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Why 3i Infotech Share Price is Rising

Nov 28, 2023

Why 3i Infotech Share Price is Rising

Smallcap and midcap stocks are getting all the attention these days, and why not. They've outperformed benchmark indices by a huge margin.

While the Sensex and Nifty have remained rangebound in the past six months, the BSE smallcap index has gained over 32%.

The rally in individual stocks is even more enthralling.

Among the list of top smallcap gainers this year is 3i Infotech.

The stock has recently seen a buying frenzy, experiencing a rally of over 27% in just a week and over 50% in the past six months.

Let's understand why...

#1 Steady Q2 Results

In the recent quarterly results, the company displayed a strong performance.

The company's revenue grew 18.7% to Rs 2.1 billion (bn) in the quarter under review compared to Rs 1.8 bn reported in the same quarter last year.

On a sequential basis, the company saw an 8.2% growth in revenue from Rs 1.9 bn reported in the June 2023 quarter.

However, due to increased cost, the company's gross margins saw a tapered growth of 6% year on year (YoY).

The earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 20.5% to Rs 27 million (m) in the recent quarter. It was a negative Rs 178 m during the same period last year.

The profit before tax (PBT) increased 2.9% YoY. The growth is slow due to increasing cost and tapered gross margins.

Now, if we look from a geographical perspective, the company offers its service in the US, India, Europe, the Middle East and Africa (EMEA) and Asia - Pacific (APAC) regions.

The revenues from India have grown by 8.8% from Rs 815 m in the June quarter to Rs 887 m in the September 2023 quarter.

Similarly, revenue from the US also shot up by 11.7%.

#2 Partnership with InsureMO

While shares of the company have seen buying interest in recent weeks owing to good Q2 numbers, the stock has been experiencing a buying frenzy since the start of September 2023 as they entered into a strategic partnership with InsureMO.

Just to give a quick insight, InsureMo is a leading Insurance Middleware Platform.

Middleware basically means companies that specialise in providing common services and capabilities to applications through their software and cloud services.

This partnership with 3i Infotech is expected to bring several benefits for InsureMO customers, including reduced underwriting operational costs, quicker launches of insurance products, and an efficient DevOps cycle for creating web applications.

The benefit for 3i Infotech here is that they are expanding their market reach and are increasing client base.

#3 Contract from Ujjivan Small Finance Bank

Following their partnership with InsureMO, the company also won a contract from Ujjivan Small Finance Bank. The contract is to develop end-user support services.

The total contract is of 5 years with a value of Rs 396 m, along with a one-time transition charge of Rs 3.5 m. If things go well, there are clauses to extend the tenure.

This contract is expected to contribute to 3i Infotech's revenue streams over the specified period.

What's Next?

The company is currently focusing on building their value brand business NuRe which is a wholly owned subsidiary company of 3i Infotech.

Under this brand, there are several products: -

  • NuRe CloudFirst, which is into design and construction of cloud-based solutions
  • NuRe Edge which offers 5G services in a cost effective way
  • NuRe Desk which enables workforce to work from their own device and network connectivity.

Recently, the company launched NuRe Bharat Network in partnership with RailTel.

This enables advertisers to connect with 1.8 m daily users through their 3i Infotech's RailTel Super App.

Moreover, 3i Infotech also offers free WiFi services across the railway network.

As the Indian government adds more high-speed corridors and expands its rail network, 3i Infotech could fetch some additional revenues from the WiFi opportunity.

3i Infotech aims to achieve organic revenue growth of US$ 1 bn by 2030.

How 3i Infotech Share Price has Performed Recently

3i Infotech share price has gained 27% in the last five days and more than 49% in the last six months.

The company touched its 52-week high of Rs 51 on 24 November 2023 and its 52-week low of Rs 26 on 28 March 2023.

chart

About 3i Infotech

3i Infotech is an IT solutions company that provides various services, including cloud computing and platform services like business process as a service (BPaaS), a form of business process outsourcing.

The company is also engaged in transaction services, particularly knowledge process outsourcing, which involves handling back office operations.

About 90%of 3i Infotech's revenue, comes from offering IT solutions to its clients. It generates 10% of its revenue from transaction services.

While it operates in more than 15 countries across four continents, the company's primary revenue source is from the United States.

For more details about the company, you can have a look at the 3i Infotech fact sheet and quarterly results on our website.

You can also compare the company with its peers.

3i Infotech vs 63 Moons Tech

3i Infotech vs Birlasoft Limited

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

Investment in securities market are subject to market risks. Read all the related documents carefully before investing

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Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...

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