VisualSoft Technologies: Is Recovery within Reach?

FACT SHEET

Website: www.visualsoft-tech.com 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 NSE Code: VISUALSOFT

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.

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