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Pentasoft Technologies plans private placement - Views on News from Equitymaster
 
 
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  • Feb 2, 2000

    Pentasoft Technologies plans private placement

    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.

    Market View:
    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.

     

     

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