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Registered Office Address |
Bhageerath, 402, Senapati Bapat Road, Pune 411016, Maharashtra, India |
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Phone |
91-20-30242000 |
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Fax |
91-20 25657888 |
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Email |
investors@persistent.co.in
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Website |
http://www.persistentsys.com
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Issue Open |
17-Mar-2010 |
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Issue Close |
19-Mar-2010 |
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Issue Size
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5419706 |
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Issue Type |
Book building |
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Face Value |
Rs 10/- |
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Price Range |
Rs 290/- to Rs 310/- |
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Tick Size |
Re 1/- |
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Market Lot |
20 |
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Minimum Order Qty |
20 |
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Listing Stock Exchange |
NSE, Mumbai |
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Registrar To The Issue |
Link Intime India Pvt Ltd.
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Grading |
-
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Book Running Lead Managers |
Enam Securities Pvt Ltd., J.P. Morgan India Pvt Ltd. |
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Analysis
Company Background- Persistent Systems Ltd. (PSL) was incorporated as Persistent Systems Pvt. Ltd. in May 1990 and was converted to Public Ltd. Company in September 2007.
- PSL is a technology company that specializes in outsourced software product development. It delivers services across the value chain of product development i.e. product conceptualization, design, development, testing and support.
- Company has significant domain expertise in telecommunications, life sciences & healthcare and infrastructure and systems.
- In FY 09, the company had 297 customers, of which the top 10 customers accounted for around 37% of its revenues. The company worked with customers in the US, Canada, Norway, Sweden, Netherlands, France, Germany, Ireland, the United Kingdom, India, Japan, New Zealand, Australia and Singapore last fiscal year.
- The company has offshore development centres located in Pune, Nagpur, Goa and Hyderabad. It also has nine development centers in Europe, America and Asia.
- For year ended March 09, time and material basis contracts dominated the company’s revenue with 80% contribution, followed by fixed price contracts with 14%, while rest of the revenues came from licenses and royalty.
- Post issue promoters & promoter’s group shareholding will reduce to 38.85% from existing 43.34%.
Objects of Issue- For the establishment of development facilities
- For procurement of Hardware
- To establish development facilities and meeting fit outs and interior design costs
IPO Grading - CRISIL has assigned a "Grade 4" to the proposed IPO. CRISIL assigns IPO grades on scale of Grade 5 to Grade 1, with Grade 5 indicating strong fundamentals and Grade 1 indicating poor fundamentals.
Strengths- Healthy Revenues: PSL witnessed a healthy growth in sales of over 40% CAGR during the period 2007-09 largely driven by an increasing trend of offshoring among Independent Software Vendor’s.
- Strong Financials: The company also has a strong financial position given its zero gearing since FY 06 and generation of robust cash. Over the past five years, PSL has generated positive cashflows from operating activites due to its sustained topline growth, debt free position and low effective tax rates.
- Optimal Cost Structure: The company derives over 89% of its revenues from services delivered from India, which creates an optimal cost-structure for the company as it does not implement product at clients’ location, it is not required to have a significant onsite presence.
- Tax Benefit Under SEZ Scheme: The company has recently commissioned facility at Hyderabad, which is on a long-term lease and would enable it to take advantage of the tax benefits available under the SEZ scheme.
- Well-diversified Customer Base: Apart from catering to leading ISV’s, PSL offers end-to-end solutions to smaller software product companies. This has led to a well-diversified customer base. The company is also planning to increase the number of fixed price contracts to attract small and mid-sized customers.
Weaknesses- Geographical Limitations: PSL at present extracts more than 80% sales from the USA. In FY 09, Rs. 5,09.80 crores sales, accounting to 85.85% of total sales of the company were from the US. This might prove to be a set back for the company mainly on account of the global economic downturn.
- Withdrawal of Tax Concessions under the STPI scheme: The company currently enjoys tax concession under the STPI scheme, which is slated to be withdrawn by the government post March 31, 2011. If the scheme is not extended, it could have an adverse impact on post tax net margins.
Financials- Net sales of the company augmented at a CAGR of 42% from Rs. 146.87 crores in FY 05 to Rs. 593.83 crores in FY 09 driven mainly by rise in export of software services and products.
- During FY 05 to FY 09, profit after tax grew at a CAGR of 19%. For year ended March 2009, PAT of the company stood at Rs. 66.09 crores against a profit of Rs. 33.34 crores in FY 05.
- For year ended March 2009, OPM and NPM stood at 16.54% and 11.13% respectively. RONW for the same period stood at 17.92%
- For nine months ended December 2009, net sales of the company fell by 3.44% to Rs. 429.41 crores compared to Rs. 444.73 crores in the same period last year.
- PAT for nine months ended December 2009 stood at Rs. 75.35 crores up by 44.84% from Rs. 52.02 crores for nine months ended December 2008 on account of rise in other income.
- OPM and NPM for nine months ended December 2009 stood at 24.95% and 17.55% respectively.
Valuations- Company’s shares are offered at a price band of Rs. 290 to Rs. 310 per share. Post issue the P/E of the company comes out to 11.93x at the lower price band and 12.75x at the upper price band.
Peer Analysis (For Nine Months Ended December 2009)Particulars | Mindtree | Polaris Software | 3i Infotech | PSL | Sales (Rs. crores) | 910.01 | 849.83 | 377.01 | 429.41 | PAT (Rs. crores) | 153.29 | 93.66 | 89.45 | 75.35 | Operating Profit (Rs. crores) | 168.79 | 132.89 | 187.33 | 107.12 | NPM (%) | 16.84 | 11.02 | 23.73 | 17.55 | OPM (%) | 18.55 | 15.64 | 49.69 | 24.95 | EPS^ (Rs.) | 52.01 | 12.63 | 7.07 | 24.33 | PE (Times) | 11.29 | 12.64 | 11.30 | 11.93-12.75 | Face Value (Rs.) | 10 | 5 | 10 | 10 | CMP (March 15, 2010) (Rs.) | 587.4 | 159.6 | 79.9 | 290-310 |
Source: Religare Technova
^Based on annualized PAT for nine months ended December 2009 |
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