V & K Softech: Below Average

Score: Below Average

INVESTMENT in the initial public offer (IPO) of V&K Softech (VKS) need not be considered.

The risks involved in the offer appear high and retail investors as such can avoid the offer. The strength of the company is that it is promoted by entrepreneurs who have experience in this line of business. However, the weaknesses appear overwhelming.

The company does not have any notable track record and needs to be viewed as a start-up. Investing in start-up firms is always a considerably risky proposition. More important, the company's focus appears to be diffused. Apart from software services for the export market, the company proposes to engage itself in product/package development and selling, offering networking solutions and hosting portals.

This apart, it is also setting up subsidiaries in the US and Canada, which would be engaged in the businesses of Internet service provider, application service provider, and so on. The diffused focus for a start-up company, which is usually strapped for resources, is a unwelcome feature. In this backdrop, investors can avoid the offer.

What the company says: The IPO of V&K Softech, priced at Rs 10, proposes to mobilise Rs 3.75 crore. The post-issue equity would be Rs 10.05 crore.

The cost of the project is Rs 11.50 crore to be financed with debt of Rs 1.15 crore and the rest through equity.

Of the project cost of Rs 11.50 crore, Rs 3.35 crore has been set aside for investing in subsidiaries.

VKS, incorporated in July 1999, recorded sales of Rs 0.88 crore and profits of Rs 0.29 crore for the 10-month period ended March 2000.

The offer opens on November 29 and closes on December 4. The shares are to be listed in Hyderabad, Calcutta and Mumbai. The lead manager to the offer is Fedex Securities. The company is promoted by Mr Mohan Prasad Polavarapu and associates. The amount payable on application is Rs 5.