PARADYNE INFOTECH....more info

Source:Capital market and Moneytimes*Stock Watch Paradyne Infotech Niche IT company *Sustained growth in the BFSIsegment and shifting of focus to high margin software services and managedservices business augur well* *Related Tables* Consolidated Financials<_javascript:arttable('2716')>Paradyne Infotech (Paradyne) caters to the banking, financial services andinsurance (BFSI) segment in the domestic market. Its wholly-owned US-basedsubsidiary, Sundune Corporation, was set up in 2000 to market and supportimplementation of its products in the US market. Paradyne holds 99.70% ofequity of Intercon Management Services, a management consultant forindustrial, commercial and administrative activities. Also in 2000, thecompany set up a development center at the Millennium Business Park, Mahape,Navi Mumbai, India.Paradyne came out with an IPO in October 2005 offering 33,00,000 equityshares of the face value of Rs 10 each at a premium of Rs 32 per shareaggregating Rs 13.86 crore. The issue was subscribed almost 45 times. Thecompany's shares were listed both on BSE and NSE on 10 November 2005. Theclosing price on the day of listing was Rs 76.10.Paradyne's services and solutions for the BSE segment are in the areas ofe-commerce, business intelligence, business process management (BPM) andcustomer relationship management (CRM). These are offered to specificindustries like banking and finance, education and research, e-governance,manufacturing and retail, healthcare and telecom. Paradyne has a resourcebase of technology professionals, with expertise in application development,BPM, CRM, systems software, systems integration, database integration,application integration, server integration, desktop and operating system(OS) integration, network integration, security integration and storageintegration for these industries.Paradyne managed services include facilities management, network management,remote management, disaster recovery management, maintenance services,application management and database management.As all its user industries are increasing their IT investment, the growthprospect of Paradyne are encouraging. Its clients in the banking andfinancial space include JM Morgan Stanley, State Bank of India, IDBI Bank,Corporation Bank, Punjab and Maharashtra Bank.In the telecom and internet service provider (ISPs) space, Paradyne catersto Reliance Infocomm, Idea Cellular, IOL Broadband, MTNL, Hathway Cable &Datacomm, Hughes Telecom, and Broadllyne Infoservices. Clients in theindependent software vendors space include Geometric Software Solutions,KPIT Cummins, MoTech Software, Zycus Infotech, Eftia OSS Solutions, 3D PLMSoftware Solutions, Comsoft Infotech, Cymbal Corporation, California and GCPInc.In e-governance, Paradyne boasts of clients like Indian Navy, Hudco, IRMRA,TIFR, GPO, MTDC, Mahada, Mumbai Police, EPF organization and DirectorateGeneral of Shipping.In the manufacturing and retail space, Reliance Industries, ExideIndustries, Rochem Separations Systems, Globus Stores, Star Value Mart,ONGC, H&R Johnson (India) and IPCL are some of the clients of Paradyne.In FY 2005, System Integration accounted for almost 90% of ParadyneInfotech's total revenue of Rs 68.58 crore. However, this is slated to comedown to 70% in FY 2006 and further down to FY 65% in FY 2007. SystemIntegration is a low profit margin area. Thus, with the increasedcontribution from software services, the profit margin will improve.In the nine months ended December 2005, Paradyne registered sales (Rs63.54crore), which is close to the sales of FY 2005 (Rs68.56 crore). Moreover, the profit after tax of Rs 5.30 crore in the ninemonths is higher than Rs 5.11 crore achieved in full FY 2005.We expect Paradyne to register sales and net profit of Rs 90.77 crore and Rs7.58 crore in FY 2006. On an equity of Rs 10.88 crore and face value of Rs10 per share, EPS works out to 7. The share price trades at Rs 63. P/E worksout to just 9.*Paradyne Infotech (PIL) **(Code No: 532672) (Rs.63)* is recommended fordecent appreciation in the medium-to- long term. The share has come off its52-week high of Rs.84 and can be picked up for sound investment.PIL came out with an IPO of 33 lakh shares at a price of Rs.42 per shareaggregating Rs.14 cr. The issue opened on 30 September 2005 and closed on 7thOctober 2005 and was subscribed 43 times.First generation entrepreneur, Annand Sarnaaik, started the business ofproviding Information Technology Services with an initial capital ofRs.1lakh, promoted PIL. In the initial years, the company providedSystemIntegration and Networking Solutions and developing software solutions inOracle and D2K technologies. Over the years, PIL has transformed and grownto become an ISO 9001:2000 certified end-to-end IT services company withcore competencies in Software Services, Managed Services, System Integrationand BPO Services. It is one of the Level 1 Turnkey Solution Providerempanelled by Government of Maharashtra along with few selected major ITcompanies like IBM, TCS, Wipro, CMC, Tata Infotech, etc.PIL's services and solutions are concentrated in the areas of e-Commerce,Business Intelligence, Business Process Management (BPM) and CustomerRelationship Management (CRM). They are offered to specific industries likeBanking & Finance, Education & Research, e-Governance, Manufacturing &Retail, Healthcare and Telecom. PIL has a resource base of technologyprofessionals, with expertise in Application Development, BPM, CRM, SystemsSoftware, Systems Integration, Database Integration, ApplicationIntegration, Server Integration, Desktop & OS Integration, NetworkIntegration, Security Integration and Storage Integration for theseindustries.PIL has struck alliances with Oracle, Sun Microsystems, Veritas, IBM, Acer,APC and Microsoft, for the enhancement of technology and service offerings.It has an impressive clientele, which include JM Morgan Stanley, IDBI Bank,Corporation Bank, SBI, Indian Navy, HUDCO, MHADA, MTNL, Reliance Infocomm,Idea Cellular, Hughes Telecom, ONGC, IPCL and KPIT Cummins and others.*PIL was declared a winner in the Deloitte Technology Fast 500 Asia Pacific2005 Program, which acknowledges and honours fast-growing technologycompanies across Asia Pacific. The expansion of PIL includes spreading itsoperation to other parts of India from Mumbai, Bangalore, Chennai and Delhi,expanding the software development centre in Mumbai, upgrading the corebanking product FinWorQs and human resource product HrWorQ, setting up adata and support centre, upgrading the R&D lab and quality certification tointernational standards, and investing in its subsidiary, SunduneCorporation in the USA. *During FY05, PIL achieved 34% higher sales of Rs.68.5 cr. Net profit rose by85% to Rs.5 cr. and EPS was Rs.6.6 on its pre-issue equity of Rs.7.6 cr. Itspost-issue EPS works out to Rs.4.6. With reserves of Rs.14.5 cr., the bookvalue of the share works out to Rs.23.3. During Q3FY06, PIL has reported anet profit of Rs.1.9 cr. on sales of Rs.21.6 cr. For the nine months ofFY06, PIL has earned a net profit of Rs.5.3 cr. on sales of Rs.64.5 cr.*Its equity capital is Rs.10.9 cr. The promoters stake after the publicissue is 69.2% and the share of the investing public is 30.8%. *PIL has worked with global businesses escalating towards innovation, betterperformance and rapid deployment in IT services. It's proven delivery modelhelps synchronize seamless and cost-effective solutions with assured qualityand consistency.Today India commands an impressive 44% share of the global IToutsourced market. Technology exports from India rose to $ 17.2billion in FY05, a 34.5% growth over $12.8 billion earned in FY04. Theprojected IT and ITES export growth in FY06 is pegged at $22.5billion, which is a 30-32% increase.PIL currently has a wholly owned subsidiary called Sundune Corporation inUSA, which is expected to look after the implementation and supportfunctions, as well as exclusively market its products in USA. PIL looksforward to enhance its marketing function in US through this subsidiary andthen plans to venture into UK markets.*Based on the current going, EPS of about Rs.7 is projected for FY06. Goingby the prospects, its EPS is expected to go up to Rs.12 in FY07. The sharesof PIL are currently available at Rs.63 discounting its estimated EPS ofRs.12 for FY07 by 5.3 times. The industry average of the industry, in whichPIL operates currently hovers at 24 leaving good scope for the PIL scrip torise handsomely. Applying a reasonable P/E of 10 into its estimated EPS ofRs.12 for FY07, the share price has the potential to touch the Rs.120 mark.The 52-week high and low of the share has been Rs.84/51.