Zenith Infotech

Future: Focus on web



Zenith is now in the process of segregating its operations into
different strategic business units (SBUs)–Banking and Financial

Software; Ecommerce and Web Technology; Database, Messaging and

Middleware; Network Software and Integration. It has Embedded and

Information Appliance Software. Under the banking segment, the company

has already developed a banking product with successful installation.

It has plans for two new products in internet banking and centralized

MIS software for head office and zonal office reporting. The company

plans to be a dominant player in the banking segment. The focus

of the banking industry is increasingly shifting to customer care

inevitably leading to computerization. This segment provides a good

opportunity for the company. It already has an impressive client

base and plans to focus on the mid-end banks.

Zenith will however be more aggressive

on the ecommerce and web technology front, which it expects, will

contribute almost 40% of the total turnover in the future. The company

plans to focus on ecommerce and maintenance of web infrastructure.

The company has developed a product called ZenSync under its SBU–Database,

Messaging and Middleware. It also plans to offer services on client-server

engineering, software component integration, and implementation

of high-end transaction processing and database replication solutions.

This SBU will be aligned with the ecommerce SBU. The networking

and embedded software SBUs will be engaged in their related activities.

To offer these services, Zenith plans

a major increase in the number of software professionals. The  aggregate

strength of its software professionals in India is slated to increase

from the current 75 to 650 by March 2003. The company also plans

to go for SEI CMM assessment in the next 8-12 months. Zenith has

tie-ups with Microsoft and Novell, and proposes to tie up with Computer

Associates. For its product ZenSync, the company is negotiating

tie-ups and technology licensing programs with various software

and consulting companies in the US. Apart from this, it plans to

build an extensive base of product resellers, consultants and technology

licensing partners over the next one year. It also plans to develop

relationships with large system integrators as a technology resource

supplier.

Financial performance:

Impressive



Zenith Infotech reported decent performance for the year ended March
1999. However, the performance of the company in the first half

was excellent. The company also reported a turnover of Rs 11 crore

for the year ended March 1999 compared to Rs 9.55 crore the previous

year. Its net profit however jumped 392% over the previous year

to close at Rs 2.43 crore. This was due to the improvement in operating

margins–from 6% to 24%. In the first half ended September 1999,

the company has reported net profit of Rs 3.14 crore on a turnover

of Rs 7.53 crore. The profit includes Rs 51.40 lakh received as

dividend from Zenith’s Singapore subsidiary. The operating margin

stood at 41% in the first half.

Zenith expects to close the current

financial year with a turnover of Rs 19.75 crore and a net profit

of Rs 7.22 crore. This translates into a growth of 92% and 198%,

respectively. It expects to earn a dividend of Rs 1.40 crore from

the Singapore subsidiary. The estimates are based on the first half

performance and the expected revenues from additional staff.

Investment potential:

Riding the IPO boom



Zenith is offering shares at Rs 110, which discounts the projected
March 2000 earnings by 17.5. While the size of the company is quite

small in relation to the offer price of Rs 110, it is charging premium

on the basis of its exposure on the emerging web-based applications.

The company has achieved excellent turnover in the first half of

the current year and hopes to replicate the performance in the year

ended March 2000. On the downside, the company is yet to acquire

land for the expansion of its operations. This may hamper its growth

rate in the next financial year.

Shares of new companies are being listed

at substantial premium to the offer price. Recent examples are Hughes

Software, Kale Consultants and Compucomp. With the listed companies

trading at mind-boggling price to earnings ratios, the interest

in IPOs is obvious. HCL Technologies, which offered shares through

book building at a price range of Rs 500-580 per share, received

an overwhelming response. Considering this and the business of the

company, investors should expect an appreciation of atleast 100%.

In the longer term, the movement of the share price will depend

on the ability of the company to gear up its infrastructure facility

to sustain the growth. Subscribe.

The views reflected here are

not of this publication. No liability is accepted for losses based

on the information presented here.

Sushanto

Mitra



is a financial consultant with Techcap Consultants India

Future: Focus on web



Zenith is now in the process of segregating its operations into
different strategic business units (SBUs)–Banking and Financial

Software; Ecommerce and Web Technology; Database, Messaging and

Middleware; Network Software and Integration. It has Embedded and

Information Appliance Software. Under the banking segment, the company

has already developed a banking product with successful installation.

It has plans for two new products in internet banking and centralized

MIS software for head office and zonal office reporting. The company

plans to be a dominant player in the banking segment. The focus

of the banking industry is increasingly shifting to customer care

inevitably leading to computerization. This segment provides a good

opportunity for the company. It already has an impressive client

base and plans to focus on the mid-end banks.

Zenith will however be more aggressive

on the ecommerce and web technology front, which it expects, will

contribute almost 40% of the total turnover in the future. The company

plans to focus on ecommerce and maintenance of web infrastructure.

The company has developed a product called ZenSync under its SBU–Database,

Messaging and Middleware. It also plans to offer services on client-server

engineering, software component integration, and implementation

of high-end transaction processing and database replication solutions.

This SBU will be aligned with the ecommerce SBU. The networking

and embedded software SBUs will be engaged in their related activities.

To offer these services, Zenith plans

a major increase in the number of software professionals. The  aggregate

strength of its software professionals in India is slated to increase

from the current 75 to 650 by March 2003. The company also plans

to go for SEI CMM assessment in the next 8-12 months. Zenith has

tie-ups with Microsoft and Novell, and proposes to tie up with Computer

Associates. For its product ZenSync, the company is negotiating

tie-ups and technology licensing programs with various software

and consulting companies in the US. Apart from this, it plans to

build an extensive base of product resellers, consultants and technology

licensing partners over the next one year. It also plans to develop

relationships with large system integrators as a technology resource

supplier.

Financial performance:

Impressive



Zenith Infotech reported decent performance for the year ended March
1999. However, the performance of the company in the first half

was excellent. The company also reported a turnover of Rs 11 crore

for the year ended March 1999 compared to Rs 9.55 crore the previous

year. Its net profit however jumped 392% over the previous year

to close at Rs 2.43 crore. This was due to the improvement in operating

margins–from 6% to 24%. In the first half ended September 1999,

the company has reported net profit of Rs 3.14 crore on a turnover

of Rs 7.53 crore. The profit includes Rs 51.40 lakh received as

dividend from Zenith’s Singapore subsidiary. The operating margin

stood at 41% in the first half.

Zenith expects to close the current

financial year with a turnover of Rs 19.75 crore and a net profit

of Rs 7.22 crore. This translates into a growth of 92% and 198%,

respectively. It expects to earn a dividend of Rs 1.40 crore from

the Singapore subsidiary. The estimates are based on the first half

performance and the expected revenues from additional staff.

Investment potential:

Riding the IPO boom



Zenith is offering shares at Rs 110, which discounts the projected
March 2000 earnings by 17.5. While the size of the company is quite

small in relation to the offer price of Rs 110, it is charging premium

on the basis of its exposure on the emerging web-based applications.

The company has achieved excellent turnover in the first half of

the current year and hopes to replicate the performance in the year

ended March 2000. On the downside, the company is yet to acquire

land for the expansion of its operations. This may hamper its growth

rate in the next financial year.

Shares of new companies are being listed

at substantial premium to the offer price. Recent examples are Hughes

Software, Kale Consultants and Compucomp. With the listed companies

trading at mind-boggling price to earnings ratios, the interest

in IPOs is obvious. HCL Technologies, which offered shares through

book building at a price range of Rs 500-580 per share, received

an overwhelming response. Considering this and the business of the

company, investors should expect an appreciation of atleast 100%.

In the longer term, the movement of the share price will depend

on the ability of the company to gear up its infrastructure facility

to sustain the growth. Subscribe.

The views reflected here are

not of this publication. No liability is accepted for losses based

on the information presented here.

Sushanto

Mitra



is a financial consultant with Techcap Consultants India