NEW DELHI, Feb 22: It's a hat-trick for software IPOs. After the fabulous innings by Sonata Software and Cybermate International, KPIT Systems has now scored with a 50 times oversubscription for its public issue.
According to market sources, the Rs 11.61 crore issue has attracted hordes of investors -- both at the retail and institutional level. Unfazed by the high premium of Rs 80, applications poured in. The oversubscription in the case of high-networth individuals is around 80 per cent, while that of small investors's is over 20 per cent.
The success of KPIT Systems's IPO owes a lot to Sonata Software's listing on the NSE and BSE at a premium. The software boom was an added bonanza. The huge appetite for software stocks has set the stage for smaller infotech companies coming out with premium issues. SQL Star International's issue is one software IPO on the anvil. Several finance companies, who have recently shifted their focus to software, are also waiting in the wings for a share of thecake.
Cybermate, a three-year old company, proved to be major hit with it's issue being oversubscribed 27 times. Cybermate's success followed Sonata's listing at a premium on the bourses. The stock touched a high of Rs 350 on BSE after two weeks of trading. The exit opportunity at this counter, in fact, fuelled investor expectations. For a number of investors, who had been trapped in several banking counters, the success of software IPOs has come as a welcome change. KPIT Systems had offered 12,90,000 equity shares of Rs 10 each at a premium of Rs 80. The 1997-98 EPS of Rs 5.15 discounts the offer price of Rs 90 by a multiple of 18.33. Sonata Software had offered its share at a P/E of only 12.40. KPIT's issue proceeds will finance the setting up of a software technology park near Pune, pay the company's long-term borrowing and set up two overseas subsidiaries.
The issue was fully underwritten. Enam Financial and DSP Merrill Lynch had underwritten to the tune of Rs 8.03 crore and Rs 1.5 crore,respectively. IL&FS and Enam Securities had pumped in Rs 1.5 crore and Rs 58.05 lakh, respectively.
The total project cost was estimated at Rs 15.40 crore of which Rs 11.61 crore was to come in through the IPO route and the balance through internal accruals. The setting up of the software development facility would cost the company Rs 6.80 crore. The company also plans to repay its long-term debts to the tune of Rs 1.20 crore. Post-issue, while the promoters will hold a 50.63 per cent stake in KPIT Systems' Rs 5.15 crore equity, while the public holding will be at 25 per cent.
As institutions have responded overwhelmingly to KPIT's IPO, the stock could command a good premium on listing. However, as the shares will be listed only at Pune, Ahmedabad and Hyderabad -- where institutions hardly trade -- one will have to wait and see the level of exit point for investors. KPIT's low floating stock is another worrying factor.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.