The Hindu Business Line : PCS Industries: Avoid

PCS Industries is making a rights offer of equity to finance the repayment of unsecured loans availed by the company from the promoter group and acquisition of companies in the software development/IT-enabled services space. The rights offer price has been fixed at Rs 25 per share.

PCS Industries makes personal computers, providing servers and networking solutions, and maintenance services.

After losses in 2001-02, it has earned only a modest profit of Rs 0.32 crore on revenues of Rs 128.34 crore for the period ended November 2002.

The hardware business continues to be dictated by wafer-thin margins, relatively slow growth in demand and fierce competition.

The company is aiming to ride out of the rough patch in hardware by acquiring a software services/IT-enabled services company. It claims that this acquisition, which is to be financed through this rights offer will be synergistic to its hardware operations.

This reasoning is flawed on two counts. First of all, `size' and `scale of operations' have become important in the software services arena.

In this backdrop, buying a small-sized software company will not prevent the marginalisation of the company in the overall IT sweepstakes.

Second, there are hardly any synergies between the hardware and software operations.

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