TAKE SOLUTIONS

Take Solutions is entering the capital market on 1^st August 2007 with a public issue of 21 lakh equity shares of Rs.10 each in the price band of Rs.675 to Rs.730 per share.

The company is into providing software products and services for Supply Chain Management (SCM) and Life Sciences (LS) Verticals and have 16 products in SCM vertical and have 6 products under LS vertical. Upto 31-03-07 the company completed more than 2,500 software installations for over 250 customers which are mainly MNCs, Medium and Small sized companies.

The company kept growing by acquiring various companies in Asia and US. However, some of the acquisitions have not yielded any results like company acquired 51% in Megatrends Ltd. but subsequently divested it. Similarly, in 2004 Take Solutions Gulf WLL was incorporated to foray in Gulf market which was liquidated in January 2007. During 2004 to 2007, the company acquired stakes in various companies to foray into automotive space in India, SCM in South East Asian market and for US markets.

On consolidated basis for FY 07, the company had total income of Rs.182.83 crores on which PAT was placed at Rs.31.64 crores on equity base of Rs.9.37 crores resulting in an EPS of Rs.33.77. The present equity of the company is Rs.9.90 crores which would rise to Rs.12 crores, post issue. Promoters stake would fall to 59.32% from 71.90%. The net worth of the company as at 31-03-07 was Rs.87.78 crores while total debt was at Rs.138 crores. The spurt in the performance of the company came only in FY 07. Consolidated PAT from FY 03 to FY 06 was just Rs.11.80 crores on total aggregate income of Rs.96.30 crores. Due to various acquisitions, debt of the company rose to Rs.138 crores from Rs.41 crores in FY 06. Even sundry debtors of Rs.78.50 crores as at 31-03-07 is quite high compared to topline of Rs.183 crores of FY 07. A debtor cycle of over 5 months.

The company has now estimated a fund requirement of about Rs.142 crores of which Rs.104 crores is for repayment of debt availed for acquisitions in the past and for pre-payment of term loan. Rs.38 crores has been earmarked for product development and enhancement of domestic infrastructure facilities. Acquisition of companies/business/products seems to be main focus for which no fund has been earmarked The entire fund is being mobilized from the proposed issue.

Since major chunk of the fund shall get used for loan repayment nothing much shall get used for improved performance. Considering PAT of Rs.31.64 crores for FY 07 EPS translates to Rs.26.36 on expanded equity base of Rs.12 crores. At the upper band of Rs.730, share is richly valued at a PER of close to 28. No doubt, product IT companies are always richly valued, but this is quite steep.

Also due to low market perception for IT stocks, investment is not recommended in the issue.