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Sequelsoft India Limited

 Issue Summary
  • Type
  • Equity
  • Size
  • Rs 60 m
  • Price
  • Rs 10
  • Face value
  • Rs 10 per share
  • Issue Opens
  • 19th Mar, 2000
  • Issue Closes
  • 23rd Mar, 2001
  • Min. subscription
  • 200 shares
  • Shares on offer
  • 6 m
  • Lead Managers
  • Fedex Securities Limited
  • Listing
  • Hyderabad and Mumbai Stock Exchanges
  • Promoters
  • Mr. Rambabu Katamaneni
  • Promoters post
        issue holding
  • 27%

     Background
  •  
  • Business
     

    SequelSoft India Limited (SSIL), incorporated in 1997, focuses on software development, consulting, document management, imaging services and vertical market places to facilitate business-to-business and business-to-consumer e-commerce. At present, the entire Income generated by the company has been from business sourced by Sequelsoft Inc, USA, which is promoted by one of Sequelsoft India's promoter Mr. Rambabu Katamaneni.

    SSIL has developed a B2B portal (www.bmethods.com), which enables customers to buy and sell products and services essential to their operations. Another portal, which has been developed, is for Internet shopping, specifically addressing consumers in Hyderabad. Both the portals are yet to be launched.

    The main objectives of the issue are

    • To set up and/or enhance facilities for the company's business plans.
    • To invest in overseas subsidiaries/companies to support its marketing activities
    • To acquire hardware, software and other assets for the forthcoming projects.
    • To meet the margin money requirement for working capital
    • To meet the expenses of the issue.
  • Promoters
      Mr. Rambabu Katamaneni, aged 36 years, is a non-resident based in USA and has been in the IT industry for over 10 years. His educational qualifications include Degrees of Bachelor of Engineering (Mechanical) from Mangalore University, Master of Science (Industrial Engineering) from Lamar University, USA. Professionally, he has been involved in SequelSoft, Inc., USA as its Vice President since its inception and Kodenet, Inc. (which recently merged with Indiainfo.com) during the past 4 years.
  • Sector
     

    In the last decade, IT software and services industry has grown from strength to strength. Industry revenue has grown eight fold from US $ 50 m in FY99 to US $ 4 bn in FY99. The growing demand for IT services worldwide is being driven by the global shift in economies to a network-centric, information-based model. As per the study conducted by NASSCOM-McKinsey, Indian IT sector is likely to generate nearly US $ 87 bn by FY08. This includes a sizable chunk of IT enabled services (US $ 19 bn), IT services (US $ 39 bn), software (US $ 20 bn) and E-business (US $ 10 bn).

    India's export competitiveness stems from a unique position of high-level skill sets at low cost. For instance, the annual salary of computer programmers in US ranges between US$ 36,000 and US$ 48,000 while in India the range is between US$ 4,500 and US$ 10,000. Hence, average salary levels in US are around 6-8 times that in India. Such cost efficiencies are one of the prime reasons for growth in software exports.

     Reasons to apply
  • With organisations slowly becoming more and more knowledge centric, knowledge management is set to play a critical role in the future. Since document management systems forms a important part of the knowledge management systems, the companies may see good growth prospects in this area.

     Reasons not to apply
  • The portals developed by SSIL are to be launched shortly. Others can imitate these portals as no copyright protection is available to the portals. The acceptability of the portals is not tested.

  • The company has entered into a Memorandum of Understanding (MoU) with SequelSoft Inc for marketing. In terms of the MoU, SequelSoft Inc, USA will pass their software development orders, assign document managing and imaging service orders exclusively to SSIL. SSIL will provide software consultants and professionals to the US company to meet their onsite requirements. The MOU is for a period of 3 years, which expires on March 2002. The loss of contracts from Sequelsoft Inc will have material impact on the company.

  • The company has plans to increase its work force from 73 to 201 employees within a year, which is crucial for the company to shift into the higher growth trajectory. But given the company's size of operations, it remains to be seen whether the company would be able to source quality talent.

  • Orders are yet to be placed. Already whatever the company had planned has been postponed by an average of more than 5 to 6 months. Going forward, it remains to be seen if the company would be able to execute projects envisaged on schedule.

  • For the first nine months of the current year ending 31st December 2000, the company has reported a net profit of Rs 1 m compared to a full year net profit of Rs 4 m. Even assuming a 100% growth in net profits Q-o-Q, growth has subdued. Given the fact that the US is witnessing a slowdown, it is unclear about future growth prospects of the company.

     Financial Performance

     Funding
  • Where the money comes from...
  • (Rs m) (%)
    Promoters, relatives and
    friends
    43 39.3%
    Public issue 60 55.5%
    Reserves and surplus 6 5.1%
    Total 108 100.0%
  • Where the money will go...
  • (Rs m) (%)
    Land and buildings 11 10.2%
    Furniture and fixtures 4 3.5%
    Other fixed assets 4 3.6%
    Motor vehicles 2 1.9%
    Hardware and software 39 36.0%
    Investment in subsidiaries 20 18.5%
    Contingencies 3 2.3%
    Preliminary and ore-operative expenses 3 2.3%
    Issue expenses 5 4.2%
    Loans and advanced 3 2.6%
    Long term working capital 16 15.0%
    Total 108 100.0%

     Shareholding