Oceana Software Solutions: Below average

Score: Below Average

BL Research Bureau

THE initial public offering (IPO) of Oceana Software Solutions does not appear to hold potential to deliver returns commensurate with the risks involved in the investment.

The offer price of Rs. 20 appears unjustified, considering the modest track record of the company.

What the company says: Oceana was incorporated in 1995 and has till now been providing software solutions to domestic companies. It is now attempting to have a tie-up with Apple Computers Inc., US, for setting up a training centre.

Oceana reported revenues of Rs. 1.15 crores and profits of Rs. 0.48 crore for the eight months ended February 2000. It now has orders worth Rs. 1.55 crores on hand.

The present offer of shares is to finance the expansion of its software development facilities, develop e-commerce and web-based project facilities and provide funds for expanding the software training centre.

The project cost is Rs. 15.04 crores, to be financed entirely with equity. The IPO is to be mobilise Rs. 10 crores with the remaining contributed by promoters.

Prospects: Oceana has been providing application development solutions to domestic customers. Even in the case of domestic business, the profile of the customers does not include any of the big corporates in either the public or the private sectors. Even the orders on hand are from small- and medium-sized enterprises. In short, Oceana's track record does not appear to infuse confidence.

With a modest background, efforts to break into the export market for software services and to scale up the operations to a sizeable level are likely to prove difficult. In terms of its foray into the training sector, Oceana is yet to firmly tie-up with Apple Computer Inc., US. Even with a tie-up, the going is likely to be tough, given the intense competition in the training sector. Overall, the company's track record and its existing profile do not appear to justify the offer price of Rs. 20. In this backdrop, investors would be better off avoiding this offer.

The lead manager to the offer, Systematix Corporate Services, has offered a safety net to individual investors. Up to a maximum of 100 shares per allottee can be sold back to the lead manager at Rs. 20 per share, till a period of six months. The scheme is applicable to fully paid-up equity shares only. Even with the existence of this safety net, the IPO remains unattractive. The offer opened on August 10 and closes on August 14.