Fair Valuation of an Enterprise Solution Provider for an Indian Financial Institution

Our Client (Client) is a leading Indian financial institution listed on NSEand BSE. The Client specialized in providing debt financing to self-employed entrepreneurs, Micro, Small & Medium Enterprises (MSME) and consumers in Indiausing technology led models.

As part of their strategic initiatives, the Client was planning to invest in a Bangalore-based enterprise tech-product company (Target). The Target developed software to digitize banking operations and offered value-added services.Our Client was familiar with the software as they were already an active user of the Target's solutions.Though the Target’s platform was built for banking & non-banking financial institutions, microfinance institutions, etc., the platform itself was industry agnostic and the Target had recently signed up clients within the telecommunication sector.

The Client engaged Nexdigm to assist in arriving at the broad valuation of the Target for the strategic investment.

After factoring in discount for lack of liquidity and control and the dilutive impact of the Employee Stock Ownership Plan (ESOP) pool on the Target’s valuation, we recommended a valuation which was 20% lower than the Target’s asking rate.

The Client was able to close the deal at 1% above our recommended price.