Mumbai, February 16, 2004 -- Four Soft Limited (FSL) is a software product company, which remains a relative rarity in India. It proposes to enter the market on February 16, 2004 with a public issue of 79.5 lakh equity shares Rs 5 each priced at a premium of Rs 20 per share aggregating Rs 19,87 crore. Its shares are proposed to be listed at the NSE and BSE. FSL which focuses on the global logistic and supply chain management industry has two prime products in its portfolio, e-Supply SP which it launched in 2001 and e-Supply EP, for which it has already got an order but is expected to go live in September, 2004.
An IT product company typically has lumpy financials, with the cost side overweighing the revenue side till a product goes live and then providing a free run on the revenue side. FSL seems to have weathered the expenditure side of the business curve satisfactorily and now sits atop the opportunity to rake in the revenues. This is where FSL reassures, through its board that comprises impressive names including the chairmen of Singapore Airlines and GF-X.
Whereas the company follows prudent accounting policies like writing off product development expenses entirely instead of deferring it and also providing for taxation even in the midst of confusion whether it is payable at all, its non-provision of two debtors disturbs. Similarly, a fairly large portion of the IPO proceeds has been earmarked for acquisitions and setting up overseas marketing offices, and unless this scalability is well managed, chances of things turning sour cannot be ruled out.
Finally, there has been an equity dilution through a 2:5 bonus issue in July, 2003. Yet, the overall picture remains positive which brings us to the question of pricing. As far as the financials go, a re-adjustment for unprovided debtors, would send the P/E multiple based on the projected annualised EPS for FY04 to around 10 which, like its P/B ratio passes muster, without exciting However, the bigger picture lies ahead as the influx of funds could simultaneously drive organic and inorganic growth for this software products company. To conclude, this is an IPO for those with some propensity to take risk as well as a long-term perspective. |
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