Omni Ax's Software -- Low-end of the value scale

Score: Below average

Suresh Krishnamurthy

OMNI Ax's Software's (OAS) is making an initial public offering (IPO) to finance the expansion of its software development facilities, software training centre and set up overseas offices.

It is offering shares at Rs. 15, aggregating to Rs. 7.13 crores. The project cost is estimated at Rs. 15.49 crores to be almost entirely funded by equity.

The offer document of OAS contained the following information: OAS is into software development and training. The company, which was promoted by Mr. K. Govindrajan and Mr. D. Rajendiran, was taken over by the current promoter in March 1997. Its income from software development and training increased from 0.03 crores in 1995 to Rs. 0.84 crore in 1999. Profits for the same period rose from 36 lakhs to Rs. 0.38 crore.

In software development, OAS has serviced a few domestic customers, having executed projects such as stock management software, supply chain management software, India Web Tourism Portal, Accounts Management System, Accounts Receivable/Pay Management. In software training, the company is an affiliate of Tata Infotech's Tulec division and has so far trained 2,500 persons in various courses.

For the period-ended November 1999, OAS reported a gross income of Rs. 1.25 crores and a net profit of Rs. 0.62 crore. Of the total income, Rs. 0.93 crore came from software training.

The company proposes to set up a software development centre, which would require approximately 200 software professionals. Its present manpower base is 25. OAS will be recruiting the required 175 additional personnel in the next quarter.

OAS' IPO would fall under the venture-capital genre. This puts the risks of an investment in this offer on the higher-end of the scale. However, returns from an investments appear unlikely to commensurate with such risks. The company is basically a franchisee of a training company. It is yet to establish itself in the arena of software development. Its operations in the past few years, which have been mainly training-based, have been primarily on the lower-end of the value scale and do no justify the price fixed by the company. In this backdrop, investors can avoid the offer.

Industry class Computer Software

Instrument type Equity

Issue size Rs. 7.13 crores

Application Amount Rs. 7.50 per share

Issue opens April 24

Earliest close April 27

Lead managers Systematix Corporate Services

Project cost Rs. 15.49 croresDebt:Equity 0.05:1

Post-issue equity Rs. 10 crores

Listing Chennai and Mumbai

Promoters P. G. Senthil and Associates