Indian Stock Market

eClerx IPO : eClerx IPO Analysis

eClerx Services, which provides data analytics and customised process solutions to global enterprise clients from its offshore delivery centres in India, is entering the capital market with its initial public offering (IPO) of equity shares of Rs 10 each for cash, at a price to be decided through a 100% book building process and aggregating to Rs 101 crores.

The issue will open on December 4, 2007, and will close on December 7, 2007. The price band has been fixed between Rs 270 and Rs 315 per Equity Share.

Expert Analysis: 

R S Iyer -KR Choksey

eClerx is a very good company and Bombay based. There is good counter demand for the stock and good for listing gains as well as with long term perspective.

Manish Bhatt - Prabhudas Lilladher

eClerx Services is a good issue. The company earned 86% of revenues from its top 5 clients for the year ended March 31, 2007. It has client base of 22 for 2007, 17 for 2006 and 7 for 2005.

Major concerns for the company are - a) small numbers of clients and b) rupee appreciation. Its 17 clients are from USA, which is one of the concerns.

It has reported profit after tax of Rs 405 million for FY07 and of Rs 164.1 million for six months ended September 2007. EPS is at Rs 26.68 for FY07 and for six months at Rs 9.97. It is available at PE of 15.83 for FY07 while its peer Firstsource Solutions at 40 PE. So at the higher end of price band of Rs 315, one can apply for the issue with medium to long term perspective

SP Tulsian - Investment Advisor

The financial performance of the company was quite good for FY 07. For six months ending September, 07, the topline of the company though rose to Rs 51.44 crore its EBITDA was lower at Rs 20.88 crore resulting into an EBITDA margin of 40.60%. A fall of almost 10%. The reason for this is strengthening rupee and increase in employee and personnel cost, which rose to 34.35% of total income in H1 FY 08 from 28.50% of FY 07. Even PAT was just Rs 16.47 crore, about 41% of FY 07.

Even if one expects a sharp rise in second half of FY 08, in topline and bottomline, it may be difficult for the company to keep its FY 07 bottomline. The tax impact in FY 08, is also the culprit for fall of profits at the net levels.

The present equity of Rs 16.55 crore may rise close to Rs 18.87 crore (at Rs 315) or may cross Rs 20 crore at the lower band of Rs 270. The EPS for FY 08 may be at Rs.20, and hence the issue price results in a PER of 13.5 to 15.5 times.

The company would definitely be treated as a small cap IT service company and recent IPOs floated by such companies, have not performed well on the bourses. Perception of such issues are at low ebb and issue at the upper band of Rs 315 is a risky proposition. Investment at the lower band of Rs 270 may be contemplated