TAKSHEEL SOLUTIONS LIMITED

September 29, 2011 by sknlakshmi

OVERVIEW

Taksheel Solutions Limited was incorporated in the year 1999 in Hyderabad. It is a 100% EOU and ISO 9001: 2008 certified company. It is comprehensive IT Solution Company focused on providing products and services for the companies engaged in financial services industry & Telecom, which are driven by technology all over the world. Headquartered in Hyderabad, with an office in North America, provide professional IT services to global clients.  Company’s solutions/services, in general technical areas, include  Wealth Management Solutions;  Telecom Solutions; Application Development & Maintenance; Data Warehousing & Business Intelligence;  and Offshore Outsourcing.

The issue proceeds are used to meet out capital expenditure for setting up a new SEZ software development center at Hyderabad, Acquisitions and Other Strategic Initiatives, Financing the Working Capital requirements and General Corporate Purpose

INVESTMENT CONCERNS

Reserve Bank of India had levied penalty on the Company for non-compliance and/or late compliance with certain mandatory requirement under the relevant regulations of FEMA in relation to issue of shares to foreign entity by way of share swap.    The company had entered into an agreement with one of the Investor, who is holding 6.12% of pre issue paid-up capital of our Company, imposes certain onerous obligations with regard to exit option and exit valuation to such Investor.  Company’s revenue dependent on clients located in the United States America. Economic slowdowns and other factors that affect the economic health of the United States may affect the business. Inflow and outflow are subject to risks arising from foreign exchange rate movements.  The industry in which the company operates is highly competitive and requires high technology base, if it fails to keep pace with the rapid changes in technology and the industries, company will suffer to register growth.  Also, it requires highly skilled professionals, whose wages are increasing, which in turn affect profit margins

The profit of our Company declined in FY 2009 as compared to 2008 to Rs.240.42 Lakhs in FY 2009 from Rs. 1403.21 in FY 2008 is mainly due to lower absorption of operating costs as compared to total turnover unexpected and sudden downturn on USA economy.  The company had also had negative operating cash flows in the previous years.

INDUSTRY OUTLOOK

Over the past decade, the Indian IT-BPO sector has become the country’s premier growth engine, crossing significant milestones in terms of revenue growth, employment generation and value creation, in addition to becoming the global brand ambassador for India.  The BPO segment grew by 14% to reach USD 14.1 billion in FY2011.  Domestic BPO segment is expected to grow by 16.9% in FY2011, to reach Rs.127 billion.  IT services is one of the fastest growing segment in the Indian domestic market, rising by 16.8% to reach Rs.501 billion,  driven by localised strategies designed by service providers.  IT services is expected to grow by about 3.5% in 2011 and 4.5% in 2012

INVESTMENT RATIONALE

Over 11 years of presence in the industry has given  good business domain knowledge and experience in deploying services & solutions.  The company provides wide range of wealth Management Solutions and entered the market at early stage.  It is Unique, Versatile and State of the art Telecom products.  It has got a wide depth of experience and knowledge in targeted industry segments.  The company is able to  Manage and Establish Enduring Relationship with Large Clients. 

The company’s revenues have grown from Rs. 3202.97 Lakhs for the Fiscal 2008, to Rs. 3543.03 Lakhs for the Fiscal 2009, to Rs. 4950.15 Lakhs for the Fiscal 2010 and to Rs. 14726.37 Lakhs for the Fiscal 2011 in large part due to acquisition of new clients, aggressive marketing initiatives and strategies planned and executed. These strategic initiatives and moves have benefitted its financial performance and have enabled  to grow at 5 year CAGR in FY 2011 of over 65.49% in revenues and about 28.16% and 28.29% in EBITDA and Profits after Tax respectively

VALUATION

With weighted average EPS of 10.51, the P/E for upper price band of Rs150 works to be 14.3 and lower price band of Rs130, P/E works to be 12.4.  When compared with Computer Software-Medium/Small Industry composite TTM P/E of 8.27, the IPO is priced high.   Under such a global economic tough time, the subscription may becomes costlier as the current high degree of uncertainties and possible severe slowdown may affect its user industry