Infinite Comp

Infinite Computer Solutions is entering the capital market on 11^th January 2010, with a public issue of 115.03 lakh equity shares, of Rs.10 each, in the price band of Rs. 155 to Rs.165 per share. Of this, fresh issue is of Rs. 57.34 lakh shares while Offer for Sale is for 57.69 lakh shares, by 3 shareholders, of which, one is the promoter of the company.

The company is a global service provider of Infrastructure Management, Intellectual Property (IP) Leveraged Solutions and IT Services focused on Telecom, Media, Technology, Manufacturing and Healthcare industries. In FY 09, the Telcom vertical contributed 59.40% of total revenue of the company. For FY 09, the total revenue of the company was at Rs. 496 crores with PAT at Rs.45.13 crores, resulting in an EPS of Rs. 11.80, on an equity base of Rs. 38.22 crores. For 6 months ending 30^th September 09, total income was at Rs. 318 crores with PAT at Rs. 37.14 crores, which has resulted in an EPS of Rs. 9.72 for the period. This results in a PAT margin of about 11.68%. However, standalone results of the company are more impressive with PAT margin being placed at 21.80%. On standalone basis, for 6 months ending 30-9-09, the company had total income of Rs. 95 crores with PAT at Rs. 20.79 crores, after providing for extraordinary expenses of Rs. 4.80 crores, failing which, PAT would have been at Rs. 25.59 crores.

Of the issue size of Rs. 178 crores to Rs. 190 crores, 50% will go to the selling shareholders while 50% will come to the company's kitty. The company intends to use this, for capital expenditure of Rs. 25.75 crores, acquititions of  Rs. 38 crores and loan repayment of Rs. 8.50 crores. It is strange to note that inspite of the company having cash and bank balance of Rs. 35 crores and yearly cash profit of about Rs. 80 crores, expected for FY 10, is going for this IPO. Does this with a view to give an exit to the selling shareholders and alongwith it, making use of  situation to raise some money for the company, which otherwise is not required.

However, the company has been showing good growth on its bottomlines, over last 2 years, though the topline of the company, on consolidated basis, has been stagnant during FY 05 to FY 08. If the company is able to maintain the same tempo of growth, as posted in first half of FY 10, EPS of the company for FY 10  is expected to be at Rs. 18 on the expanded equity base of Rs. 43.96 crores.

At the upper band of Rs. 165, Share is issued at a PE of about 9 times while its comparable peers like Tech Mahindra, Mind Tree and Infotech Enterprises are ruling between PE of 15 to 25 times. So, one can say that share is being issued at a reasonable price, where, something looks to have been left on the table, for the prospective investors.

Hence, issue is recommended for investment ,even at the upper band of Rs. 165 per share and one can expect the listing at around Rs. 190 per share.