Thinksoft Global Services had entered the capital market on 22nd September 09, with an IPO of 36.46 lakh equity shares of Rs. 10 each, in the band of Rs. 120 to Rs. 130 per share. Of this, fresh issue is of 13.50 lakh equity shares while Offer for Sale is of 22.96 lakh equity shares. Hence, at the upper band of Rs. 130, IPO size was to be of Rs. 47.40 crores, of which Rs. 17.55 crores would have come to the company and Rs. 29.85 crores, would have gone to the selling shareholders. However, as only 62% of the issue was subscribed on the closing day, the company has now decided to extend the IPO deadline to October 1, and has also revised the price band to Rs.115-Rs.125.
The company is a BFSI software testing enterprise having its offshore facilities at Chennai with 360 seats. It is now planning to add another 400 seats with a total outlay of about Rs. 17.50 crores, including IPO expenses. The company had a cash balance of Rs. 14.72 crores as at 31-03-08 and Rs. 26.56 crores as at 31-03-09. So, why these plans were not carried out and implemented by the company with its own funds and what is the need of this IPO? Is it an exit route now being given to the selling shareholders?
The company is a very small player with its total income at Rs. 95.66 crores with PAT at Rs. 14.50 crores resulting in an EPS of Rs. 16.65. This implies a PE multiple of 7.80 times at the upper band and at 7.20 times at the lower band. Presently, many quality mid cap IT stocks are available in a P.E. multiple of 6 to 8 times, while this will be a small cap company which would rule at much lower PE. These types of companies have not been able to reward shareholders and would languish after seeing initial fireworks, post listing.
Financials of the company are also not comforting. Of the cash and bank balances of Rs. 26.56 crores, held by the company, as at 31-03-09, is placed to the extent of Rs. 21.59 crores in current accounts in foreign currency. F.D. with the banks has decreased to Rs. 1.61 crores as at 31-03-09 from Rs. 4.50 crores as at 31-03-08. Even current liabilities of Rs. 17.10 crores is not comforting, of which, Rs. 10.90 crores is toward provisions for expenses. Sundry Debtors of Rs. 23.86 crores, as at 31-03-09 is quite high, considering its total income of Rs. 92 crores for FY 09. Even having a cash credit limit sanction of Rs. 2.50 crores (though not availed and utilized) raises doubt for this cash rich company, having a cash balance of atleast Rs. 5 crores in all these years.
Considering all these, issue does not merit any attention and should be given a skip.