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Strategies & Market Trends : India Coffee House -- Ignore unavailable to you. Want to Upgrade?

To: Mohan Marette who wrote (5067)	7/10/1999 12:56:00 PM
From: Mohan Marette	Read Replies (2) \| Respond to of 12475

CompanyWatch - RS Software - An attractive valuation RS Software rssoftware.com Saturday, July 10, 1999 Sunita Nagpal (Financial Express) The thrust on new businesses like e-commerce and web-enabled technology is likely to see R S Software's(RSSL) income rise by 100 per cent and net profit by over 80 per cent in the current fiscal. At present, the stock is trading at Rs 174, enjoying a PE of a mere 13.6. Thanks to the shift in the market profile from infotech to index-based stocks, RSSL has seen a downward drift to Rs 160-levels from the high of Rs 261. The counter is likely to witness a rally once the company comes out with its first-quarter results. RSSL is likely to report a net of Rs 2.8 crore for the three-month period ended June 30, 1999. On the back of strong offshore Y2K orders in FY99, sales went up by 45 per cent to Rs 41 crore, while net profits grew by 98 per cent at Rs 6 crore. Although the company claims that its exposure to Y2K is limited to only 15 per cent of the turnover now, analysts are skeptical. The company has a natural advantage in mainframe related projects. RSSL is one of the few companies in India which have consciously focused on conversions, maintenance and new development work in IBM mainframe technologies. Recently, the company has expanded it's technology base knowledge into areas like AS/400, ERP, client server, web and e-commerce. Growth areas which RSSL is now focussing on include data warehousing and Internet, which are expected to fuel growth post-Y2K. RSSL has tied up with Software AG, Germany, for domestic distribution and support of its technologies in data warehousing. In Internet, the company has tied up with Hanover Direct a US-based direct marketing company to service its online retail clients. Also, post-Y2K, the company expects Euro conversion and IT-enabled services to maintain the growth momentum. The proposed software development center spread over 60,000 square feet is expected to be completed by 2000. The company plans to spend US $ 1 billion in the next three years. The company plans to treble its employee strength from the current 350 by December 1999. The company also has plans to improve its offshore onsite ratio. Currently, the ratio is tilted towards on site consultancy at 80:20, which the company plans to reduce to 55:45. RSSL has also increased its marketing network eight fold and plans to divide its operations into three SBUs- the Strategic Consulting unit targeting high end and mixed market consulting, the Software Solutions unit would engage in providing solutions to customers with main focus on credit cards, retail and manufacturing industry segments and the Accounts unit will continue to focus on exiting major customers. Some fortune 500 and high profile clients like American Express, VISA, Lexmark, Hanover Direct, ASDA, Blockbuster Video Corpn and Newell & Budge are major clients of RS and they together contributed to some 80 per cent of export revenues in fiscal 1999. The company has also developed certain software products for the domestic market viz ICON, a computerized project management tool for tracking activities and it also enables the company to valuemanpower. Quality manager, a product for quality monitoring systems to enable validation during product development cycle. Library manager, a library maintenance tool. RSSL also plans to achieve CM Level 4 certification by December 1999. RSSL also intends to achieve PCMM certification which measures the capabilities of it's human resources. The company plans a listing at Nasdaq by 2001. The company's future business holds a lot of promise. The joint venture with Hanover Direct and its entry into Europe will be major revenue earner. Hanover Direct, which is among the top 20 marketing companies in the US, has a 60 per cent stake in the venture. The JV is expected to post a turnover of US $ 25 million in the next two years. RSSL's tie-up with Newell & Budge has already started yielding results. It has also opened a office in London for catering the European market. The stock is currently trading at a discount to its peer group, owing to poor liquidity, slower track-record of growth and negative perceptions about being located at Calcutta. While liquidity is slowly improving, the company's days of sluggish growth seem to be over. Also, growth in business is expected to be way above the industry average with an entry into new business activities and geographical locations. Investors can log into the stock for long-term returns.