Why:
- Share: the sovereign-cloud niche is real and defended. ESDS is MeitY and STQC empanelled, hosts 115 banks across 1,045 branches, runs three of STPI's six data centres, and sells compliance-grade hosting that hyperscalers do not: strip the sanctioned Russian client from both sides and the domestic book retained 114% of its revenue in FY2026, with cloud up 30% and managed services up 86% (T1).
- Execution: the founder built this from a Nashik hosting shop with patents, bank trust and third-party validation — CRISIL BBB+ positive, lenders raising facilities to ₹4,000 crore this month, and a clean 5-6x exit for its private-equity backer (T1, T2).
- Price: at the band the company costs 40 to 42 times FY2026 profit, and 72 to 75 times once the one offshore GPU contract that supplied 45% of that profit is set aside (T1). The thesis stands or falls on whether that contract is real, durable earnings.
Valuation at the band
| Floor ₹408 (T1) | Cap ₹429 (T1) | |
|---|---|---|
| Bid window | 28 August to 1 September 2026 | |
| Bid lot | 34 shares | |
| Fresh shares (₹720 cr fixed) | 1,76,47,059 | 1,67,83,217 |
| Post-issue shares | 11,80,74,812 | 11,72,10,970 |
| Market capitalisation | ₹4,817 cr | ₹5,028 cr |
| P/E on FY2026 profit | 39.9x | 41.6x |
| P/E (illustrative, ex the offshore GPU subsidiary's profit) | 72.0x | 75.2x |
| EV/EBITDA (net cash as reported) | 15.4x | 16.3x |
| EV/EBITDA (illustrative, treating the ₹1,188 cr customer advance as an obligation) | 20.5x | 21.4x |
| Promoter holding after | 39.2% | 39.5% |
The filing's only listed peer, E2E Networks, is loss-making, so its printed peer P/E carries no information. The price does not move the verdict; the six ratings judge the business, not the band.
The story
India's sovereign-cloud specialist: a Nashik-born operator selling compliance-grade cloud and managed services to banks, governments and enterprises that must keep data in India. That business grew 30% domestically in FY2026 and is the reason to be interested. Bolted onto it, late in the pre-IPO year, is something entirely different: a previously dormant subsidiary that booked ₹85 crore of revenue and ₹54 crore of profit from one unnamed offshore GPU-services customer, backed by a ₹1,177 crore advance and a five-year, USD 1.25 billion take-or-pay commitment for GPU capacity in Australia — about five times the company's entire revenue.
What this business is
ESDS runs six data centres (three of them for STPI) and sells three lines: infrastructure-as-a-service (cloud hosting and colocation, 44% of revenue), managed services (41%), and its own SaaS (15%). Its edge is regulatory: MeitY empanelment, STQC certification, RBI-grade compliance, and vertical "community clouds" for co-operative banks and government. Customers pay for the certainty their data and workloads stay inside India's rules. It holds under 1% of an India cloud market its commissioned report sizes at ₹79,100 crore, growing to ₹1,87,600 crore by FY2030.
The GPU arrangement inverts this logic: an offshore customer, offshore hardware, capacity rented from an Australian supplier (Sharon AI, delivery due September 2026), where none of the India-compliance moat applies. The filing names neither counterparty and discloses no contract terms.
Easy or difficult business? The core is genuinely hard: certifications, bank-grade uptime across 1,045 branches, government empanelments and two decades of trust take years to replicate. The GPU resale trade is the opposite — a financing-and-procurement position anyone with capital can take.
Key numbers
| ₹ cr | FY2024 | FY2025 | FY2026 |
|---|---|---|---|
| Revenue | 286.5 | 361.3 | 472.2 |
| Revenue growth % | n/a | 26.1 | 30.7 |
| EBITDA | 101.9 | 154.9 | 234.2 |
| EBITDA margin % | 35.6 | 42.9 | 49.6 |
| PAT | 13.6 | 55.6 | 120.8 |
| PAT growth % | n/a | 308.6 | 117.3 |
Two adjustments matter. FY2025's growth was almost entirely one sanctioned Russian bank, since wound down; FY2026's margin expansion and 83% of its profit increase came from the GPU subsidiary. Excluding both, the underlying business grew about 30% in FY2026 at flat margins around 42%, on a debt-free balance sheet.
| Segment, ₹ cr | FY2024 | FY2025 | FY2026 |
|---|---|---|---|
| Infrastructure-as-a-service | 142.1 | 203.6 | 207.2 |
| IaaS growth % | n/a | 43.3 | 1.8 |
| Managed services | 77.5 | 75.7 | 194.6 |
| Managed services growth % | n/a | -2.4 | 157.2 |
| SaaS | 66.9 | 82.0 | 70.4 |
| SaaS growth % | n/a | 22.6 | -14.2 |
Scorecard
| Block | Rating | Why |
|---|---|---|
| Right to win | PASS | The compliance moat is real and the numbers show it working: 114% domestic net revenue retention ex-sanctions, capacity additions absorbed at unchanged price, patents on its autoscaling. Held below STANDOUT by falling core returns and 60% of the estate leased on revenue-share terms. |
| Industry and TAM | PASS | Under 1% of a large, fast-growing, localisation-driven market; the runway question survives an 84% error in the commissioned number. Caution: the segment now driving profit sits outside every market the filing sizes. |
| Financial momentum | MARGINAL | The operating business delivered 30% growth at flat margins with negative free cash flow ex-advance; the reported surge is one contract, in a subsidiary the group's auditor did not audit, whose FY2026 revenue predates the capacity behind it. |
| Risks, governance, RPTs | MARGINAL | Nothing severe, but a decade of statutory-dues lapses, an adjudicated ₹6.3 crore GST loss, a live fraud-worded GST notice, and an auditor unable to comment on the billing software's audit trail in a year profit doubled. |
| Promoter and cap table | PASS | Clean fully diluted count, rising placement staircase, founder retains control and sells nothing; the ₹2,000 purchase of 1% of the GPU subsidiary weeks before its windfall is the one stain, small in rupees. |
| Offer structure | PASS | ₹720 crore all fresh, 80% to a named, vendor-quoted, monitored GPU capex object; no seller, no debt games. |
Watch out for
- The thesis hinge: 45% of FY2026 profit is one undisclosed offshore GPU contract. If it is real and durable, ESDS bought AI growth cheaply; if it is not, FY2026 earnings are roughly half what they appear, and the timing (signed the last day of FY2026, capacity delivered from September 2026) means its substance shows up only in the first post-listing results (T1, T2).
- A USD 1.25 billion five-year take-or-pay obligation, about five times revenue, with fees monthly in advance and USD 140 million of guarantees, sits behind the GPU trade; it appears nowhere in the filing's capital commitments (T2).
- The ₹1,253 crore of cash on the balance sheet is almost entirely a customer's prepayment, not ESDS's money in any working sense (T1).
The offer
- Raising ₹720 crore, entirely fresh; nobody sells (T1).
- For cloud and data-centre equipment at four named sites, 38% of it GPU hardware, deployed over FY2027-28 with a monitoring agency; the rest general corporate purposes.
- Implied valuation ₹4,817 to ₹5,028 crore, from the table above.
- Promoters hold 46.1% with the promoter group before the offer and about 39% after, selling nothing (T1).
Initial assessment from the RHP only, with no outside verification beyond the price band and offer dates, which come from the NSE and BSE public records, and a bounded outside check on the GPU arrangement and market position, tiered where cited. Numbers carry source tiers: (T1) the filing's audited sections, (T2) exchange, rating-agency or established trade sources, (T3) press. Not a recommendation. The valuation section states what the announced band implies and is not a view on whether that price is right.