Globsyn Technologies: Below Average

Score: Below Average

Suresh Krishnamurthy

INVESTMENTS need not be considered in the initial public offer of Globsyn Technologies.

Although, the company can boast of a few positive factors such as a reasonable track record in both the software education and software services industry and institutional investor interest in the company, the over-ambitious pricing of the initial public offer considerably reduces the offer's attractiveness. At the indicated offer price, the potential of an investment to deliver returns commensurate with the risks involved is rather low.

The offer is being made at Rs 40. The per share earnings, based on the performance for the quarter ended September 2000 and the pre-offer equity base, is Rs 3.81. Even to maintain this per share earnings on the expanded equity capital after the public offer, the net profits for the whole year would have to grow at a rate far in excess of 100 per cent. Moreover, the per share earnings calculation does not take into account the significant losses made by a wholly-owned subsidiary Globsyn Technologies Incorporated.

If that is taken into account, the per share earnings would reduce significantly. Overall, when compared to the valuations of established companies in software education-software services business, the offer is fairly over-priced. In this backdrop, investments in this offer need not be considered.

What the company says: Globsyn Technologies is engaged in the business of software services, e-consulting and high-end software education. The offer is being made to part-finance the setting up of marketing, instructional research and development and software development centre in Delhi. The project cost is Rs 17.28 crore and is to be funded entirely with equity, through this IPO, and internal accruals.

Globsyn Technologies recorded revenues of Rs 18.38 crore and profits of Rs 3.26 crore in the 15-month period ended June 2000. In the quarter-ended September 2000, Globsyn recorded revenues of Rs 5.53 crore and profits of Rs 1.47 crore. Globsyn Technologies Incorporated, its wholly owned subsidiary, recorded revenues of Rs 4.89 crore and losses of Rs 1.84 crore for the period ended September 2000.

In the 15-month period ended June 2000, software services accounted for 56 per cent of the total revenues while education and training accounted for the rest. Globsyn had executed orders for IBM Global Services, I-Vision, I-Tech Global Inc, BT Technet and GTI in the past. GTI also has 15 orders worth Rs 3.85 crores in total.

Industry :Software

Issue size :Rs 14.77 crore

Post-offer equity :Rs 21.83 crore

Listing :BSE, NSE, DSE, CSE

Lead Manager :Karvy Investor Services

Promoters :Bikram Dasgupta and associates