Persistent's prem to peers could widen further: Sharekhan

Nifty BSE | NSE 10/02/12 Are Mutual Funds betting on Nifty?

Sharekhan has come out with a research report on Persistent Systems' IPO, which has been subscribed 2.75 times. The broking firm believes that the premium over its peers could widen further in future.

The initial public offering (IPO) of Pune based software product development company opened for subscription. The company plans to raise around Rs 157.17-168 crore at price band of Rs 290-310 per equity share via 54,19,706 equity shares issue.

The report says, "Persistent Systems has reported an impressive growth in its revenue and earnings over the last five years. It operates in the niche segment of OPD which has a strong growth potential for the next few years. Factors such as revenue stickiness (given the nature of the business model), lower onshore exposure, diversification plans of the company towards the newly identified high-growth areas, all augur well for the company's growth plans."

"In terms of valuations, the stock is being offered at around 11.5-12.3x its FY2010E earnings. This offering is almost marginally above the valuation of the peers that are trading at 10.9x (the peer group average) their FY2010E earnings. However, there are no close competitors trading with a similar business model. Given the company's high growth rates historically and niche positioning in a fast-growing segment, higher premium pricing and solid client
relationships, the slight premium over its peers is more than justified and we believe that the premium could widen further in future," according to report.

Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

To read the full report click on the attachment