They are not a pure infrastructure play. This is evident from their margin profile which is quite contrasting with Netweb. They are compute provider. Their value addition happens one layer above infrastructure. They have productized all this infra to sell. For example, instead of just giving you server where you install your database, E2E will give you easy DB setup without having to think about the hardware level stuff. This is why they can dictate the margin they do.

The reason for the extreme valuation is the cash infusion they are doing to get more fixed assets(computer hardware), and they being focused on high density compute allows them to pack more compute in the same racks. Last concalls Dua said, the Data Center costs them approx 10% of the revenue which is quite low if you think about it.

They had 200cr fixed assets in March 2024. Then additional 400 cr. which is now operational (announced on Twitter). Finally the new 1400 cr. coming in bringing the total assets to 2000cr. (200 + 400 + 1400). They may not invest all the cash on computer hardware, so this 2000 cr is the upper limit. They will realize the money from L&T deal by 31st Dec, 2024 and take a quarter to acquire and install everything. If we take it to be true, that means from Q1 FY26, they can have up to 2000 cr assets vs 200cr in March 24. 10X assets → 10X sales → 10X profits. (assuming they can sell all of it.)

With the current PE of 300, if we assume correction to 150 PE for the next year, the 10/2 = 5X movement on the stock is possible. Of course, this assumes the stock will command 150 PE. If it commands 75, that gives 2.5X for FY 26.

I am concerned what the L&T partnership will entail and definitely need more info on it, but I think overall E2E has shifted gears and it’s still going to grow aggressively.