Shares of newly-listed ESDS Software Solution, which had delivered multibagger returns in a post-listing rally earlier this month, hit the 5% lower circuit at Rs 1,758 after the company reported a weak set of numbers for the first quarter of financial year 2027.
Despite the downturn, ESDS Software Solution has rallied around 330% from its IPO price of Rs 429. The stock closed at Rs 1,853.15 on Thursday, taking the company's market capitalisation to around Rs 21,700 crore.
The company reported a 7.3% year-on-year increase in operating revenue to Rs 133.7 crore in Q1 FY27. However, revenue fell 20.2% sequentially from Rs 167.5 crore in the previous quarter. Profit after tax rose 14% year-on-year to Rs 29.3 crore, but declined around 57% sequentially from Rs 67.7 crore.
The Q1 revenue growth also marks a sharp moderation from the company's roughly 28.4% revenue CAGR between FY24 and FY26, pointing to a significant slowdown in the pace of growth.
Time to be cautious, investors?
"Fresh investors should avoid chasing at current levels and wait for a meaningful correction, as valuations have become stretched (from a reasonable ~42x FY26 earnings at IPO to 140 to 170x now)," Santosh Meena, Head of Research at Swastika Investmart, told ETMarkets. Allotted investors, sitting on life-changing gains in days, should aggressively book partial profits (40 to 60% or more) to lock in returns while retaining a core holding for the longer-term story, given the high risk of sharp reversals once momentum fades.
The rally mixes genuine thematic excitement with FOMO and scarcity premium; upside remains possible if AI capacity ramps smoothly and India's cloud/GPU markets deliver the projected 20 to 50% CAGRs, but much of the multi-year optimism is already priced in, leaving limited margin of safety and elevated execution risk.
Fundamentally the industry looks robust: India's data centre capacity is set to expand several-fold by 2030 on the back of cloud adoption, data localisation, digitalisation and AI workloads, with significant capital commitments from hyperscalers and domestic players. ESDS is well-positioned as a full-stack sovereign-cloud and AI-infra provider with improving margins, sticky customers and expansion plans funded by the IPO, but near-term success hinges on timely capacity addition and contract delivery. Overall, treat it as a high-beta thematic bet, rewarding for early allottees who de-risk, risky for late entrants at peak valuations.
Even as India continues to lag markets such as South Korea and Taiwan in direct exposure to the AI and semiconductor cycle, a different AI-linked investment theme is gathering momentum at home.
India's data centre industry is entering a multi-year growth phase, driven by accelerating digitalisation, rising cloud adoption and growing artificial intelligence demand.
According to international brokerage Nomura, India's data centre IT load has expanded from around 350 MW in 2019 to nearly 1.5 to 1.6 GW in 2025, translating into a CAGR of about 29%, compared with roughly 20% globally. As a result, India's share of global data centre capacity has increased from around 1.5% in 2019 to approximately 2 to 3% in 2025.
A KPMG report projects the country's data centre industry revenue to reach nearly $45.69 billion by 2033, driven by rising AI workloads, rapid cloud adoption and data localisation requirements. "With one billion internet users and businesses rapidly adopting cloud services, building domestic data centres is now a necessity," the report noted.
Disclaimer: This article has been written by Veer Sharma, who is not a SEBI-registered Research Analyst or an Investment Adviser. Veer Sharma and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here.
