Ontrack Systems: Below average

Score: Below average

Krishnan Thiagarajan

GIVEN the relatively low scale of operations, the high risks involved in the Internet business and the heightened competition levels in the software services business, the public offer of Ontrack Systems at Rs. 20 may not offer adequate scope for capital appreciation.

Ontrack Systems is making a public offer to set up a web portal targeted at the huge tender market, Tendertimes.com, set up overseas operations and an offshore development centre in India, and tap the huge interactive voice-recording systems market, specially in a multilingual environment. The project has been estimated at Rs. 10.49 crores.

The company continues to operate at an extremely low scale with total income of Rs. 2.20 crores in 1999-2000 and post-tax earnings of Rs. 0.19 crore. The ability to scale-up from this level to the forecasted sales of Rs. 13.84 crores and Rs. 24.66 crores in 2002 and 2003 is difficult. The revenue models for the Internet business are still in a state of flux and any innovations in content may offer only a limited window of opportunity, as they are replicated quickly by competitors.

In this backdrop, an investment in this offer may be ignored. The offer opens on September 20 and closes on September 25. Indbank Merchant Banking Services is the lead manager to the offer.