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Take it

August 01, 2007 16:11 IST

Issue opens: August 1
Issue closes: August 7

Among a pack of product-based IT companies, Take Solutions appears reasonably priced.

With a large number of players in the information technology (IT) industry, it is becoming increasingly difficult for new entrants to make a mark in the already crowded marketplace. Innovative outfits score over the rest in such a scenario, by finding out a niche where there is enough potential to scale up.

Take Solutions, the case in point, is one such company which has carved out its niche in the areas of supply chain management (SCM) and life sciences – mainly clinical trials.

A fast growing company, it has made a number of acquisitions in the past. Now, it has one more acquisition to make, and is stepping into the capital markets to raise funds for the same.

Take aims to aggregate between Rs 81-87.6 crore from the market by issuing 21 million shares of Rs 10 each. The price band fixed for the issue is between Rs 675-730, and the issue comprises of 17.5 per cent of the company's fully diluted post-issue capital.

Niche line-up
Take Solutions' SCM products act as an extension to traditional enterprise resource planning (ERP) solutions, addressing the operational issues. It has positioned itself strongly in various verticals such as automobiles, consumer goods, manufacturing and pharmaceuticals.

On the other hand, Take's life sciences products help pharmaceutical companies from managing and mining data during their clinical trials processes, until the regulatory documentation is made.

"We have a track record of more than 2,500 SCM suite installations at a number of Fortune 500 clients. In life sciences, three out of the top five pharma majors are our clients," claims a confident HR Srinivasan, vice chairman, Take Solutions.

Growing base
Being a product-centric company, Take Solutions has to keep acquiring other similar outfits which have complimentary products to its own suites.

Recently, it acquired a US-based SCM product company called ClearOrbit. The company is now eyeing another acquisition of a company which specialises in supply chain information services and analytics for the food-service industry.

Financially, the company has recorded strong performances over the years. Its revenue has grown at a compounded annual rate of 131 per cent over FY03-FY07. The operating and net profit margins are strong at over 25 and 18 per cent, respectively.

FINANCIALS
Rs crore FY06 FY07 FY08E
Revenue 47.80 182.20 275.00
Operating profit 16.00 46.70 71.50
OPM (%) 33.50 26.00 26.00
Net profit 9.60 31.60 47.00
NPM (%) 20.10 17.30 17.10
EPS (Rs)*

-

26.30 39.20
* estimates based on fully diluted post-issue capital

The management aims to maintain a balanced mix between both its revenue streams going forward. In spite of being a product company, the revenues from services form a strong 40 per cent of Take's top line, which aids its repeat business and hence, stability of revenues.

Valuation
The issue is priced between 17 and 19 times Take's estimated FY08 earnings at the lower and upper end of the price band, respectively.

Compared to other product-based players in the IT arena, the issue appears reasonably priced.

PEER COMPARISON
P/E FY07 FY08E
Take Solutions @ Rs 675* 25.7 17.2
Take Solutions @ Rs 730* 27.8 18.6
iFlex 49.7 51.4
Rolta 24.8 15
Subex Azure 103.6 16.7
Sasken Communications 26.3 16.1
* estimates based on fully diluted post-issue capital

Further, with increasing emphasis of pharma majors on getting new drugs to the markets quickly, there is a strong probability of large orders from pharma companies for every new molecule that they come up with.

Although a lot depends on the company's ability to add new domains to its kitty, considering its present product portfolio and clientele, there appears little downside. Overall, the issue is worth subscribing.