Fatpipe’s IPO appears pricey

Although there are no strict comparables to Fatpipe, companies like Vakrangee Softwares, Tanla Solutions and Cyberteck System have lower PEs

Chennai-based IT firm Fatpipe Networks India Ltd's (FNIL) initial public offer (IPO) hits the market on 7 June 2010. The company plans to raise Rs49 crore from the issue. FNIL has fixed the price band at Rs82-Rs85 per share. The issue closes on 9 June 2010.

As on 31 March 2009, the company's earnings per share (EPS) stand at Rs6.46. Its price to earnings (P/E) is at 16.11 at the lower end of the price band. Although there are no strict comparables to FNIL, companies like Vakrangee Softwares Ltd (6.86), Tanla Solutions Ltd (6.30), Subex Ltd (15.11) and Cyberteck System and Software Ltd (7.28) are available at a cheaper price.

"The company is bringing the issue at a price band of Rs82-Rs85 per share which will have the P/E multiple of 22-23 on post-issue annualised EPS of Rs3.69 (On the higher band of Rs 85/share). During the 9MFY10 the intangible assets contribute major part of gross block of company which is a cause of concern," stated a research report of Hem Securities.

FNIL reported a total income of Rs45 crore with a net profit of Rs5.20 crore for the nine months ended December 2009. It registered a cash flow of Rs1.21 crore for the same period.

Brickwork Ratings has assigned an 'IPO Grade 2' to FNIL which indicates 'below average fundamentals'.

A majority of FNIL's revenue comes from the US and may face risks of foreign exchange fluctuations. The company is planning to utilise the proceeds to expand the product line, to establish 16 new marketing offices across the globe including additional offices in the USA, for acquisitions and to meet its working capital requirement. Fatpipe is eyeing to expand its operations to China, Singapore, South Africa, Kenya, Nigeria, Argentina, Belgium, Germany, France, Eastern Europe and Australia.

The company provides global corporations and government offices with technology that increases the security and reliability of wide area networks (WANs), corporate extranets, virtual private networks and all last-mile Internet connections, including wireless connectivity. The company holds patents on a technology called "Router-Clustering", which enables customers to obtain highly redundant and fast Internet/WAN access.






Bob Smith

7 years ago

The company earned a net profit after tax of Rs 399.37 lacs for the year 08-09, which was transferred to General Reserve. The balance at the end of the previous year in General Reserve was Rs 49.97 lacs. If you add, the profit transferred this year, to this figure, it should be Rs 449.34 lacs. Simple arithmetic. However, as per the statement of accounts as furnished in the DRHP, filed with SEBI, the figure is Rs 2103.04 lacs. For the difference, the corresponding entry shown in the balance sheet is Intangible assets.

DO NOT BUY!! Failure to report multiple litigation as well as challenges to its patents. Currently under federal investigation of its labor practices. Financials would not likely stand up to a US SEC audit, hence the reason to change from a U.S. company to an India company and run the IPO there. Numbers are perceived to be misleading and inaccurate.
Dr.Raghula Bhaskar and Ms Sanchaita Datta are the promoters of the company. They take in excess of $400,000USD of income on a VC supported venture. They claim profit, but no listing of dividends to its investors. Interesting to note that they are husband and wife with a combined control in excess off 33% If you scrutinize some of the other ventures such as their India based programmers company BOX, you will find the company is listed as being based out of their home. Makes one wonder whether the VC's are even aware they may have financed these other entities. This begs to question: Is this IPO merely a sham to pay back the VC who by now must be asking...where did the money go?

Bottom Line: Fat Pipe years ago was at the right place at the right time. However, it has failed miserably to stay up with the ever-changing technology and marketplace. Other companies, new technologies, have sprung up bringing with them new technologies and innovation. Sorry Fat Pipe, you are OBSOLETE!!! Do you remember Iomega with the zip drive...? IOmmm who? A bet in Las Vegas would be a better risk

James Smith

7 years ago

Bad Buy !! Too High, None disclosed litigation, Patent Challenge, Principals are Husband and wife and they seem to want to conceal that fact. wonder why, maybe because they have 33.5% Don't believe numbers would hold up under scrutiny
Hear what others have to say:


•The Company operates in a highly competitive environment.
•The majority of the operations of the Company are carried out from its branch offices in the USA. Risks related to FEMA.
•The funds requirements are not appraised by any Bank or Financial Institution.
•The Company proposes to acquire businesses/companies located outside India, the company is yet to identify companies/ businesses to be taken over.
•The Company has not yet tied-up for debt component for enhanced working capital needs.
•The Company has not paid dividend in the past.
•The global operations expose the Company to complex management.
•The combined employee strength is 120 and 50% are in sales and marketing.
•The average cost of acquisition of Equity Shares by the Promoters is at Rs 10/-
• Receivables out standing as on 30-09-09 are at Rs1269.69 lacs, against a turnover of Rs 2958.68 for the same period.


EPS for the year FY 10-11 is expected to be Rs. 5.50 per share. At the lower end of the price band of 82, PE multiple works out to 15 times. Similar companies in IT networking equipments / manufacturing are presently ruling at PE of around 8 times. Valuation is very much stressed . There are no project to be implemented. Structured IPO. The company has no dividend payment history. Keep 1000 km distance from the issue.

Another Emmbi in the making. Investors are advised to stay away from the issue.

SEBI’s effort to use banks to popularise online platforms unlikely to work

SEBI plans to enlist banks to help boost sales of mutual fund schemes, especially the schemes of mutual funds sponsored by banks. However, this move may not work

The much-hyped online mutual fund platforms on the Bombay Stock Exchange and the National Stock Exchange have mostly turned out to be a no-show. Now, the Securities and Exchange Board of India (SEBI) is making another attempt at boosting the flagging sales of mutual funds by this route. It is trying to rope in banks to give a fillip to the volumes on the online platforms. But this may not work due to a rule by the Reserve Bank of India.

As reported by Moneylife yesterday, the market watchdog has called a high-level meeting with bank-sponsored MFs and their respective retail product heads of the banks. The meeting is expected to be attended by the retail product heads of banks like IDBI Bank, HSBC Bank, Kotak Mahindra Bank, ICICI Bank, HDFC Bank and Axis Bank which also have asset management companies which may be represented by their CEOs. At the meeting, SEBI is likely to pressure banks into selling mutual fund products by a variety of means, including using the exchange platform. All these groups have their own large stock-broking firms.

But the current Reserve Bank of India (RBI) guidelines do not allow banks to set up broker terminals inside their premises. This was confirmed by a source from ICICI Bank. Most importantly, SEBI has no jurisdiction in the banking space and it is unlikely that banks will heed its call without the go-ahead from the regulator, RBI. Therefore, SEBI's attempts at having banks push fund sales through the broker terminal route may turn out to be infructuous.

The SEBI move makes sense on paper. Banks have the widest and deepest distribution network of financial products and if any segment can ensure large nationwide distribution it is the banks. Speaking about the development, a spokesperson from the Indian Banks' Association (IBA) said, "Many banks already have the systems and distribution platforms in place. It will be another business opportunity for the bank. If they find it worthwhile they will do it." Another senior official from IBA said, "As banks have a wider reach SEBI might be planning to use that channel to increase the turnover. Banks already have a system of cross-selling of financial products." But having a network is one thing. Making it work for a particular product is another matter.

By dialling banks' helpline, the market regulator is now signalling that it is ready to explore every avenue to push fund sales after net inflows into equity funds started falling from August 2009 when as part of a series of regulatory changes SEBI banned entry load and upfront commissions. This effectively eliminated the well-entrenched incentive-based distribution system of selling mutual funds. With commissions eradicated, mutual funds have found distributors deserting their products in favour of better revenue-yielding products like Unit-linked Insurance Plans (ULIPs).

When fund sales flagged, SEBI probably felt that it needed to take innovative initiatives to push mutual fund sales. One of its brainwaves was offering a system of buying and selling mutual funds through broker terminals. This resulted in the creation of the Bombay Stock Exchange's (BSE) StAR MF platform and National Stock Exchange's (NSE) NEAT Mutual Fund Service System (MFSS) late last year. This was again a logical move because stockbrokers have a wide network. But there is a fundamental flaw in the idea of getting stockbrokers to sell mutual funds. Brokers make money by getting customers to trade frequently and have little interest in selling mutual funds, the sales of which do not fetch large volumes. Not surprisingly, both platforms have struggled to make any significant inroads, as Moneylife had previously reported. (Read here: http://www.moneylife.in/article/8/3193.html).

Now SEBI has come out with one more trick by getting banks to push mutual fund products especially those of funds belonging to the same group. If the stockbroker network for banks does not work, SEBI will have to get national distributors to try other means to sell funds.




jignesh n vyas

7 years ago

Sebi is totely faild to incress MF equity investment. This rules demage Small investor. MF is push product. IFA are punished for bluander big disturbutior fo miss salling. Sebi reitroduce up front commision and after see inflow of applacation. jignesh.

Dillip kumar swain

7 years ago


Ranjan D Gupta

7 years ago

SEBI's attempt to increase sell through Bank related Mutual Funds will result in a poor show.I am surprised to understand that SEBI has no proper knowledge about the environment of investment in India.In India products like Insurance, Mutual Funds.Pension require to be sold, not being bought with enthusiasm.SEBI can draw a clue from the fact that after introduction of "no entry load" on direct investment by investors only 3-4% of the investments came from direct investors.Investors will run to the Bank to take a Fixed Deposit or lined up in a queue in Post office to purchase NSC or Kishan Vikas Patra but not come forward with the same aggresiveness to invest in Mutual Fund.
Banks can request their customers to open Demat account but not force them to do it.


7 years ago

rather than reiewing its own decision of august 2009.......

SEBI's action are trying to say everything and everyone else is wrong in mutual fund industry......and only SEBI people is right....

its high time SEBI reviews its own decisions regarding mutual funds rather than trying one trick after another....


7 years ago

Time and again SEBI forgets the most important point that IN INDIA MUTUALS FUNDS ARE SOLD NOT BOUGHT. MF's are still a push product and not directly sought by the investing community. So the link will continue to be the so called MF Distributors/IFA's. Allow them to function and give them a level playing ground.

Hemant Beniwal

7 years ago

Do you think these trainees will be AMFI certified?

"ICICI Prudential, for instance, plans to hire 50 trainees to support its existing distribution network. “The bank has a strong branch network and we are trying to leverage on that. We are also looking to hire about 50 people as trainees to work in co-ordination with our existing distribution network,” said Mr Raghav Iyengar, National Head-Sales and Distribution, ICICI Prudential.

Some of the AMCs have also been hiring B-school graduates as interns for marketing their products. “The fund houses have been approaching us and are ready to send their interns to work with us to boost the sale of mutual funds,” said the head of an investment advisory services company in the city."


7 years ago

Mr. FM your NPS Lonch last year Please check volume Your NPS account and also check after NO Brokerage what mutual fund selling volume


7 years ago

What about the channel partners, there is no record of an transactions done by a channel partner on behalf of an AMC with an investor. Only their commission is blocked till date. But what are the efforts done by the channel partners to collect the application forms and details from investor. How much percentage has been sorted out till date. Any statistics???


7 years ago

Mr.Finance Minister, wake up. See the damage caused by idiotic decisions of SEBI. If the government cannot provide employment to people, let it not ruin thier livelihood. We IFAs are been punished for the blunders committed by Big Distributors of mis-selling and churning. Dont Post Offcies pay upfront ? What is wrong with this method ? Has the Mutual Fund industry not grown substantially from 2001-2009 ?An IFA gives services from investment cheque to redemption cheque. To put back Mutual Fund Investments on track,please REINTRODUCE Upfont Commission and see the sales soaring.

V N Kulkarni

7 years ago

6 months back mr.bhave was worried about lack of advisory to investor.
Mr.bhave , can you explain what advisory a BOLT operator(90% of them are day trader/speculator) is giving while transacting mutual fund transaction over online platform.

jignesh n vyas

7 years ago

It is very bad time foy MF industry. If you not given up front commision to advisior . so very difficult to sell Mf. If you tick in form how much commision dicided between agent investor. This is right stap. No body given services to small sip and small applacation. Also on line for Mf advisor.


7 years ago

This is another MOVE which clearly shows that SEBI has lost its mental power-and it is trying to heal stomache pain by a mental disorder pain killer-infact they are not ready to accept their series of failures of mental stability-these intelligent guys who have never dealt with a retail investor are proving them selves as big FOOLS-

Daily Market View: A laboured rally continues

A break in the 17,300-16,800 band will determine the direction

The market ended higher today; however, confusion exists in the street about the long-term sustainability of the rally as the crisis in the eurozone is yet to be resolved. The Sensex ended 95 points (0.5%) higher at 17,117 while the Nifty ended 25 points (0.5%) higher at 5,135. The indices started the day on a weak note taking cues from the Asian markets. The market started recovering in the early afternoon session and gained momentum on a strong start in European indices.

Asian indices settled mixed today. Key benchmark indices in China, South Korea, Singapore and Indonesia were up by 0.08% to 0.89% while markets in Hong Kong and Taiwan were down by 0.03% to 0.21%. In Japan, the Nikkei 225 average was down 0.13% after the country's ruling party selected finance minister Naoto Kan as Japan's new prime minister.

US stocks were up on Thursday, supported by a late-day rise in technology shares. The Dow was up 5.7 points (0.06%) at 10,255. The S&P 500 added 4.4 points (0.4%) to 1,103. The Nasdaq was up 22 points (0.9%) to 2,303. The US private sector created more jobs in May and the services sector increased payrolls for the first time in more than two years. In a separate report, the Labour Department said that US non-farm productivity grew at a 2.8% annual rate between January and March, the smallest advance in a year.

Back home, the monsoon activity is expected to regain next week after it was weakened by a cyclone. The monsoon rainfall was at 16.7 millimetres for the week ended 2nd June, down 11% from the normal weekly average of 18.8 millimetres.

India is likely to allow large consumers to keep larger stocks of sugar as prices keep dropping and supplies are likely to rise. The government had banned huge stocking by large consumers in February on poor domestic supply.

Foreign institutional investors were net buyers, purchasing stocks worth Rs406 crore on Thursday. Domestic institutional investors bought stocks worth Rs79 crore.

Bhandari Consultancy & Finance (down 4.9%) said that the Delhi High Court has directed that a meeting of the equity shareholders be convened on 10 June 2010, for the purpose of considering the Scheme of Arrangement between Sindhu Trade Links, Sindhu Holdings, Garuda Imaging and Diagnostic Pvt Ltd, Uttaranchal Finance, Parnami Habitat Developers, Suvidha Stock Broking Services Pvt Ltd, Reward Vinimay Pvt Ltd and Bhandari Consultancy & Finance along with their respective shareholders and creditors.

Modern India Ltd (up 0.2%) said that pursuant to the Bombay High Court order, Indian Institute of Jewellery Ltd, a wholly-owned subsidiary of the company, has been amalgamated with Modern India. Consequently, Indian Institute of Jewellery has been dissolved without being wound up on 3 June 2010.

Ceat (down 0.2%), which currently holds 54.84% stake in its Sri Lankan investment arm Associated Ceat Holdings Company Pvt Ltd, Colombo, has acquired the remaining 45,15,789 equity shares of the company. Consequently, ACHL has become a wholly-owned subsidiary of the company. ACHL holds 50% stake in Ceat Kelani Associated Holdings Pvt Ltd (CKAH), Colombo, a joint venture between ACHL and its Sri Lankan Partner, Kelani Tyres Ltd.

CKAH has three wholly-owned subsidiaries, which are engaged in manufacturing of tyres under the 'Ceat' brand.




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