Synfosys Business Solutions Ltd

Synfosys Business Solutions Ltd.

Issue Opens : 24th Oct., 2000 Issue Price: Rs. 10/- per share (FV Rs.10/-) Issue Size: 20,50,000 shares amounting to Rs.205 lakhs Registrars to the Issue: Satguru Management Consultants Pvt. Ltd.	Issue Closes: 3rd Nov., 2000 Minimum Application: 200 shares @ Rs.10/- each Post-issue promoter’s stake: 40.72% Lead Managers: SMIFS Capital Markets Ltd.
Recommendation : Average

Listing on: Hyderabad and Bangalore Stock Exchanges

Executive Summary

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Business

Industry Scenario

Financials

Project Analysis

Critical Success Factors

Competitive Position

Market Scenario

Recommendation

Business

Synfosys Business Solutions Ltd. was incorporated as a limited company in 1997. The company started its operation with a project from the USA and thereafter had established several strategic and technical alliances in USA, Singapore, and Gulf countries to help nurture and further its vision of providing an innovative solutions spectrum.

The company's major segments of business are the following

1.On-site Software Development Services

2.Off-shore Software Development Services

3.Web-enabled Business/E-Commerce

4.Product Development

As part of product development it launched a website eNamaskar.com which introduced Multi Lingual domain names Technology for the first time in India.

The company is currently working on projects on-site as well as off-shore for the customers in USA, KSA, Singapore. Projects and consulting range from IBM mainframe to Web-Based Technologies platforms. Application areas covered include re-engineering, migration, data warehousing and product development. The company offers its clients total solution to their organisation's business needs adding the most comprehensive services and advanced technologies available to support the current and future requirements.

The company is promoted by Mr.Pramod K.Sana, Ms.Aparna Mendonce, Ms.Pranathi Reddy Sana, all are technically qualified professionals.

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Industry Scenario

Worldwide, IT has become a strategic integral tool for efficient and effective business management. As businesses have become more dependant on IT, corporate budgets for IT services have grown dramatically.

Over a period of time enterprises have built up IT solutions/networks to meet their business requirements. A number of these solutions needs to be upgraded to be in line with changes in business requirements and technology. With enterprises focussing on quicker delivery times and on cutting costs, outsourcing maintenance of their systems and development of new solutions/applications have become critical requirements.

Primary focus of the company is to establish strategic alliances for variety of software development with emphasis in the US, Far East Asian and Middle East Asian countries.

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Financials

Synfosys' total income increased by 12 percent in FY2000 as compared to the previous year. The net profit on the other hand has increased by around 20 percent in FY2000 as compared to FY99.

Financial Performance(in Rs. lakhs)
Particulars	April 2000	FY2000	FY99	FY98
Total Income	14.73	337.49	300.26	10.977
Net Profit	1.03	111.14	92.82	0.007
EPS (Rs.)	0.42*	18.52	92.82	1.00
Book Value	14.41	31.64	87.9	-
RONW (%)	2.89*	58.55	105.60	-
* Annualized

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Project Analysis

The present issue of equity shares is being made

1. to establish software development facilities.

2. to establish overseas offices in USA,Singapore and Dubai.

3. to augment working capital resources.

4. to meet the expenses of the issue.

5. to list the equity shares on the stock exchanges.

The total cost of the project has been estimated at Rs.1016.44 lakhs, of which Rs.817.41 lakhs will be financed through equity share capital, Rs.97.03 lakhs from reserves and surplus and Rs.102 lakhs by way of term loans.

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Critical Success Factors

It is not much time since the company has started its business. In the period 1998-99 the company has achieved a tremendous performance growth in terms of revenue and profitability, the company;s turnover has increased to Rs.300.26 lakhs as against a turnover of Rs.10.98 lakhs achieved during the six months period of the previous year, registering a ten times growth on an annualised basis.

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Competitive Position

To withstand the competition, the company is continuously evolving and implementing growth strategies. The company has evolved in line with the strategy of focussing on the chosen domains and contemporary technologies. The company will focus on the following areas of business for the years 2000 and 2001.

1.Multi-lingual E-Commerce - The company's objective is to empower non-English speakers to tap into e-commerce.

2.Fingerprint security technology - Its objective is to have a new type of lock for the ones based on personal biometrics information, such as voice recognition, face-matching, signature recognition, eye recognition, fingerprint.

3.Web-Enabled Security - In this area the company is working with another Silicon Valley based company.

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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

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Recommendation

The company was incorporated in 1997. So, its only 3 years that the company started its business. Major portion of revenues come from project services. The company is into Multi-Lingual e-commerce, Fingerprint Security Technology and Web-Enabled Security, which are yet to pick up.

The P/E of the company at the weighted average EPS of 37.25 of the last three years at the issue price of Rs.10/- a share is 0.27.

While the quantitative factors justify the issue price, keeping the current market conditions in mind, the issue seems over priced.

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