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

To: Mohan Marette who wrote (5233)	7/21/1999 10:46:00 PM
From: Mohan Marette	Read Replies (1) \| Respond to of 12475

Indian Stock Markets- IPO line -Subex Systems Ltd (SSL) Subex Systems Limited (SSL) • 971,000 shares available for public at a premium of Rs75 per share aggregating Rs72.8mn. • Public holding and promoter holding at 25% and 66% of the post issue capital respectively • Listing in Bangalore and Hyderabad stock exchange • Post issue number of shares 3.2mn. Lead Managers : Karvy Investors Ltd Issue open : 19th July Issue Close : 23rd July Background SSL, a Bangalore based telecom software company, was incorporated as a private limited company on Dec'94. It commenced operations post the takeover of a partnership firm engaged in manufacturing telecom equipment and accessories. The company has currently 75 employees out of which 65 are technical. During FY99, while the company's sales revenue stood at Rs117.2mn, net profits stood at Rs10.3mn, a growth of 44%yoy and 74.7% yoy respectively. Promoters >The company was promoted by first generation technocrats led by Subhash Menon (Managing Director) and Alex Puthenchira (Whole time director). Both Subhash Menon and Alex Puthenchira are Electronics Engineers with 6 years of experience in the sales department and considerable exposure to the telecom industry. Business The company's business can be broadly divided into 3 categories viz Test & Measurement Equipment, Cellular Infrastructure Solutions and Telecom Software. Test & Measurement Equipment (71%) The division contributes nearly 71% to the total revenues of the company. The division provides solutions and systems for test and measurement application for major telecom and datacomm technologies like Fibre Optic, Frame relay ATM, ISDN, GSM, XDSL and SDH/ PDH. These equipments are mainly used to measure performance so that they can be compared with specifications. Company's customers in this division include Department of Telecommunications, Basic telecom Operators, PSUs, Railways, Defense, cable manufacturers etc. The division, witnessed revenue of Rs83.4mn witnessing a growth of 87.1%yoy. The segment is expected to grow at a fast pace with the entry of private operators into the basic services segment. Also the recent policy measures on telecom by the government is expected to increase investments in these areas. Cellular Infrastructure Solutions (11%) The contribution of this segment has come down significantly from 39% in FY98 to just 11% in FY99. The company's services are basically used to strengthen the signals for cellular phones both indoors and outdoors. The division also offers fraud control devices for cellular operators. Thus the clients are mainly cellular operators. Revenue of the division dropped by 57%yoy to Rs13.6mn in FY99. The drop can be attributed to the poor state of the cellular telecom operators, which has forced them to curtail their investments. Telecom Software (13%) The company started its telecom software activities only during FY99. The division provides telecom applications in operation support systems, revenue assurance etc. During the year the division posted revenues of Rs15.6mn and contributed more than 13% to the revenues. Given the rising demand for telecom software globally the division is expected to grow at more than 60% in the next two years. Others (5%) The company also acts as a distributor to various foreign telecom equipment manufacturers for which it receives agency commission. While services and agency commission contributed 4%, interest and dividend contributed the rest. Alliances The company has business alliances with well-known international telecom giants, which it plans to capitalize on its software services. Some of the alliance partners include Oracle Corporation, Ericsson Cables, EXFOE-O Engineering Inc, Allgon Systems etc. Future Plans Software development center : The company plans to expand its software development activity. For the same the company is expanding its existing 3000 sq ft facility at Bangalore to a 24,000 sq ft software development center. The development center is expected to be completed by Sep'99 and will drive future growth. Marketing : To aid its international marketing the company plans to set up a subsidiary in the USA. The subsidiary will be involved in marketing the company's software products in the USA, which is a major market for telecom software. Key financials (Rs mn) FY98 FY99 % change FY00E % change Total income 81.3 118.3 45.5 217.8 84.1 Total Expenses (69.5) (101.2) 45.7 (170.0) 67.9 PBDIT 11.8 17.1 44.2 47.8 179.8 PBDIT margins 14.6 14.6 (0.3) 22.4 53.7 Interest (2.9) (4.6) 60.0 (2.9) (35.7) Depreciation (0.9) (1.2) 25.2 (4.2) 252.9 Tax (2.2) (1.3) (38.4) (4.5) 236.6 PAT 5.9 10.0 69.7 36.2 261.8 (Source : Company estimates) Shareholding pattern (%) Existing Post IPO Promoters/ Associates 94.7 66.1 MFs, Banks/ FIIs- 5.0 Employee Welfare Trust 5.3 3.7 Employees - 0.2 Public - 25.0 Total 100.0 100.0 (Source : Company estimates)(Probity-Research)