Taksheel Solutions Limited IPO Analysis - Indian IPO Blog

Saturday, October 1, 2011

Taksheel Solutions Limited IPO Analysis

Source: Indian IPO Blog Insights

Taksheel Solutions Limited, an IT company serving the financial services industry, has entered the capital markets with an IPO of 55,00,000 Equity Shares of Rs.10/- each to be issued in a Price Band of Rs.130/- to Rs.150/- per equity share. Applications can be made in a Bid Lot of 45 Equity Shares and in multiples thereof

The IPO has been rated by Rating Agency CARE. The IPO would remain open for subscription between September 29, 2011 and October 4, 2011. PNB Investment Services Limited is the Book Running Lead Manager to the Issue. The Syndicate Members are PNB Investment Services Limited, Reliance Securities Limited and Inventure Growth and Securities Limited, while Bigshare Services Pvt. Ltd. is the Registrar to the Issue

Company Profile:
Taksheel Solutions Limited is IT company engaged in the business of providing products and services to the financial services industry, Information Technology & Telecom. The Company is headquartered in Hyderabad, and provides professional IT services to global clients. Taksheel offers Wealth Management Technology Solutions, Telecom Solutions, Business Intelligence, Data Warehousing, Application Development and Application Maintenance

Taksheel focuses vitally on business sectors such as Finance, Information Technology, and Telecom. Entire offering supports customization and flexibility to customer’s requirement and provides extensive support with pre-defined SLA’s

According to the company's website the following are some of the services that Taksheel Solutions has on offer:

Wealth Management: Wealth management to financial institutions offerings such as Asset and Investment managers, Brokerage houses, Insurance, Hedge funds, Trusts and Family Offices.

Telecom: Enterprise IP telephony Solutions, Carrier Switching & Billing Solutions, Contact Center Solutions, IVRS, SMSC, Voice & Video Conference solutions, Chat platforms, Content Delivery Platforms, Closed Private GSM network (CPMN) and more.

Information Technology: Enterprise Network Implementation(LAN,WAN,MAN), OS migration to open source, Software Development, Application customization, Managed IT services (Desktop,Server,Network,NOCsupport) Server Implementation & Support(Windows,Unix,Sun,Linux),Data Storage Network(SAN,NAS),Network & Data Security Solutions, Network Monitoring System, NOC support Systems, Data center and Disaster recovery center implementation, CRM solution

IPO Grading: The Issue has been graded by Credit Analysis & Research Ltd (CARE) and CARE has assigned a ‘CARE IPO Grade 2’ [Grade Two] indicates “Below average fundamentals”. The IPO Grading is assigned on a 5 point scale from 1 to 5 with an ‘IPO Grade 5’ indicating strong fundamentals and an ‘IPO Grade 1’ indicating poor fundamentals

Click here to download complete grading report

Analysis of Financial Information:
The following is the Balance Sheet and Profit and Loss A/c. of the company as per the Red Herring Prospectus filed by the company:

The Balance Sheet shows Reserves and Surplus figure at around Rs.74.25 Crores, which is comforting to look at as a percentage of Total Shareholders' funds, especially after looking at Balance Sheets of some of the recent IPOs where there is serious crunch in this area.

A spurt both in the topline as well as the Net Profit can be seen in FY11 when compared to the rate of growth in both of these attributes in the earlier years. For the FY11, the company has reported a Total Income at around Rs.147.26 Crores and posted a PAT of around Rs.27.42 Crores, earning a Net Profit margin of around 18.62%. This is largely due to the fact that the company operates in SEZ and therefore the tax liability is NIL. However, it has to be noted that with effect from FY2012 onwards, this profit margin is not expected to be sustained since MAT @ 18.5% will be applicable to the company.

The Company has posted a PAT of Rs.27.42 Crores in FY11, with around 1.66 Crores shares outstanding, translating into an EPS of Rs.16.51 per share. At the upper end of the Price Band, the PE multiple would work out to be around 9 times the earning per share, which can be considered at the higher end considering that many listed peers are trading in single digit PE multiples

Concluding Remarks:
The company, unlike most others coming up with an Issue these days, does not look too bad fundamentally. However, it must be remembered that the high profitability is due to the tax holiday enjoyed by the company. Also, there are risks associated with its geographical presence in the United States where the IT sector is expected to face the adverse effects of the risk of global slowdown. The IPO may give some amount of listing gains. However, it is debatable whether the company would be a good addition to the portfolio for the long term

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