Pentasoft Technologies (earlier called Pentafour Communications) has announced a private placement of 15 million shares via the book building route. The floor price for the same has been fixed at Rs.700/- per share.
The money is to be used to fund the US$205 million deal that has led to the transfer of the business software division of the erstwhile Pentafour Software (now called Pentamedia Graphics).
Pentasoft Technologies has four business divisions: business software, education & training, systems integration and engineering services. The business software division focuses on vertical domains like banking and financial services, insurance and enterprise solutions. In education the company has 130 centres of which the company owns 16 centres. In engineering services the focus is on CAD/CAM and embedded software.
While Price Waterhouse has recommended that the company pay a minimum 30% of the consideration in cash, Pentasoft is likely to go in for a higher cash component. One reason for this is that this would improve the valuation of Pentamedia Graphics, which is supposed to be the flagship company of the group. The second could be to convince the market of the genuineness of the deal itself. (Quite often in the past there has been a negative perception of the management which has cast a doubt on the genuineness of the software revenues itself.) The third could be the fact that the cash that Pentamedia Graphics would get would enable it to acquire animation companies abroad.
While the transfer of the software division has led to a re-rating of the stock itself, the planned capital expenditure of Rs. 6.5 bn envisaged over the next four year’s could lead to a dampening of sentiment in the short term.
LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India. Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: email@example.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407