Intrasoft Tech

Intrasoft Technologies is entering the capital market on 23^rd March, 10, with a public issue of 37 lakh equity shares, of Rs.10 each, in the price band of Rs.137 to Rs.145 per share.

Better recognized as the online greetings portal 123Greetings.com, the company may be high in terms of some brand presence when it comes to greeting cards online. But a cursory scrutiny of its financials shows that all the good wishes sent back and forth by users have not really helped the bottomlines. The financial performance of the company has been on a very low scale and topline has been stagnant for the last over 5 years. For FY09, on consolidated basis, the total income of the company was at Rs.23.35 crores, which was at Rs.14.93 crores, in FY05. So a growth of just 55% in last 4 years. However, PAT rose to Rs. 5.33 crores in FY09, from Rs. 2.13 crores in FY05. A growth of 150%. However, with such a tiny level of activity, the management has balloned its paid up equity to Rs. 11.03 crores, on pre-IPO basis. This has happened due to conversion of CCPS and issue of bonus shares in the ratio of 6 bonus shares for every 1 share held. On present equity base, EPS for FY09 was placed at Rs. 4.85, while it is at Rs. 5.55, for FY10, on an annualised basis.

Also, it is strange to see the company having MAT liability only for FY09 , which also got adjusted against MAT credit, thus having no significant tax burden for the year. This is more confusing to see carry forward losses of Rs. 12.77 crores , as at 31^st March, 09, as per income tax, with the company. Also, the company is not seen of having paid income tax in the years FY 05 to FY 09, and inspite of that MAT credit has been availed in FY 08 to FY 10. All this needs a close scrutiny and explanation.

The paid up equity of the company will rise to Rs. 14.73 crores and if we value it at Rs. 145 per share, being the upper band, the market cap of the company will be Rs. 215 crores. We don't think that this kind of valuation is justified for the company, which translates into a multiple of 10 times of its topline and 36 times of its bottomline.

The company is derives 86% of its revenue from online advertising activities. The company has now chalked out a capex plan of Rs. 35 crores, which largely includes Rs. 20 crores for branding and promotion. The company is sitting on cash and bank balance of Rs. 18.80 crores as at 30-9-09, coupled with annual cash flow of over Rs. 7 crores. So, why this war chest can't get used for branding and promotion? Also, strangely the company is planning to buy corporate office in Kolkata, for which Rs. 13 crores has been estimated. Atleast, this could have been done by the company with its bank balances.

Infact the company is not in need of money at all and this IPO has just been structured to garner Rs. 50 crores, at an exorbitant and hefty valuations. Remain away from the issue.