Analysis of Everonn Systems India Limited IPO

Introduction:

Everonn Systems India Limited is a Chennai based information technology education and training company. There are other listed companies in this sector (Aptech and NIIT Limited). While Aptech specializes education in IT platforms such as Solaris, Java and Oracle, NIIT and Everonn have their presence among enterprises, educational institutions like schools and colleges, corporates and working professionals.

Business overview:

The company’s business is based on two main strategies viz:

Institutional Education and IT Infrastructure Services (IEIS) and Virtual and Technology Enabled Learning Solutions (VITELS). The company aims at setting up the necessary infrastructure for IT education / training, creating learning content that is relevant to the current needs of industry and identifying learning opportunities. The company targets to educate 5 million students by 2010.

Institutional Education and IT Infrastructure Services:

Everonn provides computer education services to 8 state governments in India. It has so far trained about 1.2 million students and has about 1900 computer laboratories. The company educates students from schools and colleges on a contractual basis. The services include:

• Supply of hardware, software and other infrastructure needed for IT education;

• Teach the students in English and local language if required;

• Provide stationary and consumables;

• Appoint faculty members at the institutions;

• Train the teachers at the institutions;

• Prepare study materials in English and local language.

The company enters into long term contracts with schools and colleges on a BOOT basis (Build, Own, Operate and Transfer). The assets shall belong to the company till the contract expires and later these shall be transferred to the respective institutions.

The following table shows the number of schools covered:

State	Schools
Andaman	12
Andhra Pradesh	183
Delhi	267
Goa	238
Jharkand	206
Karnataka	216
Uttar Pradesh	223
West Bengal	555
Total	1900

Recently, the company has signed a Memorandum of Understanding with Gujarat Council of Primary education to train 5400 teachers. It will implement computer aided learning in about 1250 schools in the state.

The company has successfully completed providing computer education solutions to all the higher secondary schools in Tamil Nadu as well as in Pondicherry.

Virtual and Technology Enabled Learning Solutions:

This essentially means live interactive learning process. VSAT (Very Small Aperture Terminal) technology is used for interaction between the faculty and the students. An instructor presents the lecture to students through the computer and LCD projector via the VSAT receiver. The instructor and the students can see and interact with each other as if they are in a regular class room. Therefore, a single instructor is able to teach hundreds of students all over the country at the same time, without compromising the quality of learning process. These may be considered as the virtual classrooms.

The above technology is available at more than 200 locations. The focus is on institutions, corporates and retail segments of learning.

The company offers certificate programmes in bioinformatics, software testing and networking for institutions. Retail segment targets franchisees. Corporate initiatives include training and placement.

Comparison between NIIT and Everonn:

Both companies focus on IT education and learning. NIIT has presence in 2000 Government schools in the states of Andhra Pradesh, Tamil Nadu, West Bengal and Karnataka where as Everonn has managed to spread the operations to 10 states (including Tamil Nadu and Pondicherry). NIIT also executes turnkey projects in IT education and infrastructure viz. systems handling, facility management, training etc.

In the stock market, NIIT Limited has performed well. It closed at 179.45 on 31.12.04. On 29.06.07 it closed at 1005. In other words, the stock has appreciated 5.6 times in about 2.5 years which is very good. We will have to see how Everonn performs in the market.

NIIT Limited has a book value of 148.39, diluted EPS of 28.06 and P/E ratio of 25 as on 31.03.07. It reported a net profit of Rs.57.30 crores for the financial year 2006 – 07. Everonn, had a book value of 42.41 and diluted EPS of 5.63. P/E works out to 24.87 at the upper end of the price band Rs.140. There is not much difference in terms of P/E ratio.

Financial performance in the past:

Item	2007	2006	2005	2004	2003
Income	4,304.46	3,093.03	1,942.95	1,616.42	1,601.54
Expenditure	2,541.16	1,655.54	946.79	799.25	868.98
PBIDT	1,763.30	1,437.48	996.16	817.18	732.56
Adjusted net profit	485.64	490.93	151.13	60.59	40.84

All figures in rupees lakhs. PBIDT = Profit before interest, depreciation and tax.

IPO Details:

Issue Period: July 05, 2007 to July 11, 2007

Issue Size: (.) Equity Shares aggregating Rs. 50 crores

Issue Type: 100% Book Building

Face Value: Rs. 10/-

Price Range: Rs.125/- to Rs.140/-

Market Lot: 50 shares

Minimum Order Quantity: 50 shares

Retail Investor cap: Rs.100,000

Application form is available from this link.

Red Herring Prospectus is available at this link.

Conclusion:

Though the company may be smaller compared to NIIT it is also in the same business and has presence in several states. NIIT has a worldwide network of centres and offices, from the United States to Fiji, apart from several locations in India whereas Everonn is primarily an Indian player. However, they may also diversify into other locations in future. In fact, Everonn has plans to set up offices in Dubai and Singapore. NIIT has done reasonably well in the stock market in the last two and a half years; we may expect the same from Everonn. So long term investors may invest in Everonn IPO with the expectation that it would perform well.

SUNDARAMURTHY VADIVELU

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India’s Allied Digital Services IPO in a Crowded Field

Introduction:

Allied Digital Services Limited is a Mumbai based IT infrastructure management and technical support services outsourcing company. It uses a combination of on site and remote services to reduce the cost of ownership of the enterprises and service providers. It delivers strategic, personalized, full service technical support services solutions.

Allied Digital has customer base in India and throughout the globe. There are about 1000 employees at 72 locations across India.

Business profile:

The company’s operations include:

Consultancy: Network design, integration and assessment, management and optimization, test and analysis.

Project Management: Project scope, schedule, integration, allocation, coordination, communication and risk management.

Implementation: Installation, system commissioning, site survey and delivery control, documentation, operations training with round the clock support.

Allied Digital provides services and solutions in networking communications, information security, software, information technology (IT), technical BPO and gateways.

In 2004, a joint venture company, Allied CNT was formed after the merger of Allied Digital India and CNT International Limited, Sri Lanka. Allied CNT is the regional distributor for check point software, eSafe antivirus and content security solutions.

Allied digital provides integrated solutions such as safety and security systems (computerized time and attendance, access control entry and exit automation system, closed circuit television system, ATM surveillance and remote monitoring system, fire detection system etc.), video conferencing systems and radio frequency identification systems.

It also provides turnkey IT solutions such as enterprise computing and management, storage, information security, messaging and collaboration, telecom solutions etc.

Management:

The company was incorporated on February 10, 1995 as Allied Digital Services Private Limited under the Companies Act, 1956 and later converted into a public limited company with fresh certificate of incorporation on March 31, 2006.

The management team comprises of Nitin Shah (Chairman and Managing Director), Prakash Shah and Manoj Shah (both executive directors), Bimal Raj (Chief executive officer), Nishith Sheth (Chief operating officer) and Sunil Bhatt (Chief technology officer).

In 1984 they started the office at Fort with just 2 employees. Within 3 years they got their first order from Mafatlal Industries, Mumbai. In 1992 they executed India’s first CAT – 3 for Hindustan Ciba Geigy. In 1996 they were appointed by Dell as the authorized distributors in India. In the same year they were given the maintenance contract of Air India’s travel agent network which continued for five years. In 1997 the company tied up with Microsoft for distribution of the entire product suite. In 2002 they joined hands with Media Gate for their unified messaging solutions on the telecom front. In 2004 the company executed Asia’s largest wireless infrastructure project for Reliance Communications.

Today the company has offices, customer support locations and service centres in many cities and towns in India. Except for the north eastern states of Nagaland, Manipur, Mizoram, Arunachal Pradesh and Tripura it has established presence all over the country.

The company has strategic alliances with IBM, Microsoft, Unisys and Intel to build advanced technology capabilites and deliver comprehensive solutions to the customers.

The company received the following in 2005.

• National and regional gold awards for storage, integrated solutions and networking by DQ Channels.

• Best support organization award by CRN magazine.

• Best system integrator award by DQ week.

The company received the following in 2006.

• Best services company award and most comprehensive solution provider award by DQ Channels.

• National and regional gold awards for integrated solutions by CRN magazine.

• Best system integrator award by Express computer.

• Deal of the year award by IBM India.

Some of the clients include Reliance Industries, Thermax, Maruti Udyog, Larsen and Toubro (manufacturing), Cable and Wireless, British Telecom, Reliance Communications, Tata Teleservices (telecom), ICICI Bank, Citibank, HDFC Bank, NSE, State bank of India (finance), Tata Power, Hindustan Petroleum, Bharat Petroleum, British Gas (oil & energy), TCS, NIIT (software), Jet airways, STAR TV, Oberoi group of hotels, Accenture (services), Air India, Government of Maharashtra (government departments / undertakings), Shoppers Stop, Pantaloon Retail, McDonalds (retail business).

The company plans to raise about Rs. 86 crores (at Rs. 190, the upper end of the price band). About Rs. 33 crores has been earmarked for starting a Global Service Delivery Centre (GDSC), which is likely to serve as a centralized control and monitoring centre for the company’s operations around the country.

Financial Data:

Description	2007	2006	2005	2004	2003
Income	156.42	88.87	51.81	39.62	40.76
Expenditure	123.24	71.49	48.43	37.78	38.94
PBIDT	33.18	17.38	3.39	1.84	1.82
Net profit before tax	31.21	16.02	2.29	0.84	1.24
Net profit after tax	22.93	12.06	1.44	0.77	0.74
Adjusted Profit	22.93	12.02	1.24	0.32	0.76

All figures are in rupees crores. PBIDT = Profit before interest, depreciation and tax.

Details of the IPO:

Issue Period: July 02, 2007 to July 05, 2007

Issue Size: 45,22,435 Equity Shares

Issue Type: 100% Book Building

Face Value: Rs. 10/-

Price Range: Rs. 170/- to Rs. 190/-

Market Lot: 35 shares

Minimum Quantity: 35 shares

Retail Investor cap: Rs.100,000

Red Herring Prospectus can be downloaded from here.

Conclusion:

The company has developed a good business model with operations all over India, extending to Caribbean, UK and Sri Lanka. The services provided are vast and diversified in the IT sector. The company has very good clientele as we have seen above. The 20+ years experience in this field is definitely an advantage.

However, the software industry does face some challenges. There are plenty of software companies in India, particularly in the southern part of the country. There are some huge players like Infosys, Satyam, Wipro, TCS, Polaris, to mention a few. There is quite a bit of competition in IT infrastructure and services. This could affect the profitability, share of business and possibly revenues. But the locational advantages may compensate for the company since it is Mumabi based.

Allied Digital is smaller in scale and quantum of operations when compared to some other larger players. But at the offer price of Rs. 190, the P/E ratio works out to 14.3 with an EPS of 13.3. This is definitely at a discount to their competitors. So it may be a good idea to invest in the IPO at the upper price band with a long term perspective.

SUNDARAMURTHY VADIVELU

Godrej Properties to raise up to Rs600 cr through IPO

Will offload 10% equity held by family and Godrej Industries; eyes Chennai, NCR, Kochi and Goa markets

Source LiveMint

Godrej Properties, which is currently developing 20 million sq ft of real estate space across the country, will go for an IPO to offload 10% of its equity, expected to fetch Rs400-600 crore for fuelling its expansion plans.

“We will be offloading 10% in the second-half of this fiscal. Currently, Godrej Industries owns 82% stake while the family owns 18% in the company,” Godrej Group chairman, Adi Godrej, told PTI in an interview here on 10 June.

With the offloading, Godrej Industries’ holding will come down to 75% and the family’s to around 15%, Godrej said, adding that merchant bankers would be appointed shortly. “We are in discussions with three or four of them and a decision will be taken very soon,” he said, without revealing their identities.

While Godrej declined to reveal the issue size, saying “it is too early to talk about this”, industry sources feel it could be anywhere between Rs400 and Rs600 crore. While not totally ruling out any pre-equity placements, Godrej, however, said that it was not on the radar at present.

Elaborating on the company’s expansion plans, Godrej said property development would be a thrust area for the group and in five years Godrej Properties could emerge as the largest player within the group.

As a part of its expansion plans, Godrej Properties is eyeing new markets such as Chennai, Kochi, the National Capital Region (NCR) and Goa. The company is presently active in Mumbai, Pune, Kolkata, Bangalore and Hyderabad.

Godrej said that one-third of the real estate development was residential while the rest was commercial which included offices, IT parks and malls.

The company is presently engaged in the development of the tallest residential towers in the country comprising of of 50-storeys. Five such towers are being built in the posh Mahalakshmi area of Mumbai, he said, adding “of course, taller towers are now being planned in places like Hyderabad.”

On the proposed repealing of the Urban Land Ceiling Act by the Maharashtra Government in the near future, Godrej expected it to greatly benefit property development in the already-congested metropolis as vast areas of land would get released for development.

He said that both the Centre and practically all states barring Maharashtra, Andhra Pradesh and West Bengal had repealed the Act. Calling for the immediate scrapping of both the Urban Land Ceiling Act and octroi, Godrej said that their continuation severely handicapped the economic progress of the state. “It is high time Maharashra abolished them,” he said. States which have done away with these outdated laws have progressed far ahead of Maharashtra which was once the citadel of industry in the country, he said.

On floor space index (FSI), the area that is allowed to be developed by the authorities in a given plot, Godrej said that “the present restrictions are ridiculous and should be done away with soon.”

“Maharashtra has the most restrictive FSI in the country and India the most restrictive in the world,” he said, adding that while Maharashtra has a FSI of 1.3, Hyderabad 3 and Kolkata 6, other places such as Hong Kong and Shanghai had FSIs of 10 each and Manhattan in New York, even higher at over 20.

He disputed claims Godrej Properties was developing residential accommodation only for the top-end segment of the population, saying that there were several properties on the outskirts of Mumbai like Thane and Kalyan which were very much in demand by the middle-class.

Asked about the existence of under-the-table transactions in the real estate industry, Godrej said that as far as his company was concerned, every transaction was cheque-based. Confident that the high economic growth momentum would be maintained in the future, he said that he did not expect any slowdown in property requirements.

“Real estate prices are now stabilising and in certain areas, falling marginally, but demand is expected to only grow,” he said.

READ MORE ARTICLES on Godrej

DLF IPO Overview

Overview:

DLF Universal Limited, originally registered as Delhi Leasing and Finance on 18^th September, 1946, is a leading real estate developer in India. It was founded by Chaudhary Raghuvendra Singh. Now headed by Kushal Pal Singh, the company essentially focuses on residential, commercial and retail segments of the real estate industry.

Mr. K.P.Singh is the son-in-law of the founder Chaudhary Raghuvendra Singh. He and his family together own about 99.5% of DLF group shares estimated to be around $10 billion as reported by Forbes magazine in 2006. He got selected to the Indian Army by British Officers Services Selection Board, UK. Subsequently, he joined the Indian Military Academy at Dehradun. He was commissioned into The Deccan Horse, a renowned cavalry regiment of The Indian Army. In the year 1960, he joined American Universal Electric Company, a joint venture between Universal Electric Company of Owosso, Michigan and the Singh family. Subsequently, he promoted another company, Willard India Limited in collaboration with ESB inc., Philadelphia for manufacturing automatic and industrial batteries in India and became its Managing Director. In the year 1979, he joined DLF Universal Limited. American Universal Company merged with DLF Universal Limited and Mr. Singh became the Managing Director of this new company.

Between 1969 and 1974, the group built around 22 colonies in Delhi and neighbourhood areas. In 1975, they began developing the DLF city, spread over 3000 acres in Gurgaon, a suburb of Delhi. Today, DLF City, spans five phases and encompasses high end residential, commercial, corporate and institutional complexes besides community, recreational and health facilities for varying sections of society.

In 1982 the group ventured into housing projects. They followed it up with building community shopping centres in 1989, “A” grade office space in 1991 and organized retail complexes in 2002. The group expanded their primarily Delhi based business into nationwide in 2003, constructing IT parks, homes, retail outlets, SEZs (special economic zones) and hotels. In 2004, a 125 acre cyber city was commissioned in Gurgaon, Haryana. DLF Cyber City is one of India’s largest integrated technology parks, which provides some of the most advanced and integrated workplaces spread over 125 acres.

In 2005, the group launched a premium residential complex project in Mangolia. Last year, they expanded their business into 29 cities across India. They also launched Park palace, a premium residential complex across select cities.

Business plans:

Office space: 62 million square foot of office space are being planned. The IT parks are located at Chandigarh, Kolkata, Bangalore, Pune, Hyderabad, Chennai and Noida.

Homes: 220 million square foot has been developed as colonies and townships in the past, including 17 million square foot of residential properties. 9 million square foot of saleable area is under construction and nearly 70 million square foot of residential projects across country in next 3 years has been planned. In the longer term 375 million square feet of residential space is being planned.

Retail outlets: Three shopping malls have been built in DLF City, Gurgaon. Two more in Delhi, two more in Gurgaon and one in Chandigarh will follow soon. Five malls in Delhi, one each in Jalandhar, Noida and Gurgaon are under construction. One shopping mall is to be launched soon in Kolkata. Three in Mumbai, 2 in Hyderabad, one each in Delhi, Ludhiana, Bangalore, Pune, Chennai, Cochin and Amritsar are being planned.

SEZ’s: SEZs are a new business concept in India, and provide attractive fiscal incentives for both developers and tenants. Each multi product SEZ will be developed as an integrated township and will include residential accommodations, commercial and retail facilities, as well as schools, hospitals, hotels and other support infrastructure, including captive power generation facilities.

Hotels: Recently DLF entered into a joint venture with Hilton to develop and own a chain of hotels and serviced apartments in India. An alliance agreement and shareholder agreement was formed between Hilton and DLF in 2006. Under the terms of the Alliance Agreement, the joint venture company plans to acquire and develop 50 to 75 hotels and serviced apartments in India under certain Hilton brands. Hilton will manage all of the hotels developed under this joint venture. The joint venture will receive an equity investment of up to US$550 million over the next five to seven years, of which DLF will contribute approximately US$407 million or 74% of the total equity share capital. The remaining US$143 million or 26% of the total equity will be contributed by Hilton. The joint venture company is in the process of evaluating 22 sites for the construction of up to 5,000 rooms catering to the business, four star, five star and deluxe segments of the hotel and serviced apartments market.

Infrastructure: DLF plans to venture into infrastructure also. The key focus areas are construction of expressways, highways, airports and other key infrastructure projects. DLF Laing O’Rourke (a joint venture between DLF and UK based construction major Laing O’Rourke) will be formed to execute various captive projects of the group.

Leisure: DLF golf and country club has a 18 hole par 72 Arnold Palmer Signature Golf Course. The City Club is spread over four and a half acres of green ambience in DLF City. World class recreational facilities and amenities are available. Equipped with Squash courts, modern gymnasium, swimming pool with an adjoining cafe, tennis courts, basketball hoop, table tennis, yoga and aerobic classes, there are also conference rooms, well appointed spacious rooms, an exclusive multi cuisine restaurant, banquet hall, cyber library, modern bar and billiards and card rooms.

Details of the IPO:

Issue period: Between June 11, 2007 and June 14, 2007

Issue size: 175,000,000 (10.26% of the fully diluted post issue capital of the company)

Face Value: Rs.2

Method: 100% book building

Price band: Rs.500 to Rs.550 (250 to 275 times face value)

Market lot: 10 shares

Minimum order: 10 shares

Retail investor cap: Rs.100,000 maximum

Application forms can be downloaded from this link. The Red Herring Prospectus is available for download here.

Conclusion:

This is really an excellent IPO. It looks great from their business model and future prospects, especially considering the demand for more housing, infrastructure etc. How it will be received by the stock market will have to be found out when it gets listed. Please read my earlier article “How do IPO’s fare in secondary market?”

SUNDARAMURTHY VADIVELU

The India Street