Zylog Systems

By Research Desk
about 14 years ago
Zylog Systems

Zylog Systems is entering the capital market on 20th July 07 with a public issue of 36 lakh equity shares of Rs.10 each in the band of Rs.330 to Rs.350 per share.


The company is a global service provider delivering technology driven business solutions with its three tier engagement model comprising of onsite, offsite and offshore. The offshore development centre of the company is located at Chennai with 250 seats. The company is now setting up two Offshore Development Centres with capacity of 800 and 1,250 seats in Tamil Nadu with total area of 2.05 lakh sq. ft. The cost for these are estimated at Rs.66.72 crores. Since the capacity is being increased by 2,050 seats, the working capital requirement would also increase for which requirement is estimated at Rs.81.89 crores. The company also plans to go for acquisition as also for making strategic investments.


In a nutshell, having established themselves and due to prospects of increasing its business activities, the capex of over Rs.150 crores has been planned. This is likely to be financed by proposed issue of Rs.126 crores (assuming price discovery at Rs.350 per share) and preferential allotment of Rs.43.88 crores with term loan of Rs.13.15 crores. The company had a cash and bank balance of Rs.83.64 crores as at 31.03-07, so term loan could have been avoided by the company.


For FY 07, the total income of the company was placed at Rs.408.12 crores with PBT of Rs.56.63 crores and PAT of Rs.54.86 crores on equity of Rs.12.85 crores, which results in an EPS of Rs.42.68. Tax liability of the company is quite low at 3% for FY 07 which would increase in FY 08. On 1st March 07, the company placed 16.25 lakh equity shares at Rs.270 per share to financial investors to mobilize Rs.44 crores which got deployed for the project. Even promoters subscribed to 8 lakh shares at Rs.225 per share.


The equity of the company is increasing from Rs.12.85 crores to Rs.16.45 crores, while its business would see a rise of about 200% to 300%. The company would be creating tangible assets which would strengthen the balance sheet of the company. Even from the existing operations and on expanded equity base, the share is issued at a PER of 8.20 which is quite attractive. Post expansion topline and bottomline would improve sharply, thus giving lot of scope of appreciation to investors.


An excellent stock to apply.


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