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.
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.
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.