Twin Cities Infotech: Below Average

Score: Below Average

BL Research Bureau

TWIN Cities Infotech is making a public offer to part-finance the cost of the software development project and set up an overseas office.

The relative inexperience of the promoters and the low scale of operations is likely to peg the price earnings multiple at a low level. The IPO at par is unlikely to offer any scope for capital appreciation.

What the offer document says:

The company converted itself into a public limited company in February 2000 with the object of setting up a software development centre.

Prior to this, the company was providing specialised training in software such as Oracle, Java and ERP training.

The company has entered into an agreement with Saroh Infotech for diverting a part of its business to the company. Saroh Infotech has entered into an agreement for joint venture with DM SOFT SRL, Italy.

The company has projected a turnover of Rs. 3.43 crores and post-tax earnings of Rs. 0.42 crore for the year-ended March 31, 2001. The turnover is expected to rise to Rs. 5.82 crores and Rs. 8.12 crores respectively over the next couple of years. The post-tax earnings over the same period is expected to grow to Rs. 0.97 crore and Rs. 1.98 crores respectively.

Investment prospects: As a late entrant into the offshore software development model and relatively low scale of operations, the ability to ramp up its revenues using the infrastructure built through this public offer, may be a difficult proposition. Moreover, given its inexperience in this line of business, its ability to handle complex projects in line with the stringent specifications of the client and to a tight deadline remains untested.

Operating from such a low scale, both the turnover projections and projected operating profit margins of 30-31 per cent, may be difficult to achieve in the next two years. In this backdrop, this public offer may not offer adequate scope for capital appreciation.

Industry Class :Computer - Software

Issue Type :Equity at par

Offer price :Rs. 10 per share

Application amount :Rs. 1000

Offer size :Rs. 1.41 crores

Project Cost :Rs. 6 crores

Post issue equity :Rs. 5.17 crores

Offer Opens on :September 14

Offer Closes on :September 20

Promoters :Prakash Kanyadara

Lead Managers :Aryaman Financial Services

Listing at :Hyderabad/Ahmedabad