Hem Securities has come out with a report on Vishal Information Technologies' IPO. It has recommended investors to ignore the issue.

The issue has opened for subscription with its initial public offering (IPO) of 27,90,000 equity shares of Rs 10 each. The issue will close on July 24, 2008. The price band has been fixed at Rs 140-150 per equity share.

Hem's report on Vishal Information Technologies' IPO:

Company provides services and customized solutions in the areas of data-digitization, E-publishing, Eaccounting and digital library. Company utilizes its understanding of specific requirements of its clients and implements end-to-end solutions to meet their specific requirements. Company gives its clients options to choose from to achieve higher levels of efficiency and cost reduction.

Company is one of the pioneers for the concept called “Digital Library for Visually Impaired & Blind” This concept was promoted though a UK based institution who promotes the causes and challenges of Visually Impaired & Blind.

Company has developed deep understanding and specialization in services that it provides to its customers. This deep domain knowledge has helped company to reduce the time taken for each activity, costs involved in implementation of the solution, pricing and time management.

Company has an experienced, qualified and dedicated management team; many of them have over 2 decades of experience in their respective fields. Company’s Intimeof the market in India will enable company to continue to take advantage of both current and future market opportunities.

Company currently derives a substantial portion of its income from limited number of (15) clients. Company’s three largest clients; UK client contributed 21%, European client contributed 19% and American client contributed for 16% of the income for the year ended March 2008. The loss or financial difficulties of any of its significant clients, or significant decreases in the volumes of work from its clients, would have a material adverse effect on company’s business, results of operations, financial condition and cash flows.

Company operates in a highly competitive environment and if company is not able to compete effectively, its income and profitability will be adversely affected.

Valuation:
 
The company at price band of Rs 150-140 will have p/e multiple of 13.23-12.35 at post issue eps of Rs 11.34 (Basis PAT FY08) The company’s sales, operating profit and profit after tax has shown CAGR of 31% from FY’04 to FY’08.The company has shown strong performance on financial basis but on the relative valuation basis , the issue looks overpriced at present level. Hence we recommend the investor to ignore the issue.

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