Persistent’s IPO valuation looks attractive

The company’s EPS is expected to be Rs25 in FY10 with price-earnings of 11.92; its peers are currently trading at a P/E between a range of 10.99-15.97

Persistent Systems Ltd, a Pune-based software services company, will hit the markets with its initial public offering (IPO) on 17 March 2010 and there has been a positive call from brokerages on its issue so far.

During FY10, the company’s earnings per share (EPS) will be around Rs25 compared to Rs21.41 in FY09. The forward price-earnings would be Rs11.92 considering the upper band of Rs310 per share. Mid-cap IT companies like Infotech Enterprises, Sasken Communications and KPIT Cummins Infosystems Ltd are currently trading at P/E ratios of 15.97, 7.29 and 10.99, respectively.

“The issue is decently priced compared to its peers. We expect the EPS to be Rs25 to Rs26 (annualised) in FY10 because its nine-month EPS is around Rs21, and it would be around 11 times at a price of Rs310. The cash flow would be positive for most of the IT companies. If high net-worth individuals (HNIs) participate actively, and the qualified institutional buyer (QIB) portion receives good response, retail participation normally picks up on the last day,” said an analyst who tracks IT.

Persistent registered a net profit of Rs79.60 crore in the quarter ended December 2009, up 56% compared to Rs50.90 crore for the corresponding period last year.

A large proportion of its revenues also come from customers that operate in the telecommunication industry. In FY09, the company’s clients in the telecommunication industry contributed to 20.9% of its revenues. Due to its concentrated customer base, the company’s top ten customers accounted for 37.4%of revenues in 2009. CRISIL has assigned IPO ‘Grade 4’ to the issue, indicating ‘above average’ fundamentals. Enam Securities Pvt Ltd and JP Morgan India Pvt Ltd are the lead book running managers. The issue opens on 17 March 2010 and closes on 19 March 2010. The company is issuing 54.2 lakh shares at a price band of Rs290-Rs310. The issue size works out to Rs157.17 crore-Rs168.01 crore.

According to the prospectus, the IPO funds would be utilised to build development facilities, capitalise its subsidiaries for establishing development facilities and meeting fit-outs and interior design costs, hardware procurement and for general corporate purposes.

Persistent has clocked a healthy growth rate of 40% compounded annual growth rate (CAGR) during 2007-09, largely driven by an increasing trend of offshoring among independent software vendors (ISVs). However, in the first six months of 2009, the company faced pressure on revenues due to delay in product release/upgrade by a few large ISVs and closure of some small ISVs.

Persistent has won the 2008 NASSCOM Innovation Award and is recognised as one of the leading technology companies in the Deloitte Touche Tohmatsu Technology Fast 500 Asia Pacific 2009 survey, the prospectus said.


A straight five-week rally—where are we headed?

The stock markets have rallied strongly for the past five consecutive weeks. How will the markets perform this week? Moneylife’s study of similar historical patterns points to a solid trend

The thirty-share BSE Sensex has been on a roll for the past few weeks. The Sensex has surged 6% to 17,166 for the week ended 12 March 2010 from 16,125 recorded for the week ended 11 February 2010. The index has been rising continuously for these five weeks. Will this rally continue or is it time for the index to shed some of its gains?

Moneylife did a study of the past performance of the Sensex when the index had reported similar growth for a span of five straight weeks. We found some interesting patterns in the data.

We looked at Sensex data from 5 January 1990 up to the last week. We found that during this period of 21 years, there have been 33 instances of a sustained rally in the Sensex for five straight weeks. What happened in the 6th week in these 33 cases? In 22 instances, the subsequent week has reported a continuation in the Sensex rally. A 66% positive outcome (22 out of 33) is significant. On these occasions, the Sensex has risen by an average of 2.44%. The index has seen a maximum gain of 9.78% and a minimum gain of 0.21%.

So does this mean that the Sensex will continue its solid show in the coming week? The data and fundamentals strongly confirm this, but a lot would depend on how the global indices fare in this period. The market is strongly up this week already.

It should also be noted that, on several occasions, the Sensex has faltered and failed to carry on the momentum into the sixth week. In the 11 instances when the Sensex has actually reversed its trend following a five-week rally, it has averaged a drop of 2.13%, with a maximum fall of 4.56%.

In case the Sensex follows the trend and continues its momentum, what can you expect in the subsequent weeks? Out of the 22 instances when the index has rallied for six straight weeks, it has carried on its growth into the subsequent week 17 times, with an average return of 1.96%. Thus, history appears to be strongly in favour of the index growth to stay in positive territory for the coming weeks. Unless global markets get cold feet, the Sensex looks set to spurt along for a few days. Beware, however, that the chances of a reversal are getting higher. An 8th consecutive week of rally happened in eight cases (out of 17 occasions when the Sensex rallied for seven weeks in a row). And a 9th consecutive week of rally took place—on five out of eight occasions.



Nagendra Nath Sahoo

7 years ago

the sensex likely to reach to about 19075 before takes south.

Narendra Doshi

7 years ago

Good past info.
Lets all wait & see the interesting next two weeks before the FY2009-2010 ends.

Indian government not planning to market RIL gas from KG basin

RIL, which currently produces around 62 million standard cubic metres per day of gas from KG-D6, sells the fuel to customers identified by the government and at rates approved by it

The Indian government is not considering taking over marketing of natural gas produced by Reliance Industries Ltd (RIL) from its eastern offshore Krishna-Godavari (KG) basin D6 fields, reports PTI.

Minister of state for petroleum and natural gas Jitin Prasada replied in the negative when suspended Samajwadi Party's member of parliament (MP) Amar Singh in the Rajya Sabha asked if the "government proposes to take over the distribution and marketing of gas (of) RIL."

RIL, which currently produces around 62 million standard cubic metres per day of gas from KG-D6, sells the fuel to customers identified by the government and at rates approved by it.

Mr Prasada said the Production Sharing Contract (PSC) like the one Mukesh Ambani company signed with the government for exploring and producing hydrocarbons from Block KG-DWN-98/3 or KG-D6, gives marketing freedom to the contractor (RIL in this case), subject to the Gas Utilisation Policy framed by the government.

"The gas produced from KG-D6 is being sold in accordance with government's priorities and decisions made by the government in this regard," he said.

An Empowered Group of Ministers (EGoM), constituted to decide issues pertaining to commercial utilisation of gas under the New Exploration Licensing Policy (NELP), has decided that the contractor would sell gas to consumers in accordance with the marketing priorities determined by the government, he added.


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