Ontrack Systems Limited |
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- Issue Opens : 20th Sept., 2000
- Issue Price: Rs. 20/- per share (FV Rs.10/-)
- Issue Size: 23,50,000 shares amounting to
Rs.4.70 crore
- Registrars to the Issue:Cameo Corporate
Services Ltd.
|
- Issue Closes: 25th Sept., 2000
- Minimum Application: 100 shares @ Rs.20/-
each
- Post-issue promoter’s stake: 36.49%
- Lead Managers: Ind Bank Merchant Banking
Services Ltd., Karvy Investors Services Ltd.
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Recommendation
: Above Average |
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Listing on: Calcutta and Chennai Stock
Exchanges
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Executive Summary |
Click Here to Read the Analysis
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| Business |
Ontrack Systems was incorporated at Calcutta in 1988 as a
private limited company and was converted into public in 2000. The company’s primary
area of operations was developing custom made application software for domestic companies.
The clients and the projects of Ontrack Systems are as follows:
Albert David Limited : Ontrack developed the complete branch and head
office applications for this pharmaceutical company. The application was developed in
Clipper under DOS environment.
Coventry Springs Limited: Developed the production, financial accounting
and payroll system for the engineering company. The application was developed in UNIFY
under UNIX.
Contemporary Target Limited: Developed the Tea Broking System for the tea
broker. The application was developed in Clipper and DOS. These systems were implemented
for the Calcutta and Guwahati offices of the company.
Woolworth India Limited: Developed the FOREX system for the company along
with financial accounting systems. The company also developed software for their associate
company in Huddersfield. UK.
ICI India Limited : Developed a custom made software package for all the
ICI depots all over India.
The company is promoted by Mr. B Hari, a B.E (Electrical Engineering), having over
16 years of experience in the IT industry. He has gained rich experience in systems
design, software consulting and business development. Hari was one of the first to develop
portal sites in India four years back. His portal site viz., "Calonline.com"
(Calcutta Online) was acquired by Research Engineers Inc, a NASDAQ listed company in 1998.
Hari is the founder member and the past Secretary of Computer Association of Eastern India
(Compass).
Top
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| Industry Scenario |
The competition in the dot.com sector is increasing by
the day. Even leading dot com ventures that are more than 3 years old, are yet to break
even. Every niche of this market faces stiff competition and only ventures with clear cut
USPs are likely to survive. These companies can survive only on a strong revenue model.Information technology industry as such is
characterized by rapidly changing technologies, intense competition from existing players
and new entrants.
Top |
| Financials |
| Ontrack Systems
recorded net profit of Rs.0.79 lakhs in FY99. Over the years, the company’s focus has
shifted from custom made application software to hardware, networking and export oriented
projects. |
Financial Performance(in Rs. lakhs) |
Particulars
|
1995-96 |
1996-97 |
1997-98 |
1998-99 |
1999-2000 |
2000-01 |
2001-02 |
2002-03 |
Total
Income |
104.7 |
110.7 |
108.52 |
136.83 |
13220.37 |
662 |
1384 |
2466 |
Net
Profit |
0.61 |
0.82 |
0.79 |
0.79 |
19.69 |
61 |
78 |
477 |
EPS
(Rs.)** |
6.91 |
9.29 |
8.95 |
8.95 |
#0.71
*8.72 |
NA |
1.55 |
9.54 |
Book
Value (Rs.100 Face Value)** |
147.89 |
157.13 |
166.15 |
173.19 |
21.10 |
NA |
20.43 |
27.30 |
RONW (%) |
4.67 |
5.91 |
5.39 |
5.17 |
#3.52
*46.69 |
NA |
7.59 |
34.93 |
The Face Value of a scrip has been reduced from Rs. 100 to Rs. 10 in
December 1999. |
Top |
| Project Analysis |
The company is embarking on a three fold project as follows.
- tendertimes.com: This is a portal targeted at the huge
tender market. The company is pioneering a change in the preferred vehicle for
accessing/publishing tender notices from the conventional newspaper publications to the
internet with a whole lot of value adding features built in.
- Overseas Operations & India Development Centre: In an
economic environment where Information Technology has taken a march over any other sector,
there are opportunities for the right service provider.
- Computer Telephony Division. This division aims at tapping
the huge Interactive Voice Recording systems market especially in multilingual
environment.
The present issue is to part-finance the following.
- The above 3 projects
- Long term working capital requirements of the company
- To meet the expenses of the issue.
| Fund Requirements |
| Tendertimes.com |
569.70 |
| Overseas Centre at
San Jose, USA |
162.94 |
| India Development
Centre |
113.65 |
| R&D for
Computer Telephony |
57.75 |
| Preliminary
Expenses |
10.00 |
| Public Issue
Expenses |
30.00 |
| Contingency |
47.20 |
| Long Term Working
Capital |
57.76 |
Total Cost of the Project |
1049.00 |
Top |
| Critical Success Factors |
In the year 1990 the company diversified into the area of providing hardware
services for its customers and acquired customers for networking and maintenance services.Some of the major contracts which the company procured include:
1.Turnkey maintenance of the computer network at Indian Institute of Management, Calcutta.
2.Network support and maintenance of Jet Airways for their Calcutta operations.
3.Turnkey maintenance contract for the ISPAT groups offices in Calcutta and Balasore.
The company has over 250 customers availing IT services of the company. The company
has recently been awarded a contract by WEBEL, to maintain 20 treasuries spread in various
districts in West Bengal. The company also decided to focus on export of software
services and in providing web based application development.
In 1995, WEBEL (West Bengal Electronics Development Corporation Limited) was awarded the
contract to produce Voters Identity Card. Ontrack played a key role in acting as a
subcontractor for this project.
The company currently has the following operating
divisions:
1.Tendertimes.com: This portal was conceived in November 1998 and was put
into a Beta stage in Sept 1999.The portal was launched in January 2000 at the COMPASS 2000
computer exhibition at Netaji Indoor Stadium, Calcutta. The portal was awarded
"The best new Software product " in the Internet category.
2.India Development Centre : This division currently is providing all the
technical and programming services for tendertimes.com. Other than this the division is
also carrying out development work on behalf of private sector, public sector and
international customers. The company has decided to invest in IBM’s e-commerce
solutions and a separate group is getting created to focus on IBM’s WebSphere
e-commerce suite.
The India development Centre has developed several web
sites for overseas and domestic customers . Some notable references
include:www.chemsultants.com, www.lpci.net, www.portofcalcutta.com, www.city4u.com,
www.mnr-india.com, www.eworldmachines.com and www.rkumar.com. The division has recently
been awarded a contract by WEBEL to develop a website for the Education Department of the
Govt. of West Bengal . The division is also constructing a portal work2study.com for a USA
client.
3.Service Division: This division provides networking, installation and
hardware services for domestic companies and for the other division of the company. Some
of the major customer of this division include:
a.Garden Reach Ship Builder’s and Engineers Limited.
b.South Eastern Railway.
c.Ordnance Factory Board.
d.Webel Informatics Limited.
e.WEBEL ECS Limited.
f.JET Airways.
g.Black Diamond Beverages Limited.
h.The Phosphate Company Limited.
i. Exide Limited.
Top
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| Competitive Position |
The company's promoter has very good experience and is
associated Computer Association of Eastern India
(Compass). The company has already proved itself in calonline.com and the success as
regards the new vetures is awaited. The company is well established in the local market
i.e. in Calcutta.
While there are more than 20 sites that offer information on tenders, Ontrack's
website also has facilities like documentation and other services of the tender process
are offered.The company's USP is the
entire spectrum of services that they offer Many vertical portals approach the company for
tender related services. The company has good technology and good understanding of the
markets.
Top |
| Market Scenario |
The primary market had witnessed a boom at the beginning of
this year when many companies came out with public issues at high premiums. The market has
however now learnt to identify the good and high growth companies from the entire lot.
While companies offering at par are still sailing through, the ones charging a premium
need to be more careful. Companies like SIP Technologies have called off their IPOs due to
poor response. Top |
| Recommendation |
The company’s weighted average EPS for the last three years is Rs.10/-. Based on the
issue price of Rs.20/- a share, the P/E is 21.53. Compared to the industry average
(Computer Software: Medium/Small) of 150.5, Ontrack's P/E is much lower indicating the
chances of capital appreciation. The company had its presence in hardware, software and
networking areas of business. The company seems to have a low risk and hence the scrip can
be preferred for medium term. Top |
