Paradyne Infotech IPO: Analysis [AS SENT TO ME BY MY ANALYST]

K

karvind79

Guest
#1
Paradyne Infotech - Focused on the domestic market

Paradyne Infotech (Paradyne), promoted by technocrat Anand Sarnaaik, caters to the banking, financial services and insurance (BFSI) segment in the domestic market. Its wholly owned US-based subsidiary, Sundune Corporation, was set up to market and support implementation of its products in the US market. Paradyne holds 99.70% of the equity of Intercon Management Services, a management consultant for industrial, commercial and adminisatrative activities.
The objects of the issue include spreading Paradynes operation in other parts of India from Mumbai, Bangalore, Chennai and Delhi, expanding the software development center in Mumbai, upgrading the core banking product FinWorQs and human resource product HrWorQ at a cost of Rs 5.19 crore, setting up a data and support centre, upgrading the research & development lab and quality certification to international standards, and investing in subsidiary Sundune Corporation in the US. To enhance the functioning of the marketing and support base, the company intends to make an investment of about Rs 3.75 crore.


Strengths

Paradynes performance in the last two years has been good, with sales rising from Rs 35.40 crore in FY 2003 to Rs 68.56 crore in FY 2005 and net profit jumping from Rs 30 lakh to Rs 5.11 crore.
The company has a balanced business mix in terms of client-wise distribution of revenues, with no significant dependence on a single client.
The current aggregate order booking (as on 1 September 2005) is around Rs. 12 crore, comprising following major customers: 3D PLM Software (Geometric Software), Amdocs, Department of Income Tax, J M Morgan Stanley, Acer India, BMC Software, Zensar Technologies, Mandvi Bank, Mercator Lines, KPIT Cummins, and Rochem Separations.
Weakness:

More than 70% of Paradynes revenue comes from system integration, which is a highly competitive and low profit margin area. The rest of the revenue is derived from software services and managed services.
The companys business is focused on the BFSI vertical in India. This makes future success highly dependent on IT spending of banks, insurance companies and financial institutions and continuance of demand for its products and services from these industries in India. Therefore, any structural changes in the BFSI vertical may materially affect business. Further, BFSI is a highly crowded space with a large number of players, both small and large, providing software services and products. This translates into a high competitive risk for the company. In addition, the major market is India, which is a geographical risk.
The quarterly revenue may fluctuate significantly from period to period in future as system integration and products constitute a major revenue stream. Further, the product business is highly exposed to technology risk.
Valuation and Recommendation



Consolidated FY 2005 EPS on post-issue equity of Rs 10.80 crore works out to Rs 4.7. The offer price of Rs 42 discounts this 8.9 times. If the company maintains its current growth tempo and succeeds in its new products, one can expect gains.One may apply for the issue for both listing gains and investment for medium term.


I received the above from one of my friends and check urself before investing

From
Arvind.K
 
#2
karvind79 said:
Paradyne Infotech - Focused on the domestic market

Paradyne Infotech (Paradyne), promoted by technocrat Anand Sarnaaik, caters to the banking, financial services and insurance (BFSI) segment in the domestic market. Its wholly owned US-based subsidiary, Sundune Corporation, was set up to market and support implementation of its products in the US market. Paradyne holds 99.70% of the equity of Intercon Management Services, a management consultant for industrial, commercial and adminisatrative activities.
The objects of the issue include spreading Paradynes operation in other parts of India from Mumbai, Bangalore, Chennai and Delhi, expanding the software development center in Mumbai, upgrading the core banking product FinWorQs and human resource product HrWorQ at a cost of Rs 5.19 crore, setting up a data and support centre, upgrading the research & development lab and quality certification to international standards, and investing in subsidiary Sundune Corporation in the US. To enhance the functioning of the marketing and support base, the company intends to make an investment of about Rs 3.75 crore.


Strengths

Paradynes performance in the last two years has been good, with sales rising from Rs 35.40 crore in FY 2003 to Rs 68.56 crore in FY 2005 and net profit jumping from Rs 30 lakh to Rs 5.11 crore.
The company has a balanced business mix in terms of client-wise distribution of revenues, with no significant dependence on a single client.
The current aggregate order booking (as on 1 September 2005) is around Rs. 12 crore, comprising following major customers: 3D PLM Software (Geometric Software), Amdocs, Department of Income Tax, J M Morgan Stanley, Acer India, BMC Software, Zensar Technologies, Mandvi Bank, Mercator Lines, KPIT Cummins, and Rochem Separations.
Weakness:

More than 70% of Paradynes revenue comes from system integration, which is a highly competitive and low profit margin area. The rest of the revenue is derived from software services and managed services.
The companys business is focused on the BFSI vertical in India. This makes future success highly dependent on IT spending of banks, insurance companies and financial institutions and continuance of demand for its products and services from these industries in India. Therefore, any structural changes in the BFSI vertical may materially affect business. Further, BFSI is a highly crowded space with a large number of players, both small and large, providing software services and products. This translates into a high competitive risk for the company. In addition, the major market is India, which is a geographical risk.
The quarterly revenue may fluctuate significantly from period to period in future as system integration and products constitute a major revenue stream. Further, the product business is highly exposed to technology risk.
Valuation and Recommendation



Consolidated FY 2005 EPS on post-issue equity of Rs 10.80 crore works out to Rs 4.7. The offer price of Rs 42 discounts this 8.9 times. If the company maintains its current growth tempo and succeeds in its new products, one can expect gains.One may apply for the issue for both listing gains and investment for medium term.


I received the above from one of my friends and check urself before investing

From
Arvind.K
Thanks for sharing Arvind.
 
K

karvind79

Guest
#3
This msg from Business LIne
*********************


Paradyne Infotech: Avoid
Suresh Krishnamurthy




AN INVESTMENT in the initial public offer of Paradyne Infotech need not be considered. The company's financial performance the past two years has been impressive. The valuation of the stock is also attractive.

Paradyne's market capitalisation, based on the offer price, works out to Rs 42 crore and the price-earnings multiple would be about 9. However, factors such as the lack of well-articulated strategy, excessive dependence on the domestic market for revenues, and the small size of the company increase the risks involved.

Paradyne does not appear to possess any distinct competitive advantage, which is essential for a software services company to sustain itself and grow.

Impressive growth


Paradyne's revenues increased from Rs 35 crore at the end of March 2003 to Rs 68.52 crore at the end of March 2005.

During the same period, profits rose from Rs 31 lakh to Rs 5 crore. The average return on net worth over the past three years is a healthy 35 per cent.

Annand Sarnaaik, a management graduate with no experience in software services, set up Paradyne Infotech in 1997.

The company is into systems integration, software services, managed services and recently entered BPO. Systems integration contributes a sizeable 75 per cent of the firm's revenues. Exports accounted for less than 10 per cent of total revenues. Growth in export sales has, however, been unimpressive.

The bulk of revenue may be generated from hardware sales. Though the company does not indicate the hardware component in the total sales, of the total 102 technical staff employed by Paradyne, 34 are hardware engineers.

Risky prospects


Nothing in the offer document suggests that Paradyne has a competitive edge over its competitors in the domestic software arena. The revenues from the latter are set to grow rapidly given that the Indian industry is expected to grow at 12 to15 per cent per annum in the next several years.

Without competitive advantage or size, Paradyne may find it difficult to take advantage of the growth prospects for domestic software services. Its management strategy is also not well articulated.

Paradyne sees itself as an integrated IT solutions provider. The company's size, however, makes such claims look lofty and suggests that it lacks a focussed strategy.

The offer document also does not clearly indicate what proportion of the profits is accounted for by systems integration, which is hardware intensive and the competition is quite intense in India.

There is also no mention of the company's performance in the quarter ended June. Paradyne has indicated that it has orders for Rs 12 crore as of end-September. This works out to a substantially small proportion of the total revenues for the year ended March. These risk factors considerably dilute the attractiveness of the offer.



Friends are need their own analuse before investing.

From

Arvind.K
 
#4
I had applied for Paradyne infotech IPO last year. I didn't get any allotment. They sent IPO refund order to my address, but unfortunately i was not there at that time and the refund order was sent back by Postal authorities.
My address and Bank account both are changed now as in December 2005 i moved to Bangalore from Hyderabad. Paradyne people had sent a letter to my old address asking for new address.
I sent several e-mails to them on their e-mails ( [email protected], [email protected] ). Till now i have not recieved any response.
Can anybody guide me how do i get my refund order?

Thank you
 

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