Taksheel Solutions IPO looks fairly priced: SMC Research

Information-technology firm Taksheel Solutions' (TSL) Rs 80 crore IPO has opened for subscription today. According to SMC Research the issue seems to be fairly priced and captures the growth potential of the company in the immediate future.

The Hyderabad-based firm, which offers IT products and services to financial services and telecom companies, plans to use Rs 22 crore from the issue proceeds for acquiring firms in a similar line of business.

SMC Research report:

Valuation 

Considering the P/E valuation on the upper end of the price band of Rs 150, the stock is priced at pre-issue P/E of 8.95x on its FY11 EPS of Rs 16.77. Post issue, the stock discounts its FY11 EPS of Rs 12.55 by 11.96x. Looking at the P/B ratio at Rs 150, the stock is priced at P/B ratio of 2.71x on the pre-issue book value of Rs 55.41 and on the post issue book value  of Rs 79.22, the P/B comes out to 1.89x.  On the lower end of the price band of Rs 130, the stock is priced at pre-issue P/E of 7.75x  on its FY11 EPS of Rs 16.77. Post issue, the stock discounts its FY11 EPS of Rs 12.55 by 10.36x.  Looking on to P/B ratio at Rs 130, the stock is priced at P/B ratio of 2.35x on the pre-issue  book value of Rs 55.41 and on the post-issue book value of Rs 79.22, the P/B comes out to  1.64x.

Outlook

The company is present in a fast growing IT Services exports industry. However, the company's major clients are concentrated in the BFSI domain in the US and most of them are not in good financial condition. The expected downturn in the US economy and the increasingly protectionist environment leading up to the elections in 2012 are the main concerns for the company. Also the operating margins of the company are very weak compared to similar sized players. On a post-issue P/E multiple of 11.96x, the issue seems to be fairly priced and captures the growth potential of the company in the immediate future.

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