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IPO Analysis Review - Persistent Systems - Invest

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at March 14, 2010

Persistent Systems is offering about 5.4 million shares, including an offer for sale by the promoter of 1.28 million shares, in the price band of Rs 290-310, would raise around 167 crore at the upper end. The funds are to be predominantly used for establishment of development facilities in Pune and Nagpur and to procure hardware.

The issue is open from March 17-19. Enam Securities and JP Morgan India are the book running lead managers to the issue.

Investors can consider subscribing to the initial public offering of Persistent Systems, an outsourced software-products development player, considering the company’s strong performance in key operating metrics and its sound positioning and growth prospects of the segment where it operates.

At Rs 310 (upper end of the price band), the share would trade at 12 times its likely 2009-10 per-share earnings on a post-offer equity base.

This is at a discount to mid-tier IT companies such as Infotech Enterprises, Sasken Communications and KPIT Cummins, which are partly comparable to Persistent Systems.

A highly favourable offshore-onsite mix, a strong base of clients, many of whom have ramped up contribution, increasing repeat-business and a strong focus on the reviving US market — the largest for IT services — are key factors in favour of the company.

Persistent Systems has enjoyed net margins in excess of 16 per cent consistently over the last several years, barring 2008-09, when it was hit by a 170 per cent increase in operating and other expenses. This was due to a combination of forex losses of close to Rs 87 crore and a higher provision for doubtful debts.

Over a three-year time frame, Persistent Systems has seen its revenues grow at a compounded annual rate of 40 per cent to Rs 600.6 crore in 2009, while net profits grew at 22.3 per cent to Rs 66.9 crore.

The growth in net profits would have been much higher, but for the above mentioned losses in 2008-09.

In FY-2010, the company seems to be back on track as far as profitability is concerned with profits growing by over 60 per cent for the nine months ended December over last fiscal, though revenues are likely to end flat.

Niche offerings

Persistent Systems is different from the conventional IT services companies in that its offerings and client-base are different.

It caters to clients who are independent software vendors (for example, Microsoft and Oracle) and companies that focus on developing software products for verticals such as telecom and life sciences.

Apart from this, the company also works with companies that are engaged in developing products around newer platforms such as SaaS (software as a service) and cloud computing, which are witnessing enormous growth.

Essentially, the company offers development and product engineering services for these companies from offshore (mainly India) locations.

Persistent Systems has a well-balanced revenue proportion accruing from these offerings. Independent software vendors contribute 47 per cent of the overall revenues; telecom accounts for 23.9 per cent, with other practices, enterprises and solutions accounting for the rest.

As witnessed by its growth rate, the outsourced, especially the offshore product development model, is quite scalable. Software product companies were hit by the economic meltdown over the last couple of years, with lower licence sales.

But even as their customers demand more for the same billing, the enhancement of features and release of newer versions requires substantial product engineering, which companies such as Persistent Systems are well-positioned to offer.

A report from IDC indicates that R&D and product engineering services are set to grow from $40.1 billion in 2010 to $65.7 billion by 2013.

The size of the offshore market within that is set to grow at a much faster clip from $8.9 billion in 2010 to $16.1 billion by 2013. A recent Forrester report suggests that although software product companies have cut their R&D budgets, offshoring would still remain the key for quicker releases and cutting costs.

Persistent Systems, with a strong offshore presence, is well-placed to benefit from this trend as in addition to providing services, it adds its own IP to software products of companies, while creating an additional revenue stream in the form of IP sales or royalty revenues.

Strong operating metrics

The company derives over 89 per cent of its revenues from services delivered from India, which creates an optimal cost-structure for the company. This is a better than what most mid-tier companies enjoy. Because the company does not implement product at clients’ location, it is not required to have a significant onsite presence. Persistent Systems derives over 41 per cent of its revenues from its top 10 customers, which is quite normal for mid-sized technology players. But what is more important is that it has a client base of over 200. This means that the risk of client concentration is minimised significantly.

The company has also witnessed a significant ramp-up in revenues of its top-clients and increased levels of repeat business (over 90 per cent) which suggests that volumes and client-mining are witnessing a fair revival.

Persistent Systems derives 83.9 per cent of its revenues from US-based clients, as many software product development companies and those involved in developing platforms are based there.

With the IT spends in the US reviving, as evidenced by increased contribution from this geography to Indian IT companies across-the-board over the last couple of quarters, the company’s concentration may be more desirable than being an impediment.

This apart, the company has seen increased contribution from fixed-price contracts (compared to the traditional time and material billing mode), which should augur well for the company’s realisations.

Risks

With the expiry of the STPI scheme by March 2011 and the increase of MAT announced in the Budget, the company’s tax incidence, which is at 8.4 per cent currently, may go up considerably, until operations migrate to SEZs.

Credits: businessline newspaper

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Indian Stock Market Calendar - 15-March-2010 to 18-March-2010

Posted by admin

at March 14, 2010

This stock market calendar is good information to know the board meetings for the purpose of EGMs, Bonus issue discussions, bonus share allocations and other company matter. Each day has been detailed with company name and event.

15/03/2010

Abhishek Corporation Ltd. - EGM 15/03/2010 - To reclassify the existing Authorized Capital of the Co. of Rs. 24,00,00,000/- div. into 1,50,00,000/- Equity Shares of Rs. 10/- each & 90,00,000/- 6% NCRPSs of Rs. 10/- each into 24,00,00,000/- div. into 2,40,00,000 Equity Shares of Rs. 10/- each.

CNI Research Ltd. - Board Meeting : Others
Coastal Corporation Ltd. - EGM 15/03/2010 - To issue of 13,00,000 Redeemable Preference Shares of Rs. 10/- each.

Cranex Ltd. - Board Meeting : Quarterly Results

Eicher Motors Ltd. - AGM 15/03/2010 - 70% Dividend

Helios and Matheson Information Technology Ltd. - Book closure date from : 15/03/2010 to : 25/03/2010 Dividend : 10.00%

Nutraplus Products (India) Ltd. - Board Meeting : Others

Passari Cellulose Ltd. - Board Meeting : Increase in Authorised Capital & Others

PFL Infotech Ltd. - Board Meeting : Conversion of Warrants

Prajay Engineers Syndicate Ltd. - EGM 15/03/2010 - To increase the Authorised Capital of the Co. to Rs. 250 Crs, to issue of GDRs/FCCBs/QIP for an aggr. amount of US $ 150 million & to increase the borrowing powers of the Co. upto Rs. 1000 Crs & to mortgage/create charge on the assets upto Rs. 1000 C

Raghava Estates Ltd. - EGM 15/03/2010 - inter alia, to change the name of the Company from “Raghava Estates Ltd” to “Raghava Estates & Properties Ltd”, subject to necessary provisions & approvals.

Thangamayil Jewellery Ltd. - Board Meeting : Interim Dividend

Titagarh Wagons Ltd. - EGM 15/03/2010 - To accord the utilization of the funds raised by IPO made vide Prospectus dated the March 31, 2008, persuant to the Shareholders approval U/S 81 (1A) of the Co’s Act, 1956 & to appointment of Shri. Umesh Chowdhary as a W.T.D on the July 01, 2002.

Wendt India Ltd. - Board Meeting : Others

16/03/2010

ACIL Cotton Industries Ltd. - EGM 16/03/2010 - To increase the Authorised Capital from 7 Crs to 12 Crs & to issue of 10000000 Equity Shares will be allotted as preferential basis to Promoters & Others, subject to approval of Shareholders of Company.

Arihant Foundations & Housing Ltd. - Board Meeting : Conversion of Warrants

Dwarikesh Sugar Industries Ltd. - AGM 16/03/2010 - 15% Dividend

Elf Trading & Chemicals Manufacturing Ltd. - Board Meeting : Others

Hella India Lighting Ltd. - Board Meeting : Others

Jindal Hotels Ltd. - Board Meeting : Conversion of Warrants & Others

Nissan Copper Ltd. - Board Meeting : Audited Results (Nine months) & Others

17/03/2010

Chembond Chemicals Ltd. - Board Meeting : Allotment of Bonus Shares

Crisil Ltd. - Book closure date from : 17/03/2010 to : 18/03/2010 Dividend : 250.00%

Decolight Ceramics Ltd. - EGM 17/03/2010 - To increase the Authorised Capital of the Company from Rs. 80 Crs to Rs. 100 Crs & to raise upto Rs. 50 Crs from the already Members approved limit of Rs. 30 Crs by way of QIP/GDRs/ADRs/FCCBs or any other Security in the Domestic / International Mark

Gaekwar Mills Ltd. - AGM 17/03/2010 & EGM 17/03/2010 - To alter the Memorandum & Articles of Association of the Company.

Gujarat Gas Company Ltd. - Book closure date from : 17/03/2010 to : 19/03/2010 Dividend : 400.00%

Hindustan Dorr-Oliver Ltd. - Bonus: 1:1 (face value 2) Bonus Issue of equity shares in the ratio of 1:1.

LG Balakrishnan & Bros Ltd. - Splits : Old Face Value : 1 - New Face Value : 10 - Consolidation of Equity Share from Re. 1/- to Rs. 10/-.

NRC Ltd. - AGM 17/03/2010

Pidilite Industries Ltd. - Bonus: 1:1 (face value 1) Bonus Issue of equity shares in the ratio of 1:1 of Rs. 1/-.

Rain Commodities Ltd. - Board Meeting : Audited Results, Dividend & Others

Shree Renuka Sugars Ltd. - Bonus: 1:1 (face value 1) Bonus Issue of equity shares in the ratio of 1:1 of Re. 1/-.

Simmonds Marshall Ltd. - Board Meeting : Allotment of Equity Shares & Others

Thomas Cook (India) Ltd. - Board Meeting : Audited Results & Dividend

Trend Electronics Ltd. - Book closure date from : 17/03/2010 to : 30/03/2010 Dividend : 10.00%

Value Industries Ltd. - Book closure date from : 17/03/2010 to : 30/03/2010 Dividend : 10.00%

Veritas (India) Ltd. - Board Meeting : Audited Results

Well Pack Papers & Containers Ltd. - Bonus: 3:4 (face value 1) Bonus Issue of equity shares in the ratio of 3:4. and Splits : Old Face Value : 10 - New Face Value : 1 - Stock split from Rs. 10/- to Re. 1/-.

18/03/2010

B N Rathi Securities Ltd. - Board Meeting : Resignation / Appointment of Director

Bajaj Hindustan Ltd. - AGM 18/03/2010 - 70% Dividend

Cera Sanitaryware Ltd. - Board Meeting : Others

Indowind Energy Ltd. - Board Meeting : Others

Kesar Petroproducts Ltd. - Board Meeting : Audited Results

Manappuram General Finance & Leasing Ltd. - Board Meeting : Stock split & Bonus Issue

Polytex India Ltd. - Board Meeting : Allotment of Equity Shares

Subuthi Finance Ltd. - Board Meeting : To consider the performance of the Co.

Wintac Ltd. - Board Meeting : Right Issue of Equity Shares

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Protected: Dalal Street Hot Chips Buy Calls - Pratibha Industries

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at March 13, 2010

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Dalal Street Hot Chips Buy Calls - Sterlite Technologies

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at March 12, 2010

STERLITE TEHNOLOGIES
BSE Code: 532374
CMP: 87.85
Investment: For trading or Investment

The improving margins due to better product and sales mix and improving returns are likely to result in better performance by the company going forward. This improved performance will be further aided by greater contribution from the high margin optic fibre segment and declining contribution from the low margin copper cable business. The company is strongly considering its earlier announced plans to venture into new verticals which would contribute towards growth of the company. The new verticals planned includes broadband solutions, power EPC solutions and new product lines like optical ground wire cables, high voltage cables etc. The company has been recently (No. of Shares) awarded a LoI by the PFC for its EastNorth inter-connection mega transmission project worth Rs 800 crore. The project involves establishment of two 400 KV double circuit transmission lines that would connect the Indian states of Assam with West Bengal and Bihar. One can look at the stock for trading as well as investment purposes.

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Wintac Rights Issue

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at March 11, 2010

Wintac spurted 9.77% to Rs 36.50 on BSE, after the company said its board will meet on 18 March 2010 to consider the issue of equity shares on rights basis. The stock hit a high of Rs 36.55 and a low of Rs 36.50 so far during the day. The stock had hit a 52-week high of Rs 36.90 on 16 December 2009 and a lifetime low of Rs 6.66 on 2 April 2009.

The current price of Rs 36.50 discounts the company’s Q3 December 2009 annualized EPS of Rs 2.56, by a PE multiple of 14.26. Wintac reported net profit of Rs 0.29 crore in Q3 December 2009 compared to net loss of Rs 0.47 crore in Q3 December 2008. Net sales rose 20.4% to Rs 4.83 crore in Q3 December 2009 over Q3 December 2008. The company produces a wide range of products in the pharmaceutical, fine chemical and agro chemical segments.

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Rights Issue

Record Date - KM Sugar Mills Stock Split

Posted by admin

at March 11, 2010

K M Sugar Mills has fixed 29 March 2010 as the record date for the purpose of sub-division / stock split of Rs. 10 per share of the company into five equity shares of Rs. 2 each. KM Sugar Mills rose 3.21% to Rs 37 on BSE, after the company fixed 29 March 2010 as the record date for a 5-for-1 stock split.The company’s equity capital is Rs 18.40. Face value per share is Rs 10. The current price of Rs 37 discounts the company’s Q1 December 2009 annualized EPS of Rs 10.39, by a PE multiple of 3.56. KM Sugar Mill reported net profit of Rs 4.78 crore in Q1 December 2009 compared to net loss of Rs 5.38 crore in Q1 December 2008. Net sales declined 7.5% to Rs 34.81 crore in Q1 December 2009 over Q1 December 2008.

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Record Date, Stock Split

Record Date - Indo Asian Finance Bonus Issue

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at March 11, 2010

Indo Asian Finance has fixed 19 March 2010 as the record date for the purpose of determining the eligible shareholders for issue of bonus shares at the rate of 2:1 (at the rate of 2 shares for every share).

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Record Date - Suprajit Engineering Stock Split and Bonus Isssue

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at March 11, 2010

Suprajit Engineering was locked at 5% upper limit at Rs 171.90 at 12:29 IST on BSE, after the company fixed 20 March 2010 as the record date for a 5-for-1 stock split and a liberal 1:1 bonus issue. The company announced the record date during trading hours today, 11 March 2010.

The company is engaged in manufacturing and selling auto components. It produces automotive, non-automotive and push pull cables. The automotive cables includes brake cables, clutch cables, throttle-cables, sear shifi cables, choke cables, speedometer cables, tachometer cables, window regulator cables, mirror cable assemblies, seat rediner cables and latch release cables. Non-automotive cables include washing machines, material handling, earth moving equipment, marine applications, ATVs and lawn movers tractors.

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Bonus Issue, Record Date, Stock Split

IPO Analysis - IL&FS Transportation Networks Limited

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at March 11, 2010

IL&FS Transportation Networks Limited is entering the capital markets with an initial public offering (IPO) at the price band of Rs. 242-258 per share to raise Rs. 7 bn. The issue comprises of an offer for sale of 4.28 million equity shares by Trinity Capital Limited and a fresh issue of more than 22.85 million equity shares with a face value of Rs. 10 per share. The object of the issue is to fund the pre-payment and repayment of a portion of debt availed by the Company and to utilize the funds towards general corporate purposes.

Valuation and recommendation:

According to our valuation, at a lower price band of Rs. 242, the Company offers an EV/EBITDA of 9.2x which is at a discount to peers’ (IRB Infra., IVRCL, Hindustan Const., Nagarjuna Const. and Gammon) average of 11.3x for FY11. The Company proposes a P/E multiple of 19.9x for FY11E, which is comparable to the peers’ average of 18.8x for FY11E, respectively. However, the Company enjoys a high EBITDA margin as compared to the peer average of 16% and also offers a better ROE of 13.7% for FY11 in comparison to the peer setâ€™s average of 12.8%. So, considering attractive valuation and strong operational capabilities and parentage, we recommend investors to Subscribe to the issue.

The issue closes on March 15, 2010.

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Manappuram General Finance Bonus Issue & Stock Split

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at March 10, 2010

Manappuram General Finance & Leasing Ltd has announced that a meeting of the Board of Directors of the Company will be held on March 18, 2010 to consider Bonus Issue, Stock Split / subdivision of shares. The stock closed the day at Rs.692.80, down by Rs.7.20 or 1.03%. The stock hit an intraday high of Rs.707 and low of Rs.690.

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