Subscribe to Take Solns, reasonably priced: Anand Rathi

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Take Solutions, an international business technology company with a focus on life sciences and supply chain management solutions, is open for subscription with an initial public offer (IPO) of upto 2,100,000 equity shares of Rs 10 each for cash at a price to be decided through the 100% book building process. The issue will close for subscription on August 7, 2007.

Anand Rathi Securities report on Take Solutions IPO

Company Overview

Take Solutions (TSL) is an international business technology company with products backed by a strong domain expertise to provide cost effective comprehensive solutions for businesses. TSL has completed more than 2500 software installations for over 250 customers as on March 31, 2007 ranging in size from multinational enterprises to medium and smaller-sized companies.

TSL's products are focused on the Supply Chain Management (SCM) and Life Sciences (LS) verticals and are complimentary to the legacy or enterprise resource planning software, which are currently used by the company's clients. TSL has currently 16 active products in the SCM vertical, which are housed under the one SCM suite, and 6 products in the LS vertical under the one Clinical suite. The foundation of all the product offerings in both segments is the domain knowledge and the TAKE RTE (Real Time Enterprise) framework.

The company's products are designed to provide customers with a palette of standard business solutions arranged in applications, which provide integrated enterprise-wide processing of business workflows. The company through its products provides industry specific solutions. TSL's revenues have grown at a CAGR of 138% and the net profit grew by 319% during the last three fiscal years.

Key Strengths

• TSL possesses deep domain expertise in the segments of Supply Chain Management and Life Sciences.
• The company is focused on niche business areas like Supply Chain Management and Life Sciences which encompasses a broad scope of activities and involve complexity in operations. Owing to the domain expertise, TSL is able to understand the unique business requirements of these chosen business segments and address them appropriately with technology, even at the granular level.
• TSL offers business solutions through the software products that it develops. TSL have a breakthrough technology framework, which supports intra as well as inter - enterprise business processes with a technology frame work. TSL's products can also be seamlessly integrated with the underlying ERP package or the legacy system used by the clients.

Concerns

• The company operates in an industry which is exposed to risk of rupee appreciation and higher attrition levels.
• TSL revenues are concentrated in the Asia Pacific region and USA and thus the business may get substantially impacted if there is slowdown in the economy of these countries.
• TSL's top 10 customers accounted for 26% of the revenues and losing a large customer may adversely impact the business of the company.
• The company's business is directly impacted by the sales cycle. The company's products typically require coordination and agreement across many departments of the customer's organization and delays associated with such timing factors may lengthen the sales cycle. Also during periods of economic slowdown the sales cycle lengthens which increases the cost of sales and reduces the profitability.

Valuation & Recommendation

At the price band of Rs 730-675, the issue is priced at 20.7x - 19.1x its FY07 EPS of Rs35.3 and at 26.5x - 24.5x its FY07 FDEPS (post issue capital). We believe that the stock is reasonably priced and we recommend investors to subscribe to the issue.