IQMS Software: Below Average

Score: Below Average

BL Research Bureau

AS IQMS Software aims to target the low end of the web-enabled/e-commerce business, the scope for volume growth may be significant, but operating profit margins may come under pressure in the medium term.

Besides, the stiff competition in its core business and the poor track record of its associate companies do not inspire confidence.

IQMS Software is making a public offer to set up the company's software development project, web-enabled business/e-commerce and management consultancy. It also proposes to invest in an overseas company to support its marketing activities. The project cost is estimated to be Rs 13 crore and the post-issue equity will be Rs 11.70 crore.

According to the offer document, the company commenced activity in June 2000 by developing software with the existing infrastructure, but full-fledged operations are likely to commence only by October 2000. The offer document states that the company has so far executed orders worth Rs 1.07 crore, mainly from Softlink Solutions, US. In addition to this, it has received two orders, one from VaiNeta Communications, US, for Rs 4.80 crore and the other from Softlink Solutions, US, for Rs 0.60 crore. Under the first contract, ViaNeta Communications has entered into an agreement with IQMS Software for outsourcing a major portion of the healthcare portal being developed by it.

In the long run, the focus on the low-end of the web-enabled/e-commerce environment may not be such an attractive business proposition. The financial projections appear achievable (based on the contracts on hand) in 2000-01. But the projected per share earnings may not offer adequate scope for capital appreciation in the medium term. In this backdrop, this IPO at an offer price of Rs 10 may be ignored. The offer opens on September 28 and closes on October 3. The lead manager is Fedex Securities and the stock is to be listed at Hyderabad and Mumbai.