New Delhi, Dec 16: Thanks to the unsatiated craze for software floats, Mumbai-based Melstar Information Technologies is offering its IPO at a price-earning multiple of as high as 44.17. The P/E is based on an annualised EPS of Rs 1.63 for the first quarter of fiscal 2000. This could be the highest priced software IPO so far in terms of offer P/E. Also, 1999-earning of 90 paise discounts the offer price of Rs 72 by a multiple of 80.
However, according to chairman of Melstar, Suresh Bansal, the company is banking on its performance for fiscal 2000 and Melstar Information would end up the year with a net profit of Rs 6 crore on a total turnover of Rs 33 crore. On an expanded equity of Rs 12.15 crore, the EPS for fiscal 2000 works out to Rs 4.93. ``The EPS for fiscal 2000 discounts the offer price of Rs 72 by a multiple of only 14.6 which is attractive considering the high discounting enjoyed by the software stocks on the bourses,'' he said.
Also, as Melstar absorbed cost for its foray into software development in fiscal 1999, the company's performance has been affected, he added. While the company achieved an operating margin of almost 40 per cent in fiscal 1999, net profit margin slipped to just 1.55 per cent.
Alongwith the Rs 16.27-crore IPO, Usha Martin Ventures, Brij Investment Pvt Ltd and Multibis Financial Services are making an offer for sale of 8.89 lakh shares at a price of Rs 72. The IPO of 22.61 lakh shares as well as the offer for sale will open for subscription on January 17.
Ahead of its Rs 16.27-crore IPO, Mumbai-based Melstar Information Technologies has formed a joint venture with The Summit Group of USA and ITC Consulting GmbH of Switzerland. Melstar is holding 45 per cent, Summit Group 45 per cent and ITC Consulting 10 per cent in the US-based joint venture.
The joint venture, named Global System Development Inc (GSD), will provide consulting business on internet, web applications, e-commerce and client/server and mainframe. The joint venture is expected to contribute Rs 25 crore to the total turnover of Rs 33 crore for fiscal 2000. Mesltar is expected to gain substantially from the joint venture by acquiring offshore projects, domain knowledge in the banking sector and expertise in consulting business and e-commerce.
Established in 1986, Melstar has been mainly engaged in trading of hardwares till fiscal 1998. As the hardware is a low margin business and software development offers immense potential for growth, the company shifted its focus to software development in 1998. The company has a workforce of over 325 and has five offices abroad. The company has important global partnership with IBM, Microsoft, Oracle, Digital, Lucent Technologies and 3Com. As the largest business partner for IBM, the company offers enterprisewide solutions to IBM's top customers in India. For Informix, the company has built a dedicated software worksite manned by 120 developers, which is hotlinked direct to Informix's office in California.
The company's clients include Citibank, Standard Chartered, Dresdner Bank, KPMG, Price Waterhouse, Colgate, P&G, Dupont, DHL, Whirlpool, Ubest and Usha Martin. The company has now drawn up a Rs 15.46-crore project to set up new software development centres at Melstar House and SEEPZ in Mumbai, investments in Melstar UK and the US subsidiary, upgradation of existing facilities and prepayment term loans to Punjab National Bank.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.