SynfoSys Business Solutions: Below Average

Score: Below Average

BL Research Bureau

THE initial public offer of SynfoSys Business Solutions at Rs 10 per share can be avoided by investors.

Although the company has been successful in gaining a foothold in the business of software services exports through the provision of low-end on-site consulting, the company's future business plans are uninspiring. Given that the company is still in the development stage, the plans to diversify into e-commerce and product development do not appear encouraging.

Such initiatives are only likely to consume costly resources, especially in terms of management focus. Without a management-focussed exclusively on dealing with issues arising from scaling up the services business, there may be setbacks in store for the company. In this backdrop, risks associated with an investment in this offer appear high and the returns may not be commensurate with the risks.

What the company says

SynfoSys registered revenues of Rs 3.35 crore and profits of Rs 1.11 crore for the year-ended March 2000.

The project cost, estimated at Rs 10.16 crore, is to be funded with an equity component of Rs 8.17 crore, term loan of Rs 1.02 crore and internal accruals of Rs 0.97 crore. The post-issue equity is Rs 8.17 crore. Based on post-issue equity, the per share earnings for the year-ended March 2000 works out to Rs 1.35. The offer is to mainly finance the establishment of software development facilities and establish overseas offices.

The promoter, Mr Pramod K Sana, was earlier a director in Frontier Information Technologies, Hyderabad.

SynfoSys proposes to focus on on-site software development, off-shore software development, web-enabled business and product development.

The company has now a technical manpower of 25 persons which it proposes to increase to 56.

SynfoSys has an ongoing contract with Saudi Science Application International estimated to earn revenues of Rs 3 crore per annum. The company has also tied up with I-DNS International Pte. Ltd, Singapore, which is estimated to earn revenues of Rs 5 crore per annum.