segments. The company has reported strong revenue and net profit traction over the past three years and is likely to maintain the momentum given the future capacity additions. However, the extent of growth will also depend upon the government policies and availability of funding options. In addition, top five customers account for one-third and top 10 form nearly half of the revenue, implying revenue concentration. The company is also exposed to input cost inflation pertaining to digital components including graphics processing units (GPU), memory and cooling agents. Given these factors, the issue looks more suitable for long-term investors with high risk appetite.ET BureauWorth Watching Strong financials and capacity additions add heft, though customer concentration and input cost risks merit attentionBusinessESDS operates five data centres across India, covering over 75,266 square feet. These are used to provide IaaS including cloud and colocation services, disaster recovery and on-demand scalability. Under the managed services, it offers IT support, data backup and migration services. Its SaaS portfolio includes data centre management suite, data security tools, and firewalls. Between FY24 and FY26, the company increased the share of managed services in revenue increased to 41% from 27% while that of IaaS fell to 44% from nearly 50%. The share of government agencies in revenue fell to 27% from 34% during the period, with rising share of enterprises to 55% from 48%.Read more: India Inc’s revenue growth to moderate to 13-15% in Q2 FY27; margins under pressure: ICRAFinancialsRevenue rose 28% annually to ₹472.2 crore between FY24 and FY26 while net profit shot up nearly nine times to ₹120.8 crore. Operating margin before depreciation and amortisation (EBITDA margin) expanded to 49.6% from 35.6% and return on equity improved to 25% from 6% during the period.ValuationBased on FY26 financials and post-IPO equity, the company demands a price-earnings (P/E) multiple of 41.6 and a price-sales (P/S) multiple of 10.7, reflecting the expectation of rapid growth in future. Cloud GPU infra provider E2E Networks, which migrated to the main board in 2022 after listing on the NSE SME board in 2018, trades at a P/S of 45; it reported an operating revenue of ₹245.6 crore and a net loss of ₹15.6 crore for FY26.