Majesco may test Rs 800, says Harit Shah

Harit Shah, IT Analyst at HDFC Securities told CNBC-TV18, "From a valuation perspective we need to understand that it is not possible to value the IT companies right now on a price to earnings multiple, what you would typically look at an Infosys or an HCL technologies on a PE multiple. When you look at globally also, Guidewire is a major peer listed on the New York Stock Exchange. That company is typically valued on EV/sales basis given the fact that a lot of incremental investments need to go into R&D, sales and marketing. So that typically depresses your profitability in the initial years. So you typically need to value it on EV/sales basis." "So, Guidewire gets about 8 times EV/sales multiple. Right now Majesco has doubled since its listing in August but even then it is trading at about 1.5 times EV/sales. So, there is a 75-80 percent gap in valuation between Majesco and Guidewire. I think that could compress over the next couple of years. Even if you give it a 50-60 percent discount to Guideiwre, I think the kind of upside potential that we see is very substantial. So right now our target price is about Rs 800. We are currently valuing it at around 2x kind of a multiple," he added.