New Listings | FAQs | Glossary | IPO Masala | Online IPO Query | IPO Khabar | Feedback | Download IPO Form | IPO Checklist | Allotment Status by mail | Demat Services Online | Disclaimer |
Shine Computech Limited |
|||||||||||||||||||||||||||||||||||
| . | |||||||||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||
Executive Summary |
|||||||||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||
| Business | |||||||||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||
| Industry Scenario | |||||||||||||||||||||||||||||||||||
The Indian software industry generates revenues from Exports and domestically. The export revenue can be from onsite projects or from off shore activities. As regards the domestic market, products developed in the country are few in number. There are very few software companies that are engaged in product development. Ironically though, this is the best way to generate revenues and that too for longer periods of time. Indian companies import software packages and provide some value addition to them. The also market imported software in the domestic market. The Exports have been growing at an annual rate of more than 55 percent. Over the next 10 years, the domestic IT industry is projected to grow to $12 billion, which is almost 30 times the current size. |
|||||||||||||||||||||||||||||||||||
| Financials | |||||||||||||||||||||||||||||||||||
Being a trading company Shine could achieve good volume of business in the past two years. However, the profit margins were abysmally low. Company’s business performance can be seen in the table given below. The accent of the company has been on incomes rather than on the bottomline. The net profit last year was just Rs.7.4 lakhs as against a total income of Rs.331 lakhs. The company's RONW is also at low levels.
|
|||||||||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||
| Project Analysis | |||||||||||||||||||||||||||||||||||
Company proposes to continue its business of trading in software and also start its own software development center that will cater to the needs of its present clientele. It also proposes to start the business of providing Internet based services viz. registration of domain name, homepage designing etc . Objective of the present issue is to provide funds for the expansion of software development facilities, for the development of software products and meet the working capital requirements. Total project cost has been estimated at Rs.1050 lakhs, which is to be raised entirely through equity. Promoters will contribute Rs.300 lakhs and the rest will be raised from public.
|
|||||||||||||||||||||||||||||||||||
| Critical Success Factors | |||||||||||||||||||||||||||||||||||
The company is planning to gain copyrights for its software packages and then market them at substantially lower prices, which will be nearly half the price of other accounting packages available in the market. |
|||||||||||||||||||||||||||||||||||
| Competitive Position | |||||||||||||||||||||||||||||||||||
Though the company's business is old, it has no good reach outside Mumbai. The company also needs to build on the marketing of its products. Shine also needs to develop its overseas tie-ups. Overall, the company's competitive position is weak. |
|||||||||||||||||||||||||||||||||||
| 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. |
|||||||||||||||||||||||||||||||||||
| Recommendation | |||||||||||||||||||||||||||||||||||
Mumbai based Shine Computech is making a premium issue without any appraisal from a financial institution. The intention of Shine’s promoters is not clear. They don’t talk about any strong plans of the software business in the prospectus. Nor do the promoters have any considerable experience in this line of business. The company is not sure about where it is going to locate the new software development office for which it has earmarked an amount of Rs.200 lakhs. Taking the weighted average EPS of last three years of 0.21 and the issue price Rs.15/- a share, the P/E multiple is 71.43, which is very close to the industry average of 94. This is a clear indication that the scrip is overpriced. At this P/E, one can get good performing software stocks from the secondary market. Investment in this issue is likely to be highly speculative and volatile in nature. The Company has limited strengths of its own. |
|||||||||||||||||||||||||||||||||||
| Top / Back |