Indian Stock Markets- IPO line-
SQL Star International Ltd (SQL)
2.6mn shares available for public and 0.35mn shares reserved for promoters at same price Price Rs10 + 40-45 per share Listing in Hyderabad, Mumbai and Delhi stock exchangesPost issue number of shares 10.4mn Promoters holding (post issue) 36.6%
Synopsis
SQL, a company promoted by a team of technocrats led by Dr Ashok Agarwal and associates is planning an IPO in the next month. The IPO pricing is expected at Rs45-60 per share, including share premium. This translates into a P/E of 16.8 times FY99E earnings even at Rs55. This is at a discount to its peers. Given the quality of management, prospects and valuation, we strongly recommend subscribing in the IPO.
Management
The day to day affairs of the company is looked after by Dr Ashok Agarwal and his team. Dr Agarwal, a technocrat has over 30 years of experience in the industry, was earlier a professor at IIM Calcutta. He is a doctorate in OR from Minnesota, USA. Brij Tankha is an engineer from BITS Pilani and an MBA from West Coast University. Praddep Gupta, another director is an engineer from IIT Delhi and MBA from IIM Calcutta. He is the promoter of Cybermedia, the publishers of Dataquest magazine. The company employs about 400 people, of which 125 professionals are working in the training division and a150 in the software division. The promoters' holding will come down to about 36.6% after issue. The ESOP trust and employees will hold about 4.7% of post issue equity.
RCTC and ICICI ventures (earlier TDICI) have taken a stake in the company. Between the two, they hold about 47% of the pre issue capital of the company. The two organizations have appointed nominee directors on the board, which will come down to 24.6% after IPO.
Business
The two main divisions of the company are software training and education business and software development and services.The company is a leading education and training company based in Hyderabad. It has tie ups with Oracle, IBM, Lotus and Microsoft. As an Authorized Training Centre for Oracle, it also offers training on the full range of products. The education and software development centers at Hyderabad have received ISO 9001 certification. It has centers at New Delhi (2), Hyderabad (2), one each in Pune, Calcutta and Bhubaneshwar.
In the last 18 months, it has aggressively pursued software development projects overseas. It set up offices in USA, Singapore and Europe to market services. Overseas cleints include IDC, Gallup, Amazon and HP. Thanks to an increasing contribution from software services, its operating margin has improved. The company has also entered into agreements with Oracle and Tata IBM and is providing ERP solutions to leading domestic companies like HLL. Its development facilities in Hyderabad are ISO9001 certified.
Financial
Rs mn Dec-98 Mar-98
9 months 12 months
Sales 190 186
OI 2 2
Expenses 151 159
EBITA 42 28
Margin ex OI 21% 14%
Interest 4 6
Depreciation 7 6
PBT 30 16
Tax 5 1
PAT 25 15
Margin expansion has been on account of change in business mix. Offshore services has increased from 7% to 17% for period ended December 98. Domestic services has also risen to 12% from 1% during the same period, resulting in higher margins.
Capex planned for the next 24 months is Rs252mn, of which about Rs162mn will come from proceeds of the issue. The outflow is towards setting up a center at Hi Tech city in Hyderabad, strengthening education centers and boosting marketing efforts overseas.
(courtesy:Probity) |
