ESDS Software stock surges 10% to fresh high; multibagger gains 231% from IPO price

Shares of ESDS Software Solutions Ltd continued their strong run on Wednesday, surging 10 per cent to hit a high of Rs 1,418.50 on BSE. With this, the multibagger stock has gained 230.65 per cent over its IPO issue price of Rs 429 apiece.

The AI-enabled data centre infrastructure company had fixed the IPO price band at Rs 408-429 per share and raised Rs 720 crore through the public issue.

ESDS Software made a strong debut on September 4, listing at Rs 757 on NSE, a 76.46 per cent premium over the issue price. On BSE, the stock opened at Rs 746.30, marking a 73.95 per cent premium.

The IPO was open for subscription between August 28 and September 1 and was subscribed 135.88 times overall. The issue received more than 63.01 lakh applications, with bids worth around Rs 72,000 crore.

Meanwhile, Choice Institutional Equities has initiated coverage on ESDS Software with a 'BUY' rating and a 12-month target price of Rs 1,550. The brokerage has valued the company at 18 times its estimated FY28 EV/EBITDA.

Choice expects India's cloud market to expand at a 23.6 per cent compound annual growth rate (CAGR), from Rs 65,100 crore in FY25 to Rs 1.9 lakh crore by FY30. According to the brokerage, enterprise digitisation, adoption across the BFSI sector and rising government workloads are expected to support this growth.

The brokerage said ESDS derives its business from the Enterprise, Government and BFSI segments, which account for 55.1 per cent, 27.4 per cent and 17.5 per cent of its business, respectively. It also pointed to the growth opportunity in India's cloud GPU market, which it expects to expand at around 50 per cent CAGR through FY30.

Choice estimates ESDS's revenue, EBITDA and profit after tax (PAT) to grow at CAGRs of 120.9 per cent, 72.6 per cent and 81.3 per cent, respectively, between FY26 and FY29E.

The brokerage expects the company's growth to be driven by its core business, capacity expansion, customer monetisation and operating leverage. It also identified ESDS's $1.25 billion AI contract as a potential earnings driver.

According to Choice, successful execution and a faster ramp-up of the AI contract could support further earnings and valuation upside.

However, the brokerage highlighted AI contract execution, customer concentration, high capex intensity and competition as key risks. These factors, it said, could delay the earnings ramp-up and put pressure on utilisation, margins and returns.