Fact |
Website: www.infotechsw.com |
The past year has been disappointing for the IT stocks but one company that
has clearly outperformed its peers as well as IT majors is Hyderabad-based
Infotech Enterprises. While the company has been able to thwart the global
slowdown by reporting decent and sustained performance in the past three
quarters, the new initiatives have been highly encouraging indicating better
times to come.
InfoTech commenced its operations with specialization in the CAD/GIS
Conversion. The company gradually spread its wings and is today engaged into
executing software projects and providing internet/intranet services. Infotech
broadly provides services in GIS/Conversion, CAD/CAM/CAE and application
software development. These have been organized under different heads to give
greater business focus.
Infotech’s performance in the third quarter was impressive with revenues
growing 97% to Rs. 27.54 crore and net profit growing 71% to Rs. 8.32 crore. On
a sequential basis, the company’s revenues and net profit have risen 22% and
47% respectively. Revenues from GIS Conversion stood at 46% of the turnover with
26% coming from Engineering Services and 27% from Software development. The
company added 12 new clients during the quarter.
After completing three acquisitions in the last couple of years, the company
has focused on entering into long-term contracts with reputed clients, which
includes the contract from Noida Power Company. However, the recent strategic
business and equity alliance with the Pratt & Whitney Division of United
Technologies Corporation (UTC) led to a spurt in the share price of the company.
Pratt & Whitney is a leader in design, manufacture and service of aircraft
engines, space propulsion systems and industrial gas turbines. The contract
would span for a minimum of five years with Pratt & Whitney picking up 18.4%
equity stake to demonstrate long-term commitment. It has also placed Charles
Ayer, Finance Director, Manufacturing and Technology, Pratt & Whitney on
Infotech’s Board. The stake has been picked up Carrier International
Mauritius, a subsidiary of UTC. While 10 million shares have been acquired at
US$ 6 per share, another 0.30 million warrants would be converted into equity
shares after 18 months at US$ 10 per share.
F i n a n |
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(All figures in Rs crore) |
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2000 | 2001 | 2002* | 2003* | |||
Sales | 33.8 | 58.2 | 101 | 171 | ||
Other Income |
1.6 | 2 | 2.9 | 2 | ||
Operating Profit |
12.1 | 20.9 | 43.8 | 74.7 | ||
OPM (%) |
35.7 | 36 | 43.3 | 43.7 | ||
Net Profit |
10.3 | 17.2 | 30.3 | 50.1 | ||
Equity# | 5.9 | 6.1 | 7.5 | 7.5 | ||
EPS (Rs.) |
17.5 | 28.2 | 40.5 | 66.8 | ||
#Fully diluted equity including conversion of warrants in 2003-04 |
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Infotech is currently traded at Rs. 530 discounting the projected March 2002
EPS by 13 times and March 2003 EPS by 8 times. The share price of the company
has jumped more than 700 % from a low of Rs. 63 in April 2001 thanks to the
impressive third quarter performance and the recent preferential allotment to
UTC. While the impact of the alliance with Pratt & Whitney is not yet known,
it is expected to be substantial and would enable the company to outshine its
peers in the next few years. Market Outperformer.
Sushanto Mitra is the founder
of Technology Capital Partners
The views reflected here are of the author and not of this publication. No
liability is accepted for losses based on the information presented here.