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.
Inside story of the National Stock Exchange’s amazing success, leading to hubris, regulatory capture and algo scam
Fiercely independent and pro-consumer information on personal finance.
1-year online access to the magazine articles published during the subscription period.
Access is given for all articles published during the week (starting Monday) your subscription starts. For example, if you subscribe on Wednesday, you will have access to articles uploaded from Monday of that week.
This means access to other articles (outside the subscription period) are not included.
Articles outside the subscription period can be bought separately for a small price per article.
Fiercely independent and pro-consumer information on personal finance.
30-day online access to the magazine articles published during the subscription period.
Access is given for all articles published during the week (starting Monday) your subscription starts. For example, if you subscribe on Wednesday, you will have access to articles uploaded from Monday of that week.
This means access to other articles (outside the subscription period) are not included.
Articles outside the subscription period can be bought separately for a small price per article.
Fiercely independent and pro-consumer information on personal finance.
Complete access to Moneylife archives since inception ( till the date of your subscription )
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
Hear what others have to say:
RISKS AND MATTERS OF CONCERN:
•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.
VALUATION
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.