Krisn Information Technologies -- Yet to gain a foothold

Score: Below average

Suresh Krishnamurthy

KRISN Information Technologies (KIT) is making a public issue of shares priced at Rs. 10, aggregating Rs. 1.30 crores.

The offer is being made to part-finance the cost of setting up a software development centre, an overseas marketing office in the US, and developing an e-commerce and web server maintenance centre. The project cost is estimated at Rs. 5.70 crores, primarily financed with equity.

The following information is contained in the offer document:

KIT was started as a proprietary concern in 1995 and was incorporated in October 1999. It plans to provide various services in the field of IT, such as hosting websites locally, converting character-based to GUI-based application, web-enabling of existing banking and insurance packages, developing e-commerce and technologies for taking off-shore projects related to Internet-enabling of old legacy systems.

KIT reported income of Rs. 0.34 crore for the year-ended March 1999 and after-tax profits of Rs. 0.03 crore. For the period up to November 15, 1999, the company reported revenues of Rs. 0.18 crore and Rs. 0.03 crore.

KIT is co-promoted by Mr. P. C. Pantulu, the promoter of a listed IT company, Cybermate Infotek, which came out with a public offer of shares at Rs. 10 in February 1999.

The company has entered into a memorandum of understanding with Merant Solutions Private Ltd, Bangalore, for developing e-business applications and with Cova Technologies Inc., San Jose, US, for marketing its existing software packages.

KIT is yet to obtain a foothold in the software services market. There are considerable risks involved in establishing a venture as well as scaling up the size of operations. In such a context, any investment in this offer acquires the dimension of a venture-capital investment. Ordinary investors would be taking risks that may not be commensurate with returns that such an investment may provide. Given this backdrop, investors would be better off avoiding an investment in this offer.

Industry class Computer Software

Instrument type Equity at par

Issue size Rs. 1.30 crores

Application Amount Rs. 10 per share

Issue opens April 24

Earliest close April 27

Lead managers Ashika Credit Capital

Project cost Rs. 5.70 crores

Debt:Equity 0.05:1

Post issue equity Rs. 5.07 crores

Listing Bangalore and Hyderabad

Promoters L. V. Subba Raju and Associates