Kirloskar Multimedia -- Not the right medium

Score: Below Average

Krishnan Thiagarajan

THE relatively unimpressive track record, heightened competition levels in the CD-ROM market and risk of technological obsolescence make the public offer of Kirloskar Multimedia an unattractive investment proposition.

Kirloskar Multimedia is making a public offer to part-finance the purchase of equipment, product marketing expenses, setting up of an international marketing office, meeting product development expenses and retiring debts. The project cost is estimated to be Rs. 4.10 crores.

The company has developed 15 multimedia CD-ROM titles for the international market, which is being marketed through its 100 per cent subsidiary, Kirloskar Multimedia Inc. in Delaware, US. On account of a substitution of funding sources, the company failed to operate on the scale envisaged initially. Although the commercial operations started on April 1, 1996, the development of the 15 multimedia titles were delayed beyond the original deadline.

In a dynamic industry such as multimedia, the risk of technological obsolescence is fairly high. In the developed markets, the DVD (Digital Versatile Disk)-ROM is already replacing the CD-ROM markets in a significant way. As the broadband revolution catches on in the US, the delivery of voice, video and text (or enriched multimedia) through the cable medium is slowly becoming a reality. As this revolution gathers momentum, CD-ROMs, as a delivery medium, may lose their importance in the medium term. In the light of the intense competition prevailing in the CD-ROM segment, marketing these CD-ROM titles may be a tough proposition.

In any case, the financial performance of the company in the past hardly inspires confidence. As of February 29, 2000, the company had accumulated losses of Rs. 1.27 crores and is estimated to incur a loss of Rs. 0.98 crore for the period-ended June 30, 2000. In this backdrop, this public offer may not offer adequate scope for capital appreciation. The offers opens for subscription on June 12, 2000 and closes on June 19, 2000.