The ESDS Software Solution IPO entered its second day of bidding on August 31, continuing to attract strong investor interest. The issue has also generated significant buzz in the grey market, with the shares commanding a premium of around 78%. The strong grey market premium (GMP) suggests that investors are anticipating a potentially strong listing for the company’s shares.On the first day of bidding, the overall issue was subscribed 2.10 times against the total offer of 1.23 crore shares. Demand was stronger in the retail segment, which was subscribed 2.69 times against 61.76 lakh shares on offer.The company has fixed the IPO price band at Rs 408-429 per share for its Rs 720-crore public issue. The three-day subscription period will remain open until September 1, 2026. The IPO comprises entirely a fresh issue of 1.68 crore equity shares.Investors can bid for a minimum of 34 equity shares and in multiples of 34 shares thereafter. At the upper end of the price band, retail investors will need to invest Rs 14,586 for one lot of 34 shares.The IPO allotment is expected to be finalised on September 2, 2026, while the shares are likely to be listed on the NSE and BSE on September 4, 2026, provided the schedule remains unchanged.ESDS Software Solution IPO ValuationAt the upper end of the price band, ESDS Software Solution’s FY2026 price-to-earnings (P/E) multiple stands at 36.33 times, compared with 34.55 times at the lower end. By comparison, the industry peer group’s average P/E multiple is 819.78 times, while the Nifty 50’s P/E ratio stood at 20.48 times as of August 20, 2026.On an EV/EBITDA basis, ESDS is valued at 16.30 times at the upper end and 15.40 times at the lower end of the price band for FY2026, compared with the peer group’s average multiple of 99.49 times. The company reported a weighted average return on net worth (RoNW) of 17.09% over the last three financial years.DAM Capital Advisors Ltd. is the book-running lead manager for the issue, while MUFG Intime India Pvt. Ltd. is the registrar.Ahead of the IPO, ESDS Software Solution raised Rs 216 crore from anchor investors.ESDS Software Solution IPO Subscription StatusThe ESDS Software Solution IPO witnessed strong demand on Day 1, with the issue subscribed 2.10 times against the total offer size of 1.23 crore shares.Retail Individual Investors (RIIs): The retail portion was subscribed 2.69 times, with bids received for 61.76 lakh shares against the 26.47 lakh shares reserved for the category.Non-Institutional Investors (NIIs): The NII segment was subscribed 3.51 times, with bids placed for the shares on offer.Qualified Institutional Buyers (QIBs): The QIB portion, comprising 35.29 lakh shares, received bids for 1% of the shares on offer so far.ESDS Software Solution IPO GMP TodayThe latest Grey Market Premium (GMP) for the ESDS Software Solution IPO stands at Rs 325, implying a premium of around 78% over the upper price band of Rs 429 per share. At the current GMP, the IPO is estimated to list at around Rs 754 per share.GMP is an unofficial market indicator and may fluctuate before listing. The estimated listing price is indicative and should not be treated as guaranteed.ESDS Software Solution IPO ProceedsThe proceeds from the ESDS Software Solution IPO will primarily be used to expand and strengthen its data centre infrastructure. Around Rs 576 crore is proposed to be allocated towards the purchase and installation of cloud computing equipment and other data centre infrastructure.The remaining proceeds will be used for general corporate purposes.Financial PerformanceESDS Software Solution Ltd. reported a significant improvement in its financial performance in FY26. Total income rose 28% year-on-year to Rs 480.65 crore, compared with Rs 376.64 crore in FY25.Profitability improved even more sharply, with profit after tax (PAT) more than doubling 117% to Rs 120.82 crore from Rs 55.61 crore a year earlier.About ESDS Software SolutionIncorporated in August 2005, ESDS Software Solution Limited is an AI-enabled provider of cloud, managed services, data centre infrastructure and software solutions in India. Its offerings span Infrastructure-as-a-Service (IaaS), managed services and Software-as-a-Service (SaaS), serving the BFSI, government and enterprise segments. In FY26, it served 2,501 customers and recorded revenue from operations of Rs 4,722.10 million.ESDS operates five Tier 3 data centres across India, spanning more than 75,266 sq. ft., and offers cloud, cybersecurity, data centre management, backup and disaster recovery, and DevOps services. Its proprietary solutions include SWARAJ Cloud and AI-powered GPU monitoring products.As of June 30, 2026, the company had 993 employees.Should you subscribe?According to Anand Rathi, ESDS is well placed to benefit from rising demand for cloud infrastructure, managed services and AI-driven workloads in India. Its integrated offerings, expanding data centre infrastructure and focus on GPU-as-a-Service (GPUaaS) could support growth.However, the company faces intense competition from global and domestic cloud and data centre providers. Customer concentration, reliance on government projects and continued investment requirements remain key risks.At the upper end of the price band, ESDS is valued at 41.6 times FY26 earnings, implying a post-issue market capitalisation of Rs 50,284 million. Anand Rathi believes its growth prospects, integrated offerings and improving profitability provide some justification for the premium valuation.Overall, Anand Rathi has assigned a “Subscribe – Long Term” rating to the IPO.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)