The Hindu Business Line : Ramco Systems: Buy

Its flagship solutions platform - Ramco VirtualWorks - is slowly gaining greater acceptance in the global marketplace, with a growing roster of clients.

This solutions platform, which focuses on a high level of automation, places the company ahead of the growth curve and competition in the customised software development space.

The earnings scorecard of Ramco Systems is also beginning to stage a turnaround, though its ability to sustain this holds the key to its valuation. In the latest quarter ended September 30, 2004, the company recorded post tax earnings of Rs 2.33 crore on revenues of Rs 32.7 crore.

On an equity base of Rs 11.65 crore, the per share earnings works out to Rs 2 (on an non-annualised basis). With the exception of a good fourth quarter ended March 31, the company has been incurring losses for the past six to eight quarters.

On the flip side, the business risks associated with the stock are high as it is still in the process of strengthening the relationships with global consulting firms and getting its marketing strategies in place in the developed markets.

But it has been steadily making progress on this front since its rights offer in December 2003.

As a part of a proposed preferential offer of equity to promoters, Ramco Systems also plans to issue warrants to Halycon Resources and Management Consulting, a consulting firm which will be assisting it in its growth plans.

These warrants are convertible into equity at a price of Rs 331 per share within 18 months of allotment and will represent nearly 2 per cent of an expanded equity of Rs 12.48 crore.

Krishnan Thiagarajan

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