Omnitech InfoSolutions is open for subscription with a public issue aggregating Rs 35 crore in the price band of Rs 90 to Rs 105 per equity share of Rs 10 each.

The company proposes to utilize the net proceeds of the issue to fund acquisitions and strategic investments and/or to alternatively set up new technology center; to set up overseas offices for business expansion; and to enhance existing facilities.

Arihant Capital Markets report on Omnitech IPO

Investment Positive

Established relationships with clients & Global IT companies

Being in the industry since the past 15 years OIL has developed a huge client base and also established broad based client relationship which would help the company for offering its current as well as future offerings. OIL’s close relationship with the global IT companies like IBM, Microsoft, Mercury, Borland etc. enables them to adapt to innovative technology and acquire the technical expertise to offer the most innovative solutions to their clients.

Flexible Delivery Models

Based on the needs of the customers OIL has adaptive delivery model to satisfy the customers. OIL has three delivery models mainly i.e. Build, Operate & Transfer (BOT) model, Service as a Software (SaaS) model and the onsite/offshore model. The BOT and SaaS model enables the customers to derive the business benefits with minimal risks and investments. These models help the clients to focus on their core business activities. Their innovative IP based Products and services Enables them to provide value for money and with no or very less competition.

Expansion/Diversification

Omnitech Info solutions is moving up the value chain by venturing into new business segment of managed services by enhancing the existing facilities at the technology center in Navi Mumbai. The company is planning to enhance the activities of the Disaster recovery center, Network operations center etc. OIL is also planning to set up new technology centers in Navi Mumbai. OIL is also planning to venture into the potentially high growth markets like the U.S.A, UK & Japan. For this they are setting up overseas offices within the next 8-9 months.

Concerns

Threat from competitors

The IT industry is highly competitive. The company faces high competition from large domestic as well as international players. These companies are placed better due to their large size & better financial, technical & marketing resources and may be able to offer products and services at a lower rate. Also venturing into the global IT market will attract competition from the already existing players in the global market. The company may also face competition from emerging countries with lower costs.

Collection Risk

The company has experienced delays in realization of dues from clients. This could have an impact on the working capital of the firm and therefore the operating results and the cash flows.

Valuations

The issue is priced at 10x FY07 earnings on post issue capital at floor price and at 11x at cap price. Omnitech Infosolutions Limited is a technology service provider and delivers a range of technology services as well as technology enabled services to its customers. The company’s offerings includes a range of IT services and products such as Business availability services, Business continuity services, systems integration solutions and framework solutions and products. There are no comparable listed companies offering the same range of services.

Recommendation

Omnitech Info solutions Limited provides end to end business availability and continuity services for enhancing user experience. OIL’s expansion plan in the overseas market and also enhancing the existing facilitates at the technology centers is based on the emerging opportunities in the market. The company’s unique delivery models as well as the APDIMA model enhance the services provided to its customers. We believe that keeping in mind the constant growth in global IT spending and the growth potential of the offshore market the company stands well poised in taking advantage of the opportunities.

Based on the valuation the issue looks good. We recommend our investors to subscribe the issue.