Stock to buy: Smallcap up 85% since March 30; Investec sees 18% upside, cites 'rare combination'

Investec has initiated coverage on Seshaasai Technologies Ltd, citing a rare combination of market leadership, annuity-like revenues, strong cash generation and emerging high-growth optionality. The brokerage has a target price of Rs 430 on the stock, implying an 18 per cent upside. It values the company at 21.7 times its estimated FY28 earnings per share.

The target comes even as the stock, which was listed on September 30 last year, has rallied 85 per cent from its 52-week low of Rs 209.05, hit on March 30 this year.

Investec said Seshaasai is India’s dominant payment card manufacturer and accounted for 31.9 per cent share in FY25. It is anchored by deep relationships with 66 banks, a pan-India footprint and a highly sticky, 97 per cent recurring revenue base, Investec said.

The foreign brokerage said Seshaasai's core payments business continues to benefit from card renewals, premiumisation and increasing penetration, while its CFS segment provides stable and predictable cash flows. 

More importantly, said Investec, Seshaasai has successfully leveraged its technology expertise to build a fast-scaling IoT business, which has grown exponentially since its 2022 entry and is positioned to ride the twin tailwinds of RFID adoption and eSIM proliferation," it said. 

While a few global players operate in the payment card ecosystem, the Indian market is largely dominated by Seshaasai and Manipal (unlisted, filed DRHP). Both companies held an identical 31.9 per cent share of India's payment card issuance market in FY25 and operate at a similar scale, with Seshaasai issuing 8.66 crore cards and Manipal billing 8.62 crore cards during the year. While Seshaasai is relatively stronger in debit cards (33.8 per cent market share), Manipal has a larger presence in credit cards (36.2 per cent market share).

Investec said a key difference, however, lies beyond cards. While Manipal remains largely a payment and identity solutions player, Seshaasai has built a diversified platform spanning Payment Solutions, Corporate Form Solutions (CFS) and Internet of Things (IoT). This diversification has become increasingly valuable amid softer card renewal volumes and moderation in new card issuance, with IoT revenue growing 45 percent YoY and CFS revenue rising 29 per cent YoY in FY26, helping offset weakness in card volumes.

"We believe Seshaasai is well-positioned across Payment Solutions, a stable and cash-generative CFS business, and a rapidly scaling IoT franchise. Longstanding customer relationships and a highly recurring revenue base provide strong earnings visibility," Investec said.

The foreign brokerage expects Seshaasai's revenue and profit to grow at 12 per cent and 14 per cent compounded annually  over FY26–29. Seshaasai operates in oligopolistic industries with high entry barriers and recurring revenues and the management has consistently adapted to technology shifts and build new growth engines, Investec said. 

The broking firm said Seshaasai's strong operating cash flow (OCF) profile provides ample headroom to fund future growth investments. It expect OCF for Seshaasai to increase from Rs 230 crore in FY26 to Rs 350 crore by FY29, comfortably exceeding annual capex requirements. 

"With key capacity additions across RFID, Payment Solutions and SIM/eSIM already commissioned, and Rs 190 crore of IPO proceeds remaining unutilised as of Q4FY26 for future expansion, we expect stronger free cash flow generation and limited reliance on external funding over the medium term," Investec said.

On Monday, the stock rose 4.85 per cent to Rs 385.95 apiece on BSE.