Taksheel Solution Ltd is entering in the capital markets with an initial public offering, IPO of 55,00,000 Equity Shares of Rs 10 each. The price band for the issue has been fixed at Rs 130/- at lower level and Rs 150/- at upper level.
Taksheel Solution Ltd is an IT Solution Company engaged in the business of providing products and services to the Financial services industry, Information Technology & Telecom. Headquartered in Hyderabad, with an office in North America, they provide professional IT services to global clients. Taksheel offering Wealth Management Technology Solutions, Telecom Solutions, Business Intelligence, Data Warehousing, Application Development and Application Maintenance. Some of their customers include Merryl Lynch and Bank of America.
The issue opens on Sep 29, 2011 and closes for subscription on Oct 04, 2011. The equity shares of the issue are proposed to be listed on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE).
Just to give you a quick note on Taksheel Solutions which was founded in 1999 and provides IT solutions and services to the companies engaged in the wealth management business. It aims to garner up to Rs 82.5 crore via an issue of 55 lakhs (5.5 million) fresh equity shares. Out of these proceeds, the company plans to deploy Rs 22 crore towards acquiring US-based companies (or assets) in order to strengthen its wealth management portfolio. Another Rs 18 crore will be used to set up new development centres at Warangal and Hyderabad. The remaining funds will be used for working capital and other corporate purposes.
The company plans to enter the telecom space to sustain further growth. Revenues from this vertical will start pouring in this fiscal onwards. It also plans to diversify into the Asia Pacific markets but these efforts will take time to fructify materially. Taksheel derives about 71 per cent revenues from a single vertical of wealth management services, which exposes it to sector specific risks. Further, it derives over 85 per cent revenues from its top 10 clients, all of whom are based in the United States. Given the weakening macroeconomic scenario in the US, the company's further growth could be hit if the demand scenario worsens.
Taksheel is majorly dependent on onsite revenues, which could come under pressure as US adopts increasingly protectionist norms. The company's debtor days, though has come down in FY11, is still pretty high at 98 days as against average creditors' collection days at 18; which could hit its cash flows adversely. With addition of six new clients in FY11 alone, Taksheel's topline has grown by nearly three-folds over FY10. At the price band of Rs 130-Rs 150, the post issue price/earnings (P/E) for FY11 works out to 10.4 to 12 times. This is way higher than 7.9 times for its larger peer Nucleus Software. If after assuming a 30 per cent growth in FY12 earnings for Taksheel, its P/E stands at 7.9-9.2 times.
Verdict
Recent IPO grading assigned by Credit Rating Agencies to Taksheel Solution Ltd is 2. Considering the high client and revenues concentration along with higher valuations, investors can skip the offer. Do remember to keep visiting our website for latest IPO review which will help you take a judicious decision i.e. whether to invest in the IPO or not and thus you can make an informed investment.
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