Infinite Computer Solutions

Infinite Computer Solutions

Havells India, Infinite Computer Solutions

Havells India, Infinite Computer Solutions

Infinite Computer Solutions Ltd

Infinite Computer Solutions Ltd

Infinite Computer Solutions

Infinite Computer Solutions

Infinite Computer Solutions

Infinite Computer Solutions

Infinite Computer Solutions Oversubscription Details

Qualified Institutional Buyers (QIBs) - 48.4435 times

Non Institutional Investors 106.0171 times

Retail Individual Investors (RIIs) 11.0781 times

Good times are back for IPO Market

Infinite Computer IPO subscribed 41.79 times

Receives bids for 40.85 crore shares

The initial public offer (IPO) of Infinite Computer Solutions (India) was oversubscribed by 41.79 times on its last day on Wednesday, 13 January 2010. The IPO got bids for 40.85 crore shares by 16:00 IST, data on NSE showed. The company proposes to sell 97.77 lakh shares through the IPO, which excludes allotment to anchor investors.

The issue closes today, 13 January 2010. The price band was set at Rs 155 to Rs 165. At the top end of the price band, the company will raise about Rs 190 crore. The company is offered shares through a 100% book-building process.

Infinite Computer Solutions got a commitment of Rs 28.46 crore from nine anchor investors. The company finalised an allocation of 17.25 lakh shares to nine anchor investors at Rs 165 per share--at the upper price band of the IPO.

The IPO included fresh issue of 57.33 lakh equity shares and an offer to sell 57.69 lakh equity shares by Whiterock Investments (Mauritius). The company intends to utilize the IPO proceeds for meeting capital expenditure, making acquisitions and repaying debt.

Infinite Computer Solutions (India) is mainly into software application development and maintenance but has diversified into other areas such as remote infrastructure management and research & development services.

Infinite Computer IPO fully subscribed on day two

Receives bids for 2.78 crore shares

The initial public offer (IPO) of Infinite Computer Solutions (India) was fully subscribed on the second day on Tuesday, 12 January 2010. The IPO got bids for 2.78 crore shares by 16:00 IST, data on NSE showed. The company proposes to sell 97.77 lakh shares through the IPO, which excludes allotment to anchor investors.

The issue closes on 13 January 2010. The price band has been set at Rs 155 to Rs 165. At the top end of the price band, the company will raise about Rs 190 crore. The company is offering shares through a 100% book-building process.

Infinite Computer Solutions got a commitment of Rs 28.46 crore from nine anchor investors. The company finalised an allocation of 17.25 lakh shares to nine anchor investors at Rs 165 per share--at the upper price band of the IPO.

The IPO includes fresh issue of 57.33 lakh equity shares and an offer to sell 57.69 lakh equity shares by Whiterock Investments (Mauritius). The company intends to utilize the IPO proceeds for meeting capital expenditure, making acquisitions and repaying debt.

Infinite Computer Solutions (India) is mainly into software application development and maintenance but has diversified into other areas such as remote infrastructure management and research & development services.

IPO Review - Infinite Computer Solutions

IPO Review - Infinite Computer Solutions

Infinite Computer Solutions - Apply or Avoid ?

While Infinite Computer Solutions has a strong base of clients, improving margins and good growth prospects, the IPO pricing appears a bit stiff.

Mid-tier IT services company, Infinite Computer Solutions is seeking to raise Rs 190 crore from an IPO to partly fund its acquisition and expansion plans. The issue will also help Whiterock Investments, a part of Singapore-based Temasek which currently holds just under 10 per cent, to exit from the company. Of the Rs 190 crore, about Rs 95 crore will be available for the expenditure programme of the company while the rest will go to investors such as Whiterock and the promoters.

The promoter’s stake will come down from 72 per cent to 58 per cent on part sale of their equity holding and on an expanded base. The issue constitutes 26 per cent of expanded capital of the company.

Business model
Infinite has three lines of business or service offerings—application management or IT services, infrastructure management and product and IP-leveraged solutions. The company which counts IBM, Fujitsu, GE and Verizon, America’s largest wireless carrier, as its clients is focussed on generating business from large companies operating in verticals of telecom, media, healthcare and utilities. While Infinite has had to make do with smaller margins initially due to its Fortune 500 company focus, it has gained in terms of the size of contracts, experience in handling large projects and steady revenues.

However, analysts say that the company is taking a big risk on its thin roster of clients (the top 5 contribute 84 per cent of revenues, with Verizon alone contributing nearly 40 per cent) and can cause problems if vendors are switched or work is downsized. The company however believes that the scale, complexity and familiarity with the critical processes ensure the “stickability” of the vendor. The company also faces geography risk with 90 per cent of its business flowing from the US.

While the long-term outlook for software services is strong and recent uptick in hiring is a positive, the recovery in the US and other developed markets continues to be shaky. Though a predominant share of the future business will continue to come from the US, the company signed a multi-million dollar deal with a European company in 2008 and is looking to diversify its geographic risk further.

Acquisitions, expansion strategy
In addition to expanding its existing businesses, Infinite is looking at acquiring companies or intellectual property-based products from customers which can be developed further. About Rs 38 crore of the IPO proceeds are earmarked to fund its acquisitions. The company is keen to acquire IP-products and move to a revenue share model, which fetch good margins. Currently, only 5 per cent of its revenues come from this route. The company had acquired US-based company Comnet in 2006 to expand its offerings and tap the entire telecom value-chain rather than limiting itself to just telecom service providers such as Verizon. Infinite is likely to maintain its focus on the telecom space, which fetches it over half of its revenues, by offering IT and telecom infrastructure management solutions. It has four development centres across the country and plans to expand its existing campus at Bangalore and set up a new facility at Gurgaon at a cost of about Rs 26 crore. Further, the company plans to retire a part of its debt of Rs 24 crore through the issue proceeds which would be to the tune of Rs 8.5 crore.

Improving numbers
While the company’s sales, operating profit and net profit have grown at a rapid clip since 2005-06, much of the growth has come in recent times. Sales jumped 45 per cent year-on-year in 2008-09 to Rs 496 crore while operating profit margins went up 540 basis points to 13.2 per cent.

The company says that the jump in operating profit margins (which have since improved to 18 per cent in the first half of 2009-10) has been on counts of change in service delivery, segment and revenue model mix. At the segment level, the company has been reducing its share of application development and maintenance business from 80 per cent in 2005-06 to 61 per cent in 2008-09 and increasing its share of higher margin business namely, IP-leveraged solutions and remote management services.

Further, the contribution from the lower margin time and material or labour hour model has decreased from 81 per cent to 50 per cent while fixed price contracts, which ensure steady revenues and are a better bet in these times, increased from 19 per cent to 43 per cent during the same period. In terms of service delivery, the share of offshore business which was at 4 per cent in 2005-06 has increased to a quarter of revenues and has helped margins.

Valuations
Based on the annualised first half numbers, the company’s revenues will increase by about 28 per cent year-on-year to Rs 636 crore in 2009-10 and net profit by 65 per cent to about Rs 74 crore. At an EPS of Rs 16.9 on expanded post-issue equity, the stock is available at 9.17-9.7 times its price band of Rs 155-Rs 165. While there are no other similar-sized players with revenues predominantly from the telecom software space (larger companies such as Mahindra Satyam are in a different league), when compared to mid-tier companies the asking price seems to be a touch stiff. Infotech Enterprises (2009-10 estimated sales at Rs 945 crore and OPM of 22 per cent) for example despite higher sales and profit margins is available at similar valuations (10.7 times estimated FY10 EPS of 27.1). Also, the high client and geographic concentration substantially increase the risks to its business. Investors with a longer-term perspective may apply at the lower price-band.

via Business Standard

Infinite Computer IPO undersubscribed on day one

Receives bids for 39.17 lakh shares

The initial public offer (IPO) of Infinite Computer Solutions (India) was undersubscribed on the first day of the opening of the issue today, 11 January 2010. The IPO got bids for 39.17 lakh shares by 16:00 IST, data on NSE showed. The company proposes to sell 97.77 lakh shares through the IPO, which excludes allotment to anchor investors.

The issue closes on 13 January 2010. The price band has been set at Rs 155 to Rs 165. At the top end of the price band, the company will raise about Rs 190 crore. The company is offering shares through a 100% book-building process.

Infinite Computer Solutions got a commitment of Rs 28.46 crore from nine anchor investors. The company finalised an allocation of 17.25 lakh shares to nine anchor investors at Rs 165 per share--at the upper price band of the IPO.

The IPO includes fresh issue of 57.33 lakh equity shares and an offer to sell 57.69 lakh equity shares by Whiterock Investments (Mauritius). The company intends to utilize the IPO proceeds for meeting capital expenditure, making acquisitions and repaying debt.

Infinite Computer Solutions (India) is mainly into software application development and maintenance but has diversified into other areas such as remote infrastructure management and research & development services.

IPO Review- Infinite Computer Solutions

IPO Review- Infinite Computer Solutions

Infinite Computer Solutions IPO Review

Investors can give the initial public offering of Infinite Computer Solutions, an IT services provider, a miss considering the relatively high valuation that it demands and the several business challenges that the company faces.

At the upper end of the price band (Rs 155-165), the offer is priced at 16 times its 2008-09 per share earnings and about 14 times its likely 2009-10 earnings, both on a post offer equity base.

This is at a premium to most small- and mid-tier IT companies. Although larger in size, Sasken Communications, which also has a telecom focus, trades at 12 times trailing earnings. Others mid and small IT companies such as Zylog Systems and Sonata Software trade at single digit PE multiples.

Infinite has seen its revenues grow at a compounded annual rate of 13 per cent over 2005-09 to Rs 495.8 crore. The profit growth has been inconsistent and top-line growth has been lower than other mid-tier IT companies. Much of even these figures of Infinite is distorted by the FY09 numbers when it registered a 45 per cent growth in revenues and more than doubled its profits over FY08, thanks to ramp up of one client and signing up another large one.

From a loss recorded at the net level in 2005-06, the company reported small profits in the subsequent year and a spike in the year after. Net margin has remained in the 2-5 per cent range for most of the last few years, spiking to 9 per cent in 2008-09.

From a business perspective, high client concentration, heavy US dependence and dollar dependence and a service-mix that largely tends towards low-margin ones are key negatives. A high onsite component also makes for high costs, reducing the edge over competitors.

Among macro trends in the IT industry, vendor consolidation undertaken by clients could result in several smaller players such as Infinite losing out to top-tier players. In the low-end services segment, the number of players vying for deals is large , which brings in pricing and other competitive pressures on the company.

Business Challenges

Infinite provides IT services to a limited set of verticals. Telecom (59.4 per cent of revenues) and healthcare (16.6 per cent) are its largest verticals. Its top five clients contribute close to 80 per cent of revenues, with its top-client (IBM) accounting for nearly 40 per cent of revenues. Though smaller companies do have higher client concentration, these levels seem quite high.

In recent interactions with the media, many large IT services players have indicated that telecom and manufacturing are not yet out of the woods.

This means that Infinite, with its heavy dependence on telecom, faces added risks on volume growth on this front.

The presence of players such as Tech Mahindra and Sasken Communications with greater execution capabilities, especially on the R&D front, a key to success in the telecom vertical, as well as top-tier IT layers puts heavy competitive pressure on Infinite.

The presence in the healthcare vertical though is welcome, especially as activity on this from clients may improve when the US passes the healthcare reforms Bill. The company also delivers lower-billed services such as application development and maintenance and testing, which account for over three-fourths of revenues. This space is a highly crowded one, what with companies of all sizes and especially the mid-tier ones looking to tap these non-discretionary deals from clients. These services are also exposed to pricing pressures.

Macro factors skewed

Another point of concern for the company is that the US contributes nearly 90 per cent of the company's revenues. With the rupee appreciating against the dollar from 51 levels to 45.6, and a weak dollar predicted for some time to come, smaller companies such as Infinite would be hard hit on the realisation front.

From a cost perspective, the company derives over 70 per cent of revenues from services delivered from onsite locations.

This creates a sub-optimal structure as these are high-cost revenues and would significantly affect margin.

The proportion of offshore revenues has increased in recent years, but it is still quite a way away from the ideal proportion.

Vendor consolidation undertaken by several large clients in recent times, where they restrict their projects to two or three large Indian vendors apart from a few global ones, has also meant that smaller players such as Infinite may find the equation skewed against them.

The Issue

Infinite is offering 11.5 million equity shares to raise about Rs 190 crore (at the upper end of the price band) which includes an offer for sale of about 5.76 million shares by existing shareholders.

Infinite Computer Solutions (India) IPO Analysis

Focused on telecom vertical

Has seen stupendous growth over the last 18 months even when the general industry as well as the telecom vertical were not doing well

Infinite Computer Solutions (India), promoted by Sanjay Govil, is a global service provider of infrastructure management, intellectual property (IP) leveraged solutions and IT services, is significantly focused on the telecom vertical. The telecom vertical contributed 59.4% of the revenue for fiscal ended March 2009 (FY 2009) and 54.4% of the revenue in the first half of FY 2010. The other focus industry verticals include media, technology, manufacturing and healthcare.

Its services span from application management outsourcing, packaged application services, independent validation & verification, product development & support, to higher value-added offerings including, managed platform and product engineering services. In the telecom vertical, its services to original equipment manufacturers (OEMs) and service providers include product engineering and lifecycle management, operational support systems (OSS) and business support systems (BSS).

Geographically, for FY 2009, USA contributed about 91.2% (88.6% for H1 FY2010) of the revenues of the company, whereas Europe contributed about 2.1% (6.4% for H1 FY2010) of revenues, India about 5% (3.3% for H1 FY2010) and Asia Pacific contributed 1.7% (1.7% for H1 FY2010) of revenues. The company has five development centers in India at Bangalore, Hyderabad, Gurgaon and Chennai. It has a global sales network comprising 14 offices across six countries, i.e., North America, Europe, China and Asia Pacific.

As of September 2009, the company had an headcount strength of 2,648 employees including 2,385 technical and 263 support. The utilization was steady at 75%. The onsite headcount has remained stable at around 600 employees. The company had 70 clients as of September 2009, with contribution from Top 10 clients at 88.2% for FY 2009. The number of clients with US$ 20 + million revenue increased from one in FY 2006 to three in FY 2009 and the number of US$ 1 million clients increased from nine to 13 over the same period.

The public offer includes fresh issue and offer for sale by selling shareholders, which include promoter Sanjay Govil, key managerial personnel Vaibhav Bhatnagar and investor WhiteRock Investment (Mauritius).

The net proceeds of the issue would be utilized for upgrading the existing facility in Bangalore and set up a new facility in Gurgaon, acquisition, and repayment of debt. The facility is to be completed by August 2010 and the acquisition by July 2010.

Strengths

* The company has seen good growth over the last 18 months on the back of change in revenue mix. For FY 2009, the operating revenue grew 44% over FY 2008 and for H1 FY 2010, the company reported 65% of FY 2009 revenue. The company has moved away from low margin business to core higher margin business. In FY 2006, Application Development & Maintenance (ADM) contributed 80% of revenue. This has come down to 61% in FY 2009, whereas the share of remote infrastructure management services increased from 6% to 8%, testing services from 4% to 11%, and IP leverage services from 8% to 17%.

* The operating margins improved from 4.3% in FY 2007 to 11.9% in FY 2009 and further to 18% in H1 FY2010. The company, which was predominantly an onsite company, has since seen the level of offshore increase from 10% in FY 2006 to 25% in FY 2009 and further up to 32% in H1 FY 2010. The share of non-linear revenue has also increased, thereby boosting margins. The billing has changed towards fixed price and revenue sharing from time & material (T&M). T&M has decreased from 81% in FY 2006 to 51%, whereas fixed price has improved from 19% to 43% and revenue sharing to 6%.

Weaknesses

* The company derives significant portion of revenue from limited number of clients. Top client contributed 40% of revenue and the top 5 clients contributed 79.7% of the revenue for fiscal 2009.

* A significant portion of business is derived from the telecom vertical. For FY 2009, telecom contributed to 59.4% of revenue. The telecom vertical has been going through bad times and revival is expected only by mid 2010, subject to stability in the global economy. Many telecom companies, both OEMs and service providers, have cut back on their budgets and expansion plans.

* The day's sales outstanding (DSO) for the company have been increasing from 94 days in FY 2006 to 150 days in FY 2009. The number is slightly lower at 141 days for the first half of fiscal 2010. The actual DSOs for the company are about 100 days. The jump in DSOs is mainly due to an arrangement entered into with a long-standing client, who has cut down on its vendors from 100 to 12. The arrangement is back to back, wherein the company would be billing the client and the vendor who is still transitioning the work would bill the company. The revenue would include a small margin of this billing, whereas the complete impact would be seen in debtors and creditors. The management expects this arrangement to end in the next 2-3 years.

Valuation

At the issue price of Rs 155 – 165 on consolidated EPS of Rs 10.2 for FY 2009, the PE works out to 15.1 – 16.1 times. The company has seen a very robust FY 2009 and first half of FY 2010, when the general industry trend was negative to sluggish. Backed by growth in top 10 clients and change in business model, the Company reported 43% growth in operating revenues and 159% jump in net profit for FY2009, For H1FY2010, it has already done 65% of FY2009 revenues and 82% of FY2009 net profit. On annualized basis, FY 2010 consolidated EPS comes to Rs 19.1 and PE comes down to 8.1 – 8.6 times.

Grey Market Premium - Infinite Computer Solutions

Company Name	Offer Price (Rs.)	Premium (Rs.)
Infinite Computer	155 to 165	12 to 15
MBL Infra	180	10 to 12

Infinite Computer sets IPO price band at Rs 155-Rs 165

Issue to remain open between 11 to 13 January 2009

Infinite Computer Solutions (India)'s initial public offer (IPO) of 1.15 crore equity shares opens for subscription on 11 January 2010. The IPO closes on 13 January 2010.

The company will offer shares through a 100% book-building process. The price band for the IPO has been set at Rs 155 to Rs 165. At the top end of the price band, the company will raise about Rs 190 crore.

The IPO includes fresh issue of 57.,33 lakh equity shares and an offer to sell 57.69 lakh equity shares by Whiterock Investments (Mauritius).

The company intends to utilize the IPO proceeds for meeting capital expenditure, making acquisitions and repaying debt.

Infinite Computer Solutions (India) is mainly into software application development and maintenance but has diversified into other areas such as remote infrastructure management and research & development services.