eClerx Services has come in a tax net in FY08; its EBIDTA margin has dipped and employee costs are rising, Investment Advisor SP Tulsian observed.
“At the upper band at Rs 315 issue, it is overpriced. Maybe if somebody is too convinced with the sector or with the company, he can go at a lower band. Otherwise the best would be to give it a pass,” he said.
Excerpts of CNBC-TV18’s exclusive interview with S P Tulsian:
Q: You find eClerx expensive as well?
A: The critical part of the company or the negative is that they had EBITDA margin or 50% in FY07. First six months performance shows an EBITDA margin of 40%, second, they have come into tax net for FY08, for the first time and third, the way the employee costs are going up, they are unable to pass. I am not talking the currency pain, which has been the case with all the companies.
Once the company has been on a very low level of about Rs 70-90 crore topline, it has been able to post this kind of performance by making issue of equity that has got ballooned to about Rs 16.5 crore right now, which post-issue will go to Rs 19 crore with equity of Rs 19-20 crore. You have a topline close to Rs 110-120 crore with an EPS of close to 18-19. That means shares are issued at a PE multiple of 15. We have seen the recent fate of IT company issues when the front liners; I am not differentiating between the services, products and all sort of things because now they are broadly classified as an IT company and if the company is issuing at a PE multiple of close to 15, you have the larger players available at a PE multiple of 20-21. Again I have considered the FY08 EPS.
So taking all this into consideration this issue is quite attractive, there is offer for sale element, part of that is about getting diluted by the promoter to the extent of 25% or 30% of the issue size. So definitely at the upper band at Rs 315 issue, it is overpriced. Maybe if somebody is too convinced with the sector or with the company, he can go at a lower band. Otherwise the best would be to give it a pass.
Source: Moneycontrol.com
Wednesday, December 5, 2007
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