VisualSoft Technologies: Is Recovery within Reach?

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  • Website:

  • Address: VisualSoft Towers
  • 6-3-1192/2/1, Kundanbagh
  • Begumpet, Hyderabad 500016
  • Tel.: +91-40-341 2266
  • Fax: +91-40-341 1088
  • Area of specialization: Software

    products and services with focus on Internet, knowledge management and

    mobile technologies
  • Revenues (March 2001) Rs 131.36 crore
  • Total Employees 565
  • Offices: India, US
  • Listing (stock exchanges): Bombay,

    Hyderabad, Bangalore, Ahmedabad and National Stock Exchange
  • Current Market Price: Rs 115
  • 52 Week High/Low: 975/60
  • BSE Code: 532214

The slowdown in the US economy served a severe blow to one of

the most prolific and fastest growing Indian IT companies–VisualSoft

Technologies. Within the past three-quarters, VisualSoft, perhaps one of the few

Indian companies with success in software products has seen its revenues dip

sharply. VisualSoft’s result for the second quarter ended September 2001

reflect a sharp decline in the product sales, down from 48% of the total

revenues in quarter ended September 2000 to 5% in quarter ended September 2001.

VisualSoft specializes in the development of software

products and software services with focus on Internet, knowledge management and

mobile technologies. In the products segment, VisualSoft has developed more than

55 products and components over the past few years. VisualSoft declared revenues

of Rs. 23.38 crore and net profit of Rs. 4.69 crore in the second quarter ended

September 2001. While revenues were down by 22%, the net profit was down by 69%

over the corresponding period last year. Revenues from products stood at 5% of

the total revenues compared to 48% of the revenues in September 2000 and 19% in

June 2001. The fall in product revenues over the past 9 months has been due to

economic turbulence as well as the sharp decline in the global Internet

business. VisualSoft achieved 63% of the revenues from the US followed by 29%

from Europe and 8% from the rest of the world in the second quarter.

VisualSoft has formed an R&D technology group to execute

R&D functions for its overseas clients and going ahead, it plans to focus on

this segment apart from concentrating on new areas such as Health Care and

Collaborative Engineering, among others. In the products segment, VisualSoft

plans to continue distribution of its products through channel partners,

although recovery of this segment seems unlikely.


(All figures in Rs crore)

  2000 2001 2002* 2003*
Sales 68.0 131.4 103.2 134.3

2.3 4.2 5.1 6.0
OPM (%) 43.6 48.9 26.8 26.3

29.7 64.2 27.6 35.3
Net Profit 28.4 61.8 24.1 30.3

6.3 19.7 19.7 19.7
EPS (Rs.) 45.4 31.4 12.3 15.4

Year ended March 31

VisualSoft trades at Rs 115 now, discounting the projected

March 2002 EPS by 10 times and March 2003 EPS by 8 times. The price, after

touching a low of Rs 60 last month has rebounded to current levels in line with

the rally in tech stocks. Going ahead, we expect the services segment to improve

but its product segment would continue to bear the brunt of the slowdown.

VisualSoft’s stock would, however, continue to move in line with the mid-cap

technology stocks. r

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