Geodesic Information Systems: The Mundu May Rule

While the software services sector matures into a stable but large business

segment, a whole new world of small niche companies, either with strong domain

knowledge or with an IP focus, are also emerging. These companies have typically

grown in areas where larger companies do not want to focus or in the IP area

where again the big companies have given a go by.

As the risk-reward ratio in the software services arena becomes less

attractive, we could see a surge of companiesand maybe some big companies

toowho enter the software product arena. Among the companies grown rapidly in

the last couple of years to emerge as the little leader is Mumbai-based

Geodesic.

Geodesic is an innovator in software products focused on information,

communication, and entertainment (ICE) for mobile phones and desktop computers.

Headquartered in Mumbai, Geodesics Mundu suite of products includes solutions

for Instant Messaging, Mobile VoIP, and Internet Radio.

Geodesic was founded in 1999 and in 2000, the company launched Hamarashop.net

(a Mumbai-specific e-commerce portal) and Mundu IM (the world's first

Interoperable Messaging System). In 2001 Mundu IM was launched on Indiatimes.com.

In 2002, Geodesic got listed on the BSE and later on in 2004 on NSE. In 2005,

the company took a big leap with the acquisition of PicoPeta Simputers, India,

Clangula IT, Sweden, and Engage Solutions, Hong Kong, and with simultaneous

launch of operation in the UK, Hong Kong, and Sweden.

The co-founder and chairman, Pankaj Kumar, has more than 23 years of IT

industry experience. He was an advisor to SCO and his marketing strategies and

distribution channels network for Intel Unix market in India were applauded.

Pankaj was involved in the first ever bank computerization project in India.

Managing director and co-founder Kiran Kulkarni is a graduate in Electronics and

Communication. His past credentials include 12 years at Aftek as an executive

board member. Kiran is the winner of The Indira Super Achiever Award, which

recognizes professional talent that has made a difference.

The promoters hold 23.99% of Geodesic while FII holding stands at 54.88%.

Financial institutions and corporates hold 6.66% and 4.07% respectively, while

the balance is held by individuals.

For the fiscal 2007 ended March 31, 2007, Net revenues stood at Rs 177.06

crore compared to Rs 100.41 crore for the previous year, growth of 76%.

Similarly, net profits stood at Rs 90 crore up from Rs 41.98 crore the previous

year same period, a growth of 114%. The overall profitability has improved from

42% to 53%. Revenue from India declined by 81%, but the international revenues

jumped by 57% on y-o-y basis.

During the year, Geodesic acquired 94.6% of Chandamama and plans to digitize

the content for delivery through Internet and mobile to audiences in India and

overseas, in addition to revamping the existing look and feel of the print

magazine. Similarly, the company added several new customers in new sectors

including portals and publishers, handset manufacturers, ISPs, and telecom

carriers. Some of the new clients include BenQ, Gothenborg Post, and Adeprimo,

among others.

The fourth generation of Mundu Interoperable IM and the first generation of

Mundu Internet Radio were successfully launched to cater to the rising smart

phone market. Editorial and user reviewers rated Geodesics Mundu IM V4.0, 4 out

of 5 stars globally and Mundu Internet Radio became the first Indian product to

make it to the Webware 100an editorial list of the top 100 products in the

world for mobile phones. The company during this financial year merged E-Dot

Solutions, a company engaged in providing Web technology solutions to large

enterprises. Similarly, Amida Simputers are being used to pilot projects such as

Traffic Rule Enforcement in India, and Mobile Data Readers and Writers for the

National Indian Identity Card. Geodesic was ranked 7th by Deloitte Technologys

fast 50 India 2006 program.

Geodesic Q2 results were quite impressive. Net profit for the second quarter

ended September 30, 2007 stood at Rs 33.18 crore, up 52.7% over Rs 21.73 crore

during the same period a year ago. The revenues for the quarter stood at 68.52

crore compared to 39.12 crore, a growth of 75.15% y-o-y basis. During the

quarter, Geodesic bagged five new clients including Magna International, a

Canadian automobile parts manufacturing company; Nordisk Mobiltelefon AB, a

mobile operator and an ISP in the Nordic countries; Mio Technology, a world

leading GPS-based handset manufacturer; and Dynatel Polaska, Poland. Similarly,

Mundu radio received the Symbian Signed status and was successfully launched

on Nokia and Sony Ericsson handsets. Mundu IM was launched for the Apple iPhone.

Chandamama saw an increase of 10% in subscription during Q2 and signed an audio

broadcast deal with a satellite radio, and the broadcast service has already

been launched in Telugu. Amida Simputer has seen good traction with government

agencies across India and developing nations as a last mile data processing and

communication device. Similarly, the Simputer has been repurposed as a car

in-dash infotainment system and as an e-learning tool. Also during the quarter,

Geodesic appointed L Subramanyan as CEO of Chandamama India, a subsidiary of the

company.

Geodesic shares currently trade at Rs 188, discounting its estimated FY 08

earning by 13 times. Given the high growth and the attractive margins, the

valuation is well justified despite the small size of the company and leaves

scope for appreciation. Outperformer.

Sushanto Mitra