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